.
Medicaid and the State Children’s Health
Insurance Program (CHIP) Provisions
in PPACA
Julie Stone, Coordinator
Specialist in Health Care Financing
Evelyne P. Baumrucker
Analyst in Health Care Financing
Cliff Binder
Analyst in Health Care Financing
Elicia J. Herz
Specialist in Health Care Financing
Elayne J. Heisler
Analyst in Health Services
Kelly Wilkicki
Presidential Management Fellow
Alexandra J. Rothenburger
Analyst in Health Policy
May 13, 2010
Congressional Research Service
7-5700
www.crs.gov
R41210
CRS Report for Congress
P
repared for Members and Committees of Congress
c11173008
.
Medicaid and CHIP Provisions in PPACA
Summary
The President signed into law H.R. 3590, the Patient Protection and Affordable Care Act
(PPACA; P.L. 111-148) on March 23, 2010. Seven days later, a second bill, H.R. 4872, was
signed into law by the President to modify P.L. 111-148. This second law, the Health Care and
Education Reconciliation Act of 2010 (hereinafter referred to as the Reconciliation Act or
HCERA; P.L. 111-152), was signed on March 30, 2010. Together these laws constitute what we
now refer to as health reform law. Health reform law makes many significant changes to the
private and public markets for health insurance, as well as modifies aspects of the publicly
financed health care delivery system. It represents the most significant reform in health care
financing since the establishment of Medicaid and Medicare in 1965. This report provides a
summary of the Medicaid and CHIP provisions in health reform laws P.L. 111-148 and P.L. 111-
152.
Regarding Medicaid eligibility, beginning in 2014, or sooner at state option, nonelderly, non-
pregnant individuals with income below 133% of the federal poverty level (FPL) who were
previously ineligible for Medicaid will be newly eligible for Medicaid. This change represents a
significant expansion of eligibility under Medicaid. From 2014 to 2016, the federal government
will cover 100% of the Medicaid costs of newly eligible individuals. In 2017, the federal share
will be 95%, in 2018 it will be 94%, in 2019 it will be 93%, and in 2020 and beyond, the federal
share for this population will be 90%.
The health reform law also adds new mandatory benefits to Medicaid, including, for example,
coverage of services in free-standing birthing centers. Further, it expands state options for
providing home and community-based services as an alternative to institutional care, and
provides financial incentives to states to do so. Among the financing changes, the law reduces
Medicaid disproportionate share hospital (DSH) payments. It also increases prescription drug
rebates, certain pharmacy reimbursements, primary care physician payment rates for selected
preventive care services, and federal spending for the territories, among other payment system
reforms.
This report provides a summary of the Medicaid and CHIP provisions in P.L. 111-148 and P.L.
111-152. To help highlight the most important Medicaid and CHIP changes, applicable provisions
are grouped into the following seven major issue areas: eligibility, benefits, financing, program
integrity, demonstrations and grant funding, CHIP, and miscellaneous. The Appendix provides a
cross walk between the provision titles and the amending sections of P.L. 111-148 and P.L. 111-
152.
Another appendix will be added to the report, in an update, to include the effective dates of each
provision. A forthcoming CRS report will include a more detailed timeline based on effective
dates for all of the Medicaid and CHIP provisions.
Congressional Research Service
.
Medicaid and CHIP Provisions in PPACA
Contents
Introduction ................................................................................................................................ 1
Congressional Budget Office and Joint Committee on Taxation Analysis............................... 2
Overview of the Medicaid and CHIP Provisions in Health Reform Law ...................................... 2
Eligibility.................................................................................................................................... 4
Medicaid and Health Insurance Reform................................................................................. 5
Medicaid Coverage for the Lowest-Income Populations .................................................. 5
Medicaid Coverage for Former Foster Care Children..................................................... 10
Protection for Recipients of Home and Community-Based Services Against
Spousal Impoverishment ............................................................................................ 10
Optional Eligibility Expansions........................................................................................... 11
Non-elderly, Non-pregnant Individuals with Family Income Above 133% of the
FPL............................................................................................................................ 11
State Eligibility Option for Family Planning Services .................................................... 11
Removal of Barriers to Providing Home and Community-Based Services...................... 12
Outreach and Enrollment Facilitation .................................................................................. 13
Streamlining Procedures for Enrollment Through a Health Insurance Exchange
and Medicaid, CHIP, and Other Health Subsidy Programs .......................................... 13
Enrollment Simplification and Coordination with State Health Insurance
Exchanges.................................................................................................................. 14
Permitting Hospitals to Make Presumptive Eligibility Determinations for All
Medicaid Eligible Populations.................................................................................... 15
Standards and Best Practices to Improve Enrollment of Vulnerable and
Underserved Populations............................................................................................ 15
New Reporting Requirements........................................................................................ 16
Benefits .................................................................................................................................... 16
Modifications to DRA Benchmark and Benchmark-Equivalent Coverage ...................... 17
Premium Assistance ...................................................................................................... 17
Birthing Centers............................................................................................................ 18
Adult Preventive Care ................................................................................................... 18
Smoking Cessation Services for Pregnant Women ......................................................... 19
Scope of Coverage for Children Receiving Hospice Care .............................................. 19
Community First Choice Option.................................................................................... 19
State Option to Provide Health Homes for Enrollees with Chronic Conditions............... 20
Changes to Existing Medicaid Benefits ............................................................................... 22
Removal of Barriers to Providing Home and Community-Based Services...................... 22
Clarification of The Definition of Medical Assistance.................................................... 22
Financing.................................................................................................................................. 22
Payments to States .............................................................................................................. 22
Additional Federal Financial Assistance Under Health Reform...................................... 22
Incentives for States to Offer Home and Community-Based Services as a Long-
Term Care Alternative to Nursing Homes ................................................................... 25
Disproportionate Share Hospital Payments .................................................................... 26
Special FMAP Adjustment for States Recovering From a Major Disaster....................... 27
Payments to the Territories .................................................................................................. 28
Payments for Primary Care Providers.................................................................................. 29
Payments to Providers for Health-Care Acquired Conditions ............................................... 30
Congressional Research Service
.
