Congress Weighs a “Fallback” for Medicaid Coverage Gap

Foley Hoag LLP - Medicaid and the Law
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Foley Hoag LLP - Medicaid and the Law

[author: Tyrus Jackson]

One of President Biden’s major health care goals is to close the “Medicaid coverage gap” – which refers to those states that have not expanded Medicaid eligibility under the Affordable Care Act (ACA). Until now, the principle strategy to accomplish this goal was to offer the 12 states that have failed to expand Medicaid a “carrot” to incentivize adoption. For example, the American Rescue Plan offered these states a sweetheart of a deal, offering a five percentage point increase in their regular federal matching rate for two years after expansion, in addition to the 90 percent federal match already authorized by the ACA. This means that if these 12 states expand Medicaid they would have an increase in the share of cost paid for by the federal government, which could lead them to focus their state budgets on other needs. Though this offer is still on the table, there is growing concern that these states will not budge, mostly due to political considerations. For example, Republican-led legislatures in both Texas and Wyoming voted against expansion and Georgia’s governor, Brian Kemp, has offered a limited plan that includes work or activity requirements just to qualify.

To combat this inertia, there are now talks of a federal fallback option. Senators Warnock and Ossoff from Georgia sent a letter to the Senate Majority and Minority Leaders proposing a federal Medicaid look-alike program that would be run through CMS. This proposal would allow the federal government to provide coverage to those in the coverage gap financed through cost savings that would be achieved by letting Medicare negotiate drug prices. Another proposal on the table is to allow people to get fully subsidized coverage through the ACA’s marketplaces. Whichever proposal stands faces an uphill battle, though, as there are a few issues that may arise.

One principal concern is those states that have already expanded Medicaid and are responsible for a percentage of the costs for these newly eligible beneficiaries (currently 10%). Any legislative option that offered full Federal financing for the expansion population could possibly lure more conservative states that have already expanded Medicaid, but are somewhat reluctant adopters. Therefore, the plan has to provide something to discourage states from undoing their Medicaid expansion.

The second battle is a legislative one. With a slim margin in the Senate, one Democratic dissent or a threat of a filibuster could kill all chances of a federal fix to address the coverage gap. Of course there is always a chance that it could be attached to the infrastructure plan or be pushed through budget reconciliation, but we will have to wait and see. We will update you on the blog as a Federal fallback option is further considered by Congress.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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