GAO Report on Medicaid Expansion

August 10, 2012

The GAO recently released the new report title Medicaid Expansion: States’ Implementation of the Patient Protections and Affordable Care Act. The report contains results of research conducted to see what states are doing to implement Medicaid expansion, learn what their responsibilities are, and identify what challenges they face. It addresses the following issues relating to implementing Medicaid expansion:

  • State responsibilities
  • Actions taken to prepare
  • States’ views on the financial implications of expansion

The GAO conducted a web-based survey and interviewed Medicaid officials in six states: Colorado, Georgia, Iowa, Minnesota, New York, and Virginia. They selected these states based on:

  • Size of expected enrollment
  • Enrollment rates
  • Geographic dispersion
  • Insurance coverage provided to childless adults

The ACA requires Medicaid eligibility to be expanded to non-elderly people with incomes at or below 133% or the federal poverty level (FPL). It also specifies that each state must change how it determines Medicaid eligibility, as well as streamline eligibility and enrollment systems that will coordinate enrollment across Medicaid, Children’s Health Insurance Program (CHIP) and the state health insurance exchanges.

The bill allows states to opt out of the expansion, but stipulates that they will lose their existing federal Medicaid funds if they do so. When the Supreme Court ruled on the constitutionality of the health care law in June of 2012, it modified the provision on Medicaid expansion by allowing states to opt out without losing their existing federal Medicaid funding. This change prompted the Congressional Budget Office (CBO) to update its budget estimates, reflecting projections that fewer people will be covered by Medicaid and CHIP, while more people will be enrolled through state health insurance exchanges and uninsured than in its previous estimate. The GAO completed its field work on this study prior to the Supreme Court’s ruling, so the impact of that decision was not included in their analysis. However, the requirements for states that choose to participate in the Medicaid expansion have not changed as a result of the Supreme Court decision and the report is still a useful snapshot of how these states are getting on with preparations for it.

Requirements for states that participate in Medicaid expansion

By January 1, 2014 states must:

  • Expand eligibility to non-elderly people with incomes at or below 133% of FPL
  • Streamline their enrollment process
  • Transition to Modified Adjusted Gross Income (MAGI) to determine income eligibility
  • Identify those who are newly eligible to obtain federal matching funds
  • Simplify and streamline the eligibility determination process

Table 1: ACA provisions included in the GAO study.

ACA Provision

Description

Medicaid eligibility Expand eligibility to non-elderly people with incomes at or below 133% of FPL.
Modified adjusted gross income (MAGI) Transition to using MAGI to determine income eligibility.
Early expansion option States can expand coverage to newly eligible people prior to January 1, 2014.
Maintenance of effort States must maintain eligibility standards until an exchange is fully operational.
Federal matching Federal matching funds will be provided to states for newly eligible adults.
Streamlined eligibility and enrollment systems “States must provide a process for individuals to apply for or renew their Medicaid eligibility through a website that enrolls individuals in the appropriate program (Medicaid, CHIP, or exchanges) no matter to which program they originally apply.”

The GAO found that the states studied are taking steps to prepare for Medicaid expansion, but they face some challenges including the need for additional federal regulations and guidance. CMS has issued a final Medicaid rule and indicated that more guidance will be forthcoming. In addition, the majority of state budget directors interviewed believe the following factors will contribute to the cost of expanding Medicaid.

  1. Administration required to manage Medicaid enrollment
  2. Acquisition or modification of information technology systems to support Medicaid
  3. Enrolling people who were previously eligible, but have not so far enrolled in Medicaid

They also expressed uncertainty about:

  • The impact of shifting exiting Medicaid enrollees into health benefit exchanges
  • Fiscal capacity and the state’s share of Medicaid expenditures
  • Guidance needed to develop budget estimates
  • Additional regulations and/or guidance needed on
    • How to apply MAGI
    • Conversion of Medicaid eligibility standards
    • Access to eligibility data through the Federal Data Services Hub

After reviewing and commenting on the study, HHS agreed to provide states with additional regulations and/or guidance on MAGI conversion and FMAP computation. HHS also reiterated that the decision to participate in Medicaid expansion is up to the state – there is no deadline date for their decision – and federal matching funds are available to help states cover information technology costs for modernizing eligibility systems, which don’t have to be paid back if the state decides not to expand Medicaid.

Read the GAO report

Previous blog post: CBO update estimates $84 billion savings from SCOTUS decision

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