Medicaid and CHIP Provisions in PPACA
Prescription Drugs .............................................................................................................. 31
Prescription Drug Rebates............................................................................................. 31
Elimination of Exclusion of Coverage of Certain Drugs ................................................ 33
Providing Adequate Pharmacy Reimbursement ............................................................. 33
340B Prescription Drug Discount Program Expansion................................................... 35
Program Integrity...................................................................................................................... 36
Expansion of the Recovery Audit Contractor (RAC) Program ....................................... 36
Termination of Provider Participation Under Medicaid if Terminated Under
Medicare or Other State Health Care Program ............................................................ 37
Medicaid Exclusion from Participation Relating to Certain Ownership, Control,
and Management Affiliations ..................................................................................... 37
Billing Agents, Clearinghouses, or Other Alternate Payees Required to Register
Under Medicaid ......................................................................................................... 38
Requirement to Report Expanded Set of Data Elements Under MMIS to Detect
Fraud and Abuse ........................................................................................................ 38
Prohibition on Payments to Institutions or Entities Located Outside of the United
States ......................................................................................................................... 39
Overpayments ............................................................................................................... 39
Mandatory State Use of National Correct Coding Initiative ........................................... 39
General Effective Date for Medicaid and CHIP Program Integrity Activities ................. 40
Other Program Integrity and Related Provisions Applicable to Medicaid ............................. 40
Demonstrations and Grant Funding ........................................................................................... 44
Money Follows the Person ............................................................................................ 44
Demonstration Project to Evaluate Integrated Care Around Hospitalization ................... 44
Medicaid Global Payment System Demonstration Project ............................................. 45
Pediatric Accountable Care Organization Demonstration Project ................................... 45
Medicaid Emergency Psychiatric Demonstration Project ............................................... 46
Grants for School-Based Health Centers........................................................................ 47
Incentives for Prevention of Chronic Diseases in Medicaid............................................ 47
Funding of Childhood Obesity Demonstration Project ................................................... 48
State Children’s Health Insurance Program (CHIP) ................................................................... 48
Additional Federal Financing Participation for CHIP..................................................... 49
Distribution of CHIP Allotments Among States ............................................................. 50
Extension of Funding for CHIP Through FY2015 and Other Related Provisions ............ 51
Technical Corrections to the CHIP Statute ..................................................................... 54
Miscellaneous ........................................................................................................................... 54
Medicaid Improvement Fund Rescission ....................................................................... 54
Removal of Barriers to Providing Home and Community-Based Services...................... 55
Funding to Expand State Aging and Disability Resource Centers................................... 55
Sense of the Senate Regarding Long-Term Care ............................................................ 55
Five-Year Period for [Dual Eligible] Demonstration Projects......................................... 55
Federal Coverage and Payment Coordination for Dual Eligible Beneficiaries ................ 56
Adult Health Quality Measures ..................................................................................... 57
MACPAC Assessment of Policies Affecting All Medicaid Beneficiaries ........................ 58
Protections for American Indians and Alaska Natives .................................................... 59
Establishment of Center for Medicare and Medicaid Innovation within CMS ................ 60
GAO Study and Report on Causes of Action ................................................................. 61
Public Awareness of Preventive and Obesity-Related Services....................................... 61
Section 1115 Waiver Transparency ................................................................................ 62
Congressional Research Service
.
