CMS Proposes New Rules For Redesigning Medicaid, States Have Greater Flexibility In Benefits, Cost Sharing

Main Category: Medicare / Medicaid / SCHIP
Article Date: 22 Feb 2008 - 4:00 PDT

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Two new proposed rules that would give states unprecedented flexibility in designing their own Medicaid programs, including adjusting their benefit package to more closely align with beneficiary needs and requiring increased cost sharing by enrollees, were announced by the Centers for Medicare and Medicaid Services (CMS).

The proposed rules would implement provisions of the Deficit Reduction Act of 2005 and the Tax Relief and Health Care Act of 2006. The rules are the latest in a series of regulations to implement the Administration's goals of aligning Medicaid more closely with private market insurance and giving states more control over their Medicaid benefits packages.

"These new rules recognize that states are in the best position to design plans that provide Medicaid beneficiaries better health care for the same or even lower cost," Health and Human Services Secretary Mike Leavitt said. "The proposed rules will result in patients having more choices and greater control over their health care decisions.

The flexibility these proposals provide is valuable for the beneficiary and the state. States will now have the opportunity to offer beneficiaries health care that has the same value as plans that are being offered to other populations in the state, through alternative benefit packages called "benchmark plans."

Benchmark plans are models states can use in designing new programs. These benchmark plans are similar to the flexibility provided to states under the State Children's Health Insurance Program (SCHIP). Benchmark coverage includes:

- The standard Blue Cross/Blue Shield preferred provider option service benefit plan under the Federal Employees Health Benefit Plan;
- State employee coverage;
- Coverage that is offered by the largest commercial health maintenance organization in the state; or
- Coverage that the Secretary of Health and Human Services approves.

These benchmark options provide states with the opportunity to target benefits to meet the specific needs of individuals. In some cases, state employee benchmark coverage may be more generous than the state Medicaid plan. Approved coverage may offer the opportunity for disabled individuals to obtain integrated coverage for acute care and community-based long term care. For individuals who cannot afford the premiums associated with health insurance offered through their employer, states have the option of paying part of the employee premium to make it more affordable, so the employee can maintain private coverage.

States would also be able to create new benefit packages tailored to different populations. These proposed rules also give states the flexibility to provide wrap-around and additional benefits, such as dental coverage. This will provide increased efficiency in state programs by providing services in a more cost-effective manner while giving beneficiaries more comprehensive care.

"Until passage of the DRA, states had few options, other than through waivers, to update the health benefit packages offered through their Medicaid programs to meet the needs of the people they serve," CMS Acting Administrator Kerry Weems said. "These proposed changes allow states to use modern methods of providing health insurance coverage and encourage families to participate in their own health care decisions."

CMS also released proposed regulations on DRA provisions that allow states to change current premiums and cost sharing structures. These new provisions are similar to what is allowed under SCHIP and will not change existing cost sharing rules for Medicaid beneficiaries with family income below 100 percent of the federal poverty level (FPL). Individuals with family incomes between 100 and 150 percent of the FPL may see some cost sharing while monthly premiums can be charged to individuals with incomes above 150 percent of the FPL. As in SCHIP, all cost sharing must be limited to no more than five percent of the family's income. The 2008 FPL for a family of four is $21,200.

The proposed rules are expected to be published in the Feb. 22 Federal Register and will have a 30-day public comment period.

Centers for Medicare and Medicaid Services