Partial Medicaid Expansion Not Eligible for Full Funding, According to CMS

by King & Spalding

On December 10, 2012, CMS published a list of answers to Frequently Asked Questions on topics related to the Affordable Care Act, particularly exchanges and Medicaid expansion.  The FAQ publication was accompanied by a letter to state governors from HHS Secretary Kathleen Sebelius.  Importantly, CMS announced in one of its answers that states cannot choose to partially expand their Medicaid programs and expect to receive full federal matching funding for the partial expansion.

Under the Affordable Care Act, the federal government will fully fund the cost of states’ expansion of their Medicaid programs to 133 percent of the federal poverty level (FPL) for three years, beginning in 2014.  By 2020, the match rate will cover slightly less (90 percent) of state expansion costs.  With the Supreme Court’s ruling in June that states cannot be penalized for not complying with the Affordable Care Act’s Medicaid expansion requirement, the question arose as to whether a state can expand to less than 133 percent of the FPL and still receive 100% federal matching funds.  According to CMS, the answer is no because the “[t]he law does not provide for a phased-in or partial expansion.  As such, we will not consider partial expansions for populations eligible for the 100 percent matching rate in 2014 through 2016.”

However, CMS stated that it would consider such an arrangement as a demonstration project “to the extent that it furthers the purposes of the program, subject to the regular federal matching rate.”  Moreover, in 2017, when the 100% federal funding is slightly reduced, CMS may consider section 1115 Medicaid waivers as a way for states to accomplish phased-in or partial Medicaid expansion.  

The CMS publication also announced or explained that:

  • CMS no longer supports the Medicaid blended matching rate that was previously included in recent budget proposals;
  • CMS provides 90 percent federal matching funds for new or improved Medicaid eligibility systems, and is continuing to explore initiatives to reduce the administrative costs of Medicaid expansion;
  • Low-income individuals in states that do not expand Medicaid to 133 percent of the FPL, and who have incomes above 100 percent of the FPL and are not eligible for Medicaid or CHIP, will be eligible for premium tax credits and cost sharing reductions, assuming they also meet other requirements to purchase coverage in the exchanges.  Low-income individuals with incomes below 100 percent of the FPL in states that do not expand Medicaid will not be eligible for insurance subsidies; and
  • The Affordable Care Act provides for a coordinated system for making eligibility determinations between Medicaid, CHIP, and exchanges to avoid gaps in coverage.

The CMS FAQ is available here.

Reporter, Jennifer S. Lewin, Atlanta, +1 404 572 3569,

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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