Medicaid and CHIP Provisions in PPACA
Tables
Table 1. Federal Medicaid Medical Assistance Payment (FMAP) Rates for Required
Medicaid Expansions, Beginning 2014................................................................................... 24
Table 2. Law Sections to be Included in GAO Study on Causes of Action.................................. 61
Table A-1. Health Reform Law: Statutory References for Medicaid Changes to Eligibility ........ 63
Table A-2. Health Reform Law: Statutory References for Medicaid Changes to Benefits ........... 65
Table A-3. Health Reform Law: Statutory References for Medicaid Changes to Financing......... 66
Table A-4. Health Reform Law: Statutory References for CHIP and Medicaid Changes to
Program Integrity................................................................................................................... 67
Table A-5. Health Reform Law: Statutory References for Medicaid Changes to
Demonstrations and Grant Funding ........................................................................................ 68
Table A-6. Health Reform Law: Statutory References for Changes to CHIP............................... 68
Table A-7. Health Reform Law: Statutory References for
Miscellaneous Changes to Medicaid....................................................................................... 69
Appendixes
Appendix. Statutory References for Medicaid and CHIP provisions........................................... 63
Contacts
Author Contact Information ...................................................................................................... 70
Acknowledgments .................................................................................................................... 70
Key Policy Staff........................................................................................................................ 70
Congressional Research Service
.
Medicaid and CHIP Provisions in PPACA
Introduction
The President signed into law H.R. 3590, the Patient Protection and Affordable Care Act
(PPACA; P.L. 111-148) on March 23, 2010.1 Seven days later, a second bill, H.R. 4872, was
signed into law by the President to modify P.L. 111-148. This second law, entitled the Health Care
and Education Reconciliation Act of 2010 (hereinafter referred to as the Reconciliation Act or
HCERA; P.L. 111-152),2 was signed on March 30, 2010.3 Together these laws constitute what we
now refer to as health reform law. Health reform law makes many significant changes to the
private and public markets for health insurance, as well as modifies aspects of the publicly
financed health care delivery system. It represents the most significant reform in health care
financing since the establishment of Medicaid and Medicare in 1965.
In general, PPACA and HCERA expand health insurance coverage to many Americans who
currently are uninsured, while attempting to reduce expenditures. They also offer mechanisms to
increase care coordination, encourage more use of health prevention, and improve quality of care.
More specifically, PPACA and HCERA (1) reform the private health insurance market, (2)
impose a mandate for most legal U.S. residents to obtain health insurance,4 (3) establish the
American Health Benefits Exchanges (hereinafter referred to as exchanges) for individuals to
shop for insurance coverage; (4) expand Medicaid eligibility; (5) create programs to improve
quality of care and encourage more use of preventive services; (6) address healthcare workforce
issues;5 and (6) make a number of other Medicaid and Medicare program and federal tax code
changes.
This report provides a summary of the Medicaid and CHIP provisions in P.L. 111-148 and P.L.
111-152. To help highlight the most important Medicaid and CHIP changes, applicable provisions
are grouped into the following seven major issue areas: eligibility, benefits, financing, program
integrity, demonstrations and grant funding, CHIP, and miscellaneous. The Appendix provides a
cross walk between the provision titles and the amending sections of P.L. 111-148 and P.L. 111-
152.
Another appendix will be added to the report, in an update, to include the effective dates of each
provision. A forthcoming CRS report will include a more detailed timeline based on effective
dates for all of the Medicaid and CHIP provisions.
1 Passed by the Senate on December 24, 2009, and the House on March 21, 2010.
2 The Reconciliation Act includes two titles: (1) Coverage, Medicare, Medicaid, and Revenues, and (2) Education and
Health. Title I contains provisions related to health care and revenues including modifications made by the
Reconciliation Act to P.L. 111-148. Title II includes amendments to the Higher Education Act of 1965, which
authorizes most of the federal programs involving postsecondary education, and other health amendments.
3 Passed by the House as an amendment in the nature of a substitute to H.R. 4872 on March, 21, 2010, and passed with
amendments by the Senate on March 25, 2010. The House subsequently agreed to the Senate amendments and cleared
the bill for the White House later that same day.
4 For more information about the treatment of noncitizens and the verification of individual’s eligibility for premium
credits under the various health reform bills see CRS Report R40889, Noncitizen Eligibility and Verification Issues in
the Health Care Reform Legislation, by Ruth Ellen Wasem.
5 CRS Report R40943, Public Health, Workforce, Quality, and Related Provisions in the Patient Protection and
Affordable Care Act (P.L. 111-148), coordinated by C. Stephen Redhead and Erin D. Williams.
Congressional Research Service
1
.
Medicaid and CHIP Provisions in PPACA
Unless otherwise indicated, the Secretary of the Department of Health and Human Services is
referred to as “the Secretary” throughout this report.
