Medicare Compliance & Reimbursement

The Bush administration continues urging states to accept its capped-funding plan for Medicaid, but details of the proposal still seem to be in flux, judging from comments made by Centers for Medicare & Medicaid Services Administrator Tom Scully at an Oct. 8 hearing.

In January, the administration unveiled a voluntary ten-year program in which states could get additional federal funds to provide Medicaid-optional benefits and to cover optional populations over the next few years - to tide them over current tough economic times - along with greatly expanded flexibility to design their Medicaid programs. In exchange, participating states would accept lower spending than current law promises in the final three years of the decade, to maintain federal budget neutrality for the plan.

Governors weren't enthusiastic, and Congress didn't formally consider the plan this year, but Scully was back before the House Commerce Health Subcommittee Oct. 8 to renew the administration's pitch in an apparently slightly altered form.

Explaining to Democrats how the proposal differs from a traditional block grant in which overall funding is capped, he said that states could get a "negotiated per capita payment amount" for their optional populations. The statement marks the first time a "per capita cap" has been mentioned in connection with the White House plan, according to several analysts.

One complaint about the original program was that accepting an overall funding cap could cause problems if a population in need burgeoned during the ten-year period. Under an overall cap, states might either decline to cover some needy populations or find themselves on the hook for covering an enlarged population with federal funding they agreed to when lesser need was predicted.

A per capita cap presumably would avert such scenarios, allowing states to negotiate a funding cap per eligible individual in Medicaid's optional coverage categories but draw down increased federal funds if the pool of eligible beneficiaries expanded.

It's not clear whether Scully's hearing comments constituted a trial balloon; a misstatement stemming from CMS's having negotiated some Medicaid waivers with per capita caps, notably in waivers designed to provide prescription-drug coverage to seniors; or an actual new wrinkle in the state-flexibility overhaul plan. There's little question that use of per capita caps could make the administration offer more enticing to some governors, who have worried about how population growth might hurt them under the original plan, however.

Some analysts are skeptical that the new phrase means much, saying that a per capita cap could be negotiated for some part of state spending while the state's overall share still would be subject to a general cap. "To get the budget predictability" in Medicaid that the White House is looking for, "it's hard to believe that a per capita cap would be done independent of an overall cap," says Edwin Park of the liberal Center on Budget and Policy Priorities.