Federal Financial Support for State Health Reform Implementation

Edwin ParkCenter on Budget and Policy Priorities

From Vision to Reality: State Strategies for Health Reform

ImplementationNovember 10, 2010

States bear primary or significant responsibility for all of the major coverage elements.

• Establishing new health insurance exchanges.

• Instituting health insurance market reforms.

• Helping administer the premium credits and cost-sharing

reductions, and the individual and employer responsibility

requirements.

• Expanding Medicaid.

• Coordinating enrollment of eligible individuals into public

programs and premium credits and cost-sharing subsidies.

State Role in Implementing New Coverage Pathways

By 2014, states must establish new marketplaces for individuals and small businesses.

• Federal minimum requirements for exchanges.

• Significant flexibility on how states can design their exchanges.

• Only source of coverage eligible for premium credits and cost-

sharing reductions for individuals/families and for small business

tax credits.

• Existing individual and small group markets remain in place.

• Determine eligibility for premium credits and cost-sharing

reductions.

• Coordinate eligibility with Medicaid and CHIP.

Health Insurance Exchanges

HHS is providing grants to states for any “activities (including planning activities) related to establishing” an Exchange.

• Uncapped, mandatory $, with discretion on total $, state

amounts, requirements and renewals left to HHS Secretary.

• First $1 million grants were awarded at end of September.

• Next round of general grants to be awarded in early 2011.

• Further grants will likely be tied to states meeting certain

federal requirements and benchmarks.

Exchange Planning and Establishment Grants

Use of planning and establishment grants to fund special grants to develop innovative IT systems for exchanges.

• 2 year grants for up to 5 states (or 5 state consortia).

• Applications due by December 22, 2010 and to be awarded by

February 15, 2011.

• States must commit to establish an exchange.

• Resulting model systems to be available for other states to

adopt.

• Cannot be used solely for Medicaid or CHIP eligibility systems.

Exchange IT Systems Grants

By 2014, states are required to expand their Medicaid programs to all non-elderly individuals up to 133% of the poverty line.

• Significant change in eligibility for adults, particularly childless

adults.

• Gains for people with disabilities, including those in 2-yr.

waiting period.

• No assets test.

• Changes in how income is counted.

Medicaid Expansion

Federal Government Picks Up Nearly All Costs of Expansion

Modest Increase in State Costs

That is because Medicaid matching rate (FMAP) will be significantly higher for “newly eligible” population than the regular FMAP (on average, 57%).

• 2014-2016: 100%

• 2017: 95%

• 2018: 94%

• 2019: 93%

• 2020 and after: 90%

Higher Medicaid Matching Rates for Expansions

Regular matching rate for current eligibles who newly enroll.

Exceptions include:

• Childless adults in “early expansion” states.

• Children switched from CHIP to Medicaid.

• Costs of temporary increase in primary care physician payment

rates.

Matching Rates for Current Eligibles

Regular administrative matching rate for Medicaid implementation costs generally.

New proposed regulation would provide higher federal support for improvements to Medicaid eligibility systems. Estimated $2.2 billion through 2015.

• Same higher match now available for claims processing (MMIS).

• 90% for improvements through end of 2015 and 75% for

ongoing operation and costs permanently.

• States must meet certain conditions and must perform cost

allocation.

Proposed Higher Match for Systems Improvements

Affordable Care Act provides additional sources of funding to help support health reform implementation and other health improvements. Examples:

• $250 million in rate review grants through 2014. First round

awarded.

• $300 million in development of Medicaid quality measures for

adults.

• $100 million in Medicaid prevention and wellness grants.

• Funding to experiment with health care delivery system

reforms in Medicaid including bundled payments, global

payments for safety net hospital systems, and pediatric

accountable care organizations.

Other Sources of Federal Funding for States