HHS Secretary Kathleen Sebelius issued a letter Dec. 10 to governors aimed at addressing questions on flexibility and state responsibilities that some of them asked months earlier. The administration also dispatched its point person on the issue, Cindy Mann, to field unresolved questions on the issue on Capitol Hill.
One answer was that HHS will provide the full federal funding that the law promises to pay for the new coverage only to states that expand eligibility to 133% of the federal poverty level, which could discourage participation by states where governors have proposed expanding eligibility to a lower threshold as a way to limit their share of future costs as the federal share decreases.
“There probably will be some that will wait as a result of not having available an option to expand up to 100% or some lower level, and what happens from there will probably depend on how the program unfolds over the next few years,” Dr. Mark McClellan, an economist at the Brookings Institution and a former CMS administrator, said in an interview.
Further questions were spurred by HHS' brief comments promising rules next year that clarify the extent of cuts to disproportionate-share hospital payments. Hospitals have raised concerns that they could face the double impact of their state not expanding Medicaid coverage to include many of their uninsured patients and the healthcare law cutting their DSH payments.
Mann confirmed in an interview that those DSH payment cuts could vary between states based on how they use their DSH payments to reduce their numbers of uninsured.
Mann declined to specify when in 2013 those regulations could come, and that could affect whether state legislatures, many of which begin meeting in January, authorize the expansion.
“It seems to me like the overarching issue here comes back to the disproportionate-share payments,” Bruce Caswell, president of the health services segment at Maximus, said in an interview. “Will the impact be so severe in the hospital systems and the delivery networks that with the loss of those funds it gets balanced toward a substantive discussion in the next legislative season about expanding Medicaid?”
States will be weighing their worries over DSH payments against other factors. Some states that expand Medicaid could reduce their spending on non-Medicaid health programs funded solely by the state, such as those for mental illness and substance-abuse treatment, said Deborah Bachrach, special counsel at Manatt, Phelps and Phillips.