Congressional Budget Office and Joint Committee on
Taxation Analysis
The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) issued a
revised cost estimate on March 20, 2010, for PPACA and HCERA. CBO estimated that PPACA
and the HCERA will reduce federal budget deficits by $143 billion over the FY2010-FY2019
period as a result of changes in direct spending and revenue. CBO’s $143 billion estimate is
composed of $124 billion in reductions and revenue from health care provisions and $19 billion
in spending reductions from education.6 CBO’s preliminary estimate of PPACA and the HCERA
showed reductions in federal deficits of $138 billion (for health care and education) over the
2010-2019 period.7 CBO and JCT previously estimated that PPACA by itself would reduce
federal deficits by $118 billion over the 2010-2019 period.8
Overview of the Medicaid and CHIP Provisions in
Health Reform Law
Key Medicaid and CHIP provisions included in health reform law are summarized below.
• Eligibility-related reforms. Beginning in 2014, or sooner at state option, the law
requires states to expand Medicaid to certain individuals who are under age 65
with income up to 133% of the federal poverty level (FPL). This reform not only
expands eligibility to a group that is not currently eligible for Medicaid (low
income childless adults), but also raises Medicaid’s mandatory income eligibility
level for certain existing groups to 133% of the FPL and represents the most
significant expansion of Medicaid eligibility in many years. The law also
modifies income counting rules when determining Medicaid eligibility for certain
populations.9 From 2014 to 2016, the federal government will cover 100% of the
Medicaid costs of these newly eligible individuals, with the percentage dropping
to 90% (with states covering the difference) by 2020.
• Maintenance of effort provisions. The law requires states to maintain current
Medicaid and CHIP eligibility levels—through 2013 for adults and 2019 for
children.
6 Congressional Budget Office, letter to Honorable Nancy Pelosi, March 20, 2010, available at http://www.cbo.gov/
ftpdocs/113xx/doc11379/Manager'sAmendmenttoReconciliationProposal.pdf.
7 Congressional Budget Office, letter to the Honorable Nancy Pelosi, March 18, 2010, available at http://www.cbo.gov/
ftpdocs/113xx/doc11355/hr4872.pdf.
8 Congressional Budget Office, letter to the Honorable Harry Reid, March 11, 2010, available at http://www.cbo.gov/
ftpdocs/113xx/doc11307/Reid_Letter_HR3590.pdf.
9 For individuals whose income will be determined using the new income counting rules, the law also specifies that an
income disregard in the amount of 5% FPL be deducted from an individual’s income when determining Medicaid
eligibility. This income counting rule effectively raises the upper income eligibility threshold for the new Medicaid
eligibility group to 138% FPL.
Congressional Research Service
2
.
Medicaid and CHIP Provisions in PPACA
• Outreach and enrollment provisions. The law includes provisions to encourage
states to improve outreach, streamline enrollment, and coordinate with the
proposed American Health Benefit Exchanges (exchanges).10
• Benefit reforms. The law adds new mandatory and optional benefits to Medicaid.
Such mandatory benefits include coverage of free-standing birth clinics, and
tobacco cessation services for pregnant woman. The law also authorizes states to
offer new optional benefits such as preventive services for adults, health homes
for persons with chronic conditions, and additional options for states to expand
home and community-based services as an alternative to institutional care.
• Payment and financing reforms. Some of the law’s reforms affecting payments
and financing include (1) increases in federal matching payments for the
eligibility expansions, (2) reductions in Medicaid disproportionate share hospital
(DSH) allotments, (3) expenditure reductions for prescription drugs including
revising the definition of the average manufacture’s price (AMP) to help make
AMP more closely reflect prices retail community pharmacies pay for
prescription drugs, (4) reductions in inappropriate hospital expenditures for
health care-acquired conditions, and (5) increases in primary care physician
payment rates for selected services.
• Increased funding for the Territories. The law provides an increase on the
territories’ Medicaid spending caps beginning with the second quarter of
FY2011.
• Program integrity reforms. The law creates enforcement and monitoring tools
and imposes new data reporting and oversight requirements on states and
providers. States will also be required to implement initiatives used by the
Medicare program, such as a national correct coding initiative and a recovery
audit contract program for their Medicaid programs. The law provides additional
program integrity funding through indexing of the Medicaid Integrity Program
for fiscal years beginning with FY2010.
• Nursing home accountability. The law adds a number of requirements to improve
the transparency of information within facilities and chains, and provides long-
term care (LTC) consumers with information on the quality and performance of
nursing homes.
• Demonstrations, pilot programs, and grants. The law provides the Secretary of
the Department of Health and Human Services (the Secretary) and state Medicaid
and CHIP programs with opportunities to test models for improving the delivery,
quality, and payment of services.
