Healthcare Business News

Reform Update: Michigan Legislature approves Medicaid expansion, but will the CMS?

By Steven Ross Johnson
Posted: September 3, 2013 - 4:15 pm ET

In the wake of the Michigan Legislature's approval of a plan to expand its Medicaid program to include an estimated 470,000 low-income residents, some observers are questioning whether the Obama administration will OK the state's request to require enrollees to pay up to 5% of their income for cost-sharing.

The Republican-controlled Michigan Senate narrowly approved a measure last week to expand the state's Medicaid program to include all childless adults with incomes up to 138% of the poverty line, or $15,500 for an individual; the state House of Representatives approved the Senate version today. Five percent of a $15,500 income is nearly $800, which experts say is a lot of money for someone at that income level.

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The bill now goes to Republican Gov. Rick Snyder, who supports expanding Medicaid. The bill won't become effective until late March or early April because the Senate refused to reconsider its decision last week not to give its passage of the bill immediate effect.

Once signed, Michigan will become the 24th state plus the District of Columbia to expand Medicaid as authorized by the Patient Protection and Affordable Care Act. Twenty-one states have rejected expansion, while five—including Pennsylvania, Ohio, Indiana, New Hampshire and Tennessee—remain undecided. Under the ACA, the federal government will pay 100% of the costs for the Medicaid expansion population for the first three years, then 90% after that.

Snyder said the cost-sharing provision included in the Medicaid expansion plan was a way for enrollees to take more of a responsible role in their healthcare by deterring them from pursuing unnecessary medical treatment. “The Healthy Michigan plan emphasizes personal responsibility,” he said in a news release. “Those covered by the plan will be required to share in the costs through premiums. There also will be incentives for them to take responsibility for their lifestyle choices and to maintain or improve their health.”

Once reconciled and signed, the plan will need to get approval from the CMS, which some observers believe is uncertain despite the desire of the Obama administration to have all states approve the Medicaid expansion, a key mechanism for expanding coverage under the ACA.

The problem lies in provisions in the Michigan legislation that will require two waivers from the CMS before it can be implemented. The first would require all nondisabled Medicaid beneficiaries to pay up to 5% of their income on co-payments for their medical care after the first six months. The states would then need a second waiver to move forward on its plan to require those receiving Medicaid coverage after four years to pay up to 7% of their income in cost sharing or else buy private coverage through the state health insurance exchange.

“It's somewhat unusual,” said Sonya Schwartz, a research fellow at Georgetown University Health Policy Institute's Center for Children and Families. “I think CMS is going to look at it really carefully, particularly the part that requires people under 100% of poverty to have to pay premiums.” Under the bill, recipients would be charged co-pays for services.

Premiums, co-payments and other types of cost-sharing are not by themselves unusual in state Medicaid programs in recent years. According to the CMS, states have the option to charge premiums and enrollment fees for individuals and families whose income exceeds 150% of the federal poverty level, in states that had expanded Medicaid eligibility to that income level prior to passage of the ACA.

Schwartz pointed out that lawmakers and governors in several Republican-controlled states where Medicaid expansion under the ACA has faced tough political sledding—including Iowa, Wisconsin, Ohio and Pennsylvania—have proposed similar cost-sharing as a condition of expansion. None of those states has yet approved a Medicaid expansion. What makes Michigan's provisions different, according to Schwartz, is basing eligibility on time spent in the program.

In Iowa, a similar provision was included in proposed legislation that would charge premiums to low-income individuals and families whose incomes were between 100% and 138% of the poverty level. In Ohio and Pennsylvania, where debate continues over whether to expand Medicaid, co-pay requirements have been considered as part of those proposed plans.

Schwartz said the political goal of elected officials proposing such measures is to reduce the number of people receiving Medicaid coverage. She predicted that it would take a lot of time and expense for the states to try to collect these copayment amounts from low-income people.

“At the end of the day, I don't know how exactly how this is going to work,” Schwartz said of state efforts to try to collect the cost-sharing amounts from Medicaid recipients. “But it could end up being a deterrent from enrolling.”

Schwartz said it was difficult to tell what the CMS would ultimately decide on such proposed measures at this point since the legislation has not yet been signed into law and the agency has yet to receive any waiver request from the state. It's expected that if the agency rejected the waiver requests, Michigan lawmakers would reverse their approval of the Medicaid expansion.

As the federal government continues to urge more states to expand their Medicaid program as part of the ACA, rejection of plans such as Michigan's could put efforts to provide coverage for low-income people at risk. On the other hand, Obama administration officials and their allies recognize the problems with imposing stiff cost-sharing on poor people.

“They know how sensitive people are to premiums and cost-sharing,” Schwartz said. “So I think CMS will look at it very carefully.”

Follow Steven Ross Johnson on Twitter: @MHSjohnson

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