There's a catch

The Obama administration and healthcare reform advocates celebrated after a number of Republican-run states decided to expand Medicaid. Their celebrations may have been premature, however.

The problem? Some of those expansions may run into opposition from the CMS.

At least six Republican governors recently announced that they will drop their cost and control concerns to back the optional expansion of Medicaid eligibility for the uninsured earning between 100% and 138% of the income poverty level. But their support is contingent on using approaches that have drawn previous opposition from the Obama administration, such as health savings accounts and some types of premium support.

“The conversation has turned from, 'I'm definitely not going to do it,' to 'Maybe I could do it if I got the flexibility for X,' ” said Matt Salo, executive director of the National Association of Medicaid Directors. “What X is is going to be different in every state.”

Once the state plans are legislatively approved and signed by the governors, they will be forwarded to the CMS for approval, which can take different forms depending on the extent of the changes proposed for their Medicaid programs.

Although details are still under development in many states where the governor has made the preliminary decision to move ahead with expansion, some potentially problematic elements have begun to emerge.

For instance, Indiana's Republican Gov. Mike Pence proposed in a Feb. 13 letter to HHS Secretary Kathleen Sebelius to expand Medicaid to an additional 400,000 state residents, according to some estimates. However, the expanded coverage would have to occur through a Medicaid program—the Healthy Indiana Plan—that uses a version of health savings accounts, which may run counter to a recent federal ban on levying premiums on many Medicaid beneficiaries.

“Our administration would predicate any expansion of Medicaid in Indiana on our ability to promote Hoosier innovation in the Healthy Indiana Plan to the expanded population,” Pence wrote.

It is unclear whether the CMS even has the authority to issue a waiver allowing the Indiana approach because of the statutory ban, according to health policy experts. “This is really a question that CMS is going to have to answer,” said Judy Solomon, a vice president at the liberal Center on Budget and Policy Priorities.

Complications may also arise in Ohio, where Republican Gov. John Kasich drew praise from Democrats and derision from Republicans for announcing plans on Feb. 4 to expand Medicaid to cover up to 684,000 more Ohioans, according to one analysis by the Urban Institute and the Kaiser Family Foundation.

But emerging details indicate that the Ohio plan will include a premium assistance model, which has drawn opposition in the past from the Obama administration.

Last January, HHS proposed rules allowing the use of premium assistance to help Medicaid and Children's Health Insurance Plan enrollees pay for coverage purchased from health insurance exchanges. Ohio's plan would use Medicaid funds to cover beneficiaries with incomes between 100% and 138% of the federal poverty level. However, it's unclear whether Ohio's proposal would fulfill the rule's caveats, which prevent higher nonpremium cost-sharing than Medicaid-eligible enrollees in exchange plans would otherwise be allowed to incur.

“You really need a lot more details before you can evaluate it,” Solomon said.

Virginia is another Republican-run state that may adopt a Medicaid expansion plan that runs afoul of federal laws or regulations, according to health policy experts. Even states with Democratic governors may advance problematic elements.

The details will emerge only as legislatures in the states opting into the Medicaid expansion finalize and vote on their proposals in the coming weeks.

CMS officials are expected to try to accept most proposals they are legally allowed to consider. The CMS did not respond to questions regarding its approval process.

“I don't think they'll ultimately be accepted exactly as proposed, but there is a real interest in having a dialogue with states,” said Patricia Boozang, a managing director at Manatt Health Solutions.