• CHIP-related provisions. The law requires states to maintain the current CHIP
structure through FY2019, but does not provide federal CHIP appropriations
beyond FY2015, at which point, if future appropriations are insufficient, CHIP
children will obtain comparable coverage through the exchanges or Medicaid, as
applicable. If new funding is made available, states will receive higher federal
matching rates for CHIP services beginning in FY2016. Upon enactment, states
10 For a description of the exchanges, see CRS Report R40942, Private Health Insurance Provisions in PPACA (P.L.
111-148) , by Hinda Chaikind et al.
Congressional Research Service
3
.
Medicaid and CHIP Provisions in PPACA
are required to maintain CHIP eligibility levels through FY2019 as a condition of
receiving federal matching funds for Medicaid expenditures (notwithstanding the
lack of corresponding federal CHIP appropriations for FY2016 through FY2019).
• Miscellaneous Medicaid and CHIP reforms. The law adds several offices within
the Centers for Medicare and Medicaid Services (CMS) to better coordinate care
across the Medicare and Medicaid/CHIP programs. One of these offices will be
dedicated to improving coordination for beneficiaries eligible for both Medicare
and Medicaid (dual eligibles). Another will add a Medicare and Medicaid
Innovation Center to develop and test new payment and service delivery models
to reduce Medicare, Medicaid, and CHIP expenditures, while preserving and
enhancing quality of care for beneficiaries.
Eligibility
Medicaid is a means-tested entitlement program operated by states within broad federal
guidelines. To qualify, an individual must meet both categorical (i.e., must be a member of a
covered group such as children, pregnant women, families with dependent children, the elderly,
or the disabled), and financial eligibility requirements.
Of the approximately 50 different eligibility “pathways” into Medicaid, including those that
existed even before health reform law was enacted, some are mandatory while others may be
offered at state option. Examples of groups that states must provide Medicaid to include pregnant
women, and poor individuals with disabilities or poor individuals over age 64 who qualify for
cash assistance under the Supplemental Security Income (SSI) program. Examples of groups that
states may choose to cover under Medicaid include pregnant women and infants with family
income between 133% FPL and 185% FPL, and “medically needy” individuals who meet
categorical requirements with income up to 133% of the maximum payment amount applicable
under states’ former Aid to Families with Dependent Children (AFDC) programs based on family
size.11 Under prior law, “childless adults” (nonelderly adults who are not disabled, not pregnant
and not parents of dependent children), for example, were generally not eligible for Medicaid,
regardless of their income.
The health reform law makes several changes to Medicaid eligibility. PPACA adds two new
mandatory eligibility groups, and several new optional eligibility groups. In addition, it makes
several modifications to existing eligibility groups, changes the way income is counted for certain
groups to determine if an individual meets Medicaid’s income eligibility requirements, and adds
provisions to facilitate outreach and enrollment in Medicaid, CHIP, and the Health Insurance
exchanges.12
11 Unlike most other eligibility groups, medical expenses (if any) may be subtracted from income in determining
financial eligibility for medically needy coverage. This is often referred to as “spend down.”
12 Similar to existing state health reform models, such as the Massachusetts Connector, the Exchange will facilitate the
purchase of qualified health benefit plans by individuals and businesses. The Exchange will not be a health insurer; but
will provide eligible individuals and small businesses a vehicle to shop and compare insurers’ health plans.
Congressional Research Service
4
.
Medicaid and CHIP Provisions in PPACA
Medicaid and Health Insurance Reform
Medicaid Coverage for the Lowest-Income Populations
(P.L. 111-148: §2001 as modified by §10201; P.L. 111-152: §1004 and §1201)
Health reform law creates a new mandatory Medicaid eligibility category for all non-elderly, non-
pregnant individuals (e.g., childless adults, certain parents, certain people with disabilities) who
are not entitled to or enrolled in Medicare Part A or enrolled in Medicare Part B, and are
otherwise ineligible for Medicaid. For such individuals (hereinafter referred to as “newly
eligible” individuals), the provision establishes 133% of FPL based on modified adjusted gross
income (or MAGI as described below) as the new mandatory minimum Medicaid income
eligibility level. For “newly eligible” individuals, Section 1004(e) of the HCERA requires states
to apply an income disregard equal to the dollar amount equivalent (expressed as a percentage of
the federal poverty line) of the difference between 133% FPL and an increase in such threshold
by 5 percentage points. This provision makes the effective upper income eligibility threshold for
“newly eligible” populations equal to 138% FPL.
Some individuals with disabilities who are not currently eligible for a state’s Medicaid program—
either because they do not meet the Supplemental Security Income program’s (SSI’s ) definition
of disability (used to determine disability for a number of Medicaid’s eligibility groups) or they
have income or asset levels that exceed their state’s threshold—may now qualify for Medicaid
under health reform law. Eligibility for Medicaid under this pathway will entitle them to
Medicaid’s comprehensive benefit package. Some individuals with disabilities who are currently
enrolled in Medicaid may transfer to this eligibility pathway if it is determined to be more
desirable, especially since no asset test applies (see the discussion following on MAGI).
As a conforming measure, the provision also changes the mandatory Medicaid income eligibility
level for poverty-related children ages 6 to 19 from 100% FPL to 133% FPL (as applied under
prior law to children under age 6). As in the case of the “newly eligible” populations, MAGI
income counting rules and the 5% income disregard will apply. Thus, in 2014, most non-elderly
citizens up to 138% FPL (i.e., 133% FPL with the 5% FPL income disregard) will be eligible for
Medicaid.
During the transitional period between April 1, 2010 and January 1, 2014, states will have the
option to expand Medicaid to “newly eligible” individuals as long as the state does not extend
coverage to (1) individuals with higher income before those with lower income or (2) parents
unless their children are enrolled in the state plan, a waiver, or in other health coverage. However,
during the optional phase-in period, no additional federal financial assistance will be available for
covering such individuals. (Beginning in 2014, states are required to extend Medicaid to the
“newly eligible” group, and additional federal financial assistance will be provided to all states to
share in the cost of covering such individuals. These financing arrangements are described in
more detail under the financing section of this report.)
PPACA also allows states to make a “presumptive eligibility” determination (subject to guidance
that will be established by the Secretary) for “newly eligible” individuals or for individuals
eligible for family coverage under Section 1931 of the Social Security Act (SSA),13 if the state
13 Section 1931 of the Social Security Act, added in 1996, allows states to cover low income parents with incomes
(continued...)
Congressional Research Service
5
.
Medicaid and CHIP Provisions in PPACA
already allows for presumptive eligibility determinations for children, and pregnant women. That
is, states may enroll such individuals for a limited period of time, before completed Medicaid
applications are filed and processed, based on a preliminary determination by Medicaid providers
of likely Medicaid eligibility. “Newly eligible” individuals must then formally apply for coverage
within a certain timeframe to continue receiving this benefit. Under prior law, such presumptive
eligibility determinations could only be made for children, pregnant women, and certain women
with breast or cervical cancer.
Financial Eligibility Requirements for “Newly Eligible” and Other Non-elderly
Populations Determined Using Modified Adjusted Gross Income (MAGI)
(P.L. 111-148: §2001 as modified by §10201; P.L. 111-152: §1004)
Generally, Medicaid’s financial eligibility requirements place limits on the maximum amount of
income, and also sometimes, assets that individuals may possess to participate. Additional
guidelines specify how states should calculate these amounts. The specific income and asset
limitations that apply to each eligibility group are set through a combination of federal parameters
and state definitions. Consequently, these standards vary across states, and different standards
apply to different population groups within states.
Under PPACA, asset tests and certain income disregards (e.g., type of expenses such as child care
costs or block of income disregards where a specified portion of family income is not counted)
will no longer be used to asses the financial eligibility of (1) “newly eligible” individuals, (2)
other non-elderly populations eligible under prior law (subject to certain exceptions as specified
below in the subsection titled “Financial Eligibility Requirements for Certain Populations Eligible
Under Prior Law”), and (3) certain CHIP-eligible individuals. The new income test for these
individuals will be based on MAGI, or in the case of an individual in a family greater than one,
the household income of such family.14
MAGI is defined as the Internal Revenue Code’s (IRC’s) Adjusted Gross Income (AGI), which
reflects a number of deductions, including trade and business deductions, losses from sale of
property, and alimony payments, increased by tax-exempt interest and income earned by U.S.
citizens or residents living abroad. Although PPACA prohibits any continued use of income
disregards under Medicaid once the new income definitions are in place, the Reconciliation Act
(Section 1004(e)) requires states determining individuals’ Medicaid eligibility under MAGI to
reduce their countable income by a certain amount. That amount will be 5% of the upper income
limit for that Medicaid eligibility pathway. MAGI and household income will also be used to
determine applicable premium and cost sharing amounts under the state plan or waiver.
(...continued)
below Aid to Families with Dependent Children 1996 thresholds. States may provide coverage to parents with higher
incomes by increasing asset and income limits and utilizing asset and income disregards.
14 MAGI and household income will be used for determining the amount of premium credit assistance for the purchase
of a qualified health benefits plan under state exchanges, described in Section 1401 of PPACA. For more information
on MAGI and household income see CRS Report R40942, Private Health Insurance Provisions in PPACA (P.L. 111-
148) , by Hinda Chaikind et al.
Congressional Research Service
6
.
Medicaid and CHIP Provisions in PPACA
Financial Eligibility Requirements for Certain Populations Eligible Under
Prior Law
(P.L. 111-148: §2001 and §2002 as modified by §10201)
Under health reform law, certain groups are exempted from income eligibility determinations
based on MAGI. Prior law’s income counting rules under Medicaid will continue to be used for
determining eligibility for certain groups, including (1) individuals who are eligible for Medicaid
through another federal or state assistance program (e.g., foster care children and individuals
receiving SSI), (2) the elderly, (3) certain disabled individuals who qualify for Medicaid on the
basis of being blind or disabled without regard to whether the individual is eligible for SSI, (4)
the medically needy, and (5) enrollees in a Medicare Savings Program (e.g., Qualified Medicare
Beneficiaries for which Medicaid pays the Medicare premiums, and/or coinsurance and
deductibles). In addition, MAGI does not affect eligibility determinations through Express Lane
(to determine whether a child has met Medicaid or CHIP eligibility requirements), for Medicare
prescription drug low-income subsidies, or for determinations of eligibility for Medicaid long
term care services.15
Any individual enrolled in Medicaid (under the state plan or a waiver) on January 1, 2014, who is
determined ineligible for medical assistance solely because of the application of the new MAGI
or household income counting rule will remain Medicaid eligible (and subject to the same
premiums and cost-sharing as applied to the individual on that date) until the later of March 31,
2014, or his/her next Medicaid eligibility redetermination date. At that point such persons could
purchase insurance, with the help of subsidies, through state exchanges.
Finally, state use of MAGI and household income to determine income eligibility for Medicaid
(and for any other purposes applicable under the state plan) will not affect or limit the application
of (1) the state plan requirement to determine an individual’s income when a Medicaid
application is processed or (2) Medicaid rules regarding sources of countable income.
In general, these provisions take effect on January 1, 2014. For a state that chooses to transition to
MAGI earlier, these provisions take effect upon the enactment of an individual state’s law.
Medicaid Benefit Coverage for The New Mandatory Eligibility Group
(P.L. 111-148: §2001 as modified by §10201)
Medicaid’s standard benefits are identified in federal statute and regulations and include a wide
range of medical services. Some Medicaid benefits are mandatory, meaning they must be made
available by states to the majority of Medicaid populations (i.e., those classified as “categorically
needy”), while other benefits may be covered at state option. As an alternative to providing all of
the mandatory and selected optional benefits under traditional Medicaid, states have the option to
15 Long term care services include institutional services, such as nursing facility care and home or community-based
services, such as home care, personal care, transportation, and care management, furnished under the state plan or a
waiver.
Congressional Research Service
7
.
Medicaid and CHIP Provisions in PPACA
enroll certain state-specified groups in benchmark and benchmark-equivalent benefit plans, as
permitted under Section 1937 of the SSA.16
Under the new law, “newly eligible” individuals will receive either benchmark or benchmark-
equivalent coverage, including Secretary-approved benchmark coverage, consistent with the
requirements of Section 1937 of the SSA. Section 1937 excludes from benchmark or benchmark-
equivalent coverage certain groups, including blind or disabled persons, hospice patients, etc.
(Any newly eligible who fall into one of these groups would also be excluded from benchmark or
benchmark-equivalent coverage.) Finally (as per the requirements of Section 1937), children
covered under the “newly eligible” group must receive all Early and Periodic Screening,
Diagnostic, and Treatment (EPSDT) services.
Maintenance of Medicaid Income Eligibility (MOE)
(P.L. 111-148: §2001 as modified by §10201)
Health reform law includes a Medicaid eligibility maintenance of effort (MOE) requirement in
which states lose access to federal financial participation under Medicaid if their eligibility
standards, methodologies, or procedures under the state’s Medicaid plan (including any waivers)
are more restrictive than the eligibility standards, methodologies, or procedures, under a plan (or
waiver) in effect as of the date of enactment (i.e., March 23, 2010). For adult populations, the
MOE requirements remain in effect from the date of enactment through the date the exchanges
(established by the state under Section 1311 of PPACA) are fully operational, as determined by
the Secretary. For any Medicaid eligible child who is under age 19 (or such higher age as the state
may have elected), the MOE will continue through September 30, 2019.17,18
The requirement to use MAGI when determining Medicaid income eligibility (as described
above) will not affect compliance with the MOE requirement. States will be permitted to expand
Medicaid eligibility or move populations covered under a waiver to state plan coverage at the
same (or higher) eligibility level that applied under the waiver without affecting compliance with
the Medicaid eligibility MOE requirements.
Between January 1, 2011 and December 31, 2013, a state will be exempt from the MOE
requirement for optional non-pregnant, non-disabled adult populations whose income is above
133% FPL if the state certifies to the Secretary that the state is currently experiencing a budget
deficit or projects to have a budget deficit in the following state fiscal year. The state may make
such certification on or after December 31, 2010. For such states, the MOE exemption will apply
from the date the state submits the certification to the Secretary through December 31, 2013.
16 For more information on benchmark and benchmark-equivalent coverage, including the recently enacted changes to
this coverage, see the Benefits section of this report.
17 Section 2101 P.L. 111-148 contains a CHIP MOE provision. Upon enactment, states would be required to maintain
income eligibility levels for CHIP through September 30, 2019 as a condition of receiving payments under Medicaid.
Specifically, with the exception of waiting lists for enrolling children in CHIP or enrolling CHIP-eligible children in
certified exchange plans, states could not implement eligibility standards, methodologies, or procedures that are more
restrictive than those in place on the date of enactment. However, states could expand their current income eligibility
levels—that is, states could enact less restrictive standards, methodologies or procedures.
18 For more information on the State Children’s Health Insurance Program, see CRS Report R40444, State Children’s
Health Insurance Program (CHIP): A Brief Overview, by Elicia J. Herz, Chris L. Peterson, and Evelyne P.
Baumrucker.
Congressional Research Service
8
.
Medicaid and CHIP Provisions in PPACA
States are required to establish Medicaid income eligibility thresholds for state plan services (or
waiver services) using MAGI levels that are not less than the effective income eligibility levels
applicable as of the date of enactment. To meet the MOE requirements during the transition to
MAGI and household income (described above), among other requirements, states are required to
work with the Secretary to establish an equivalent income test that ensures that individuals
eligible for Medicaid services as of the date of enactment will not lose coverage. The Secretary is
permitted to waive provisions of Medicaid or CHIP to ensure that states establish income and
eligibility determination systems that protect beneficiaries.
Health Care Power of Attorney
(P.L. 111-148: §2955)
Under the federal foster care program (SSA Title IV-E) a state is required to have in place a case
review system for each child in foster care to, among other things, periodically review the child’s
status in foster care and to develop and carry out a permanency plan for the child. The case
review system must ensure that a transition plan is developed for youth aging out of a state’s
foster care system. This usually occurs at age 18, but states can elect to cover foster care up to age
21. The plan must include specific options on housing, health insurance, education, local
opportunities for mentors and continuing support services, and workforce supports and
employment services. Under the Chafee Foster Care Independence Program (CFCIP; SSA §477),
states receive funds to provide independent living services for youth who are expected to age out
of foster care and for those who have already aged out of care. As part of their application for
these funds, states must provide certain certifications regarding how the programs will be carried
out. Finally, under the Stephanie Tubbs Jones Child Welfare Services Program (SSA Title IV-B,
Subpart 1), states are required to develop a plan for the ongoing oversight and coordination of
health care services for children in foster care. The state child welfare agency and the state agency
that administers Medicaid must coordinate and collaborate in the development of this plan, and
the plan must outline specific steps to ensure that children in foster care have their health care
needs identified and appropriately met and that medical information for children in foster care is
updated and appropriately shared.
Health reform law requires that the mandatory transition plan for a youth who is about to age out
of foster care include information about the importance of designating another individual to make
health care treatment decisions on behalf of the youth if he or she becomes unable to participate
in these decisions and either does not have a relative who would be authorized to make these
decisions under state law or does not want that relative to make those decisions. In addition, the
transition plan must provide the youth with the option to execute a health care power of attorney,
health care proxy, or other similar document recognized under state law.
States are required, as part of their application for CFCIP funds, to certify that foster care (or
former foster care) adolescents receiving independent living services also receive education about
(1) the importance of designating an individual to make health care treatment decisions for them
if appropriate, (2) whether a health care power of attorney, health care proxy, or other similar
document is recognized under state law and (3) how to execute such a document if desired.
Finally, health reform law requires that the health care oversight plan developed collaboratively
between the state child welfare agency and the state Medicaid agency outline steps to ensure that
the health-care related components of the transition plan for youth aging out of foster care are
met. These include options for health insurance, information about a health care power of
Congressional Research Service
9
.
Medicaid and CHIP Provisions in PPACA
attorney, health care proxy, or other similar document recognized by state law, and the option to
execute such a document. This provision is effective on October 1, 2010.
Medicaid Coverage for Former Foster Care Children
(P.L. 111-148: §2004 as modified by §10201)
Youth ages 19 or 20 may qualify for Medicaid coverage under several of the existing mandatory
and optional eligibility pathways, three of which target individuals who were recently discharged
from the child welfare system (i.e., Chafee Foster Care Independence Program (CFCIP)/Title IV-
E, “Ribicoff” children, and youth participating in State Adoption Assistance Agreements).
Health reform law adds a new mandatory Medicaid eligibility group to include individuals who
are (1) under 26 years of age, (2) not eligible or enrolled under existing Medicaid mandatory
eligibility groups (or who are described in any of the existing Medicaid mandatory eligibility
groups but have income that exceeds the upper income eligibility limit established under any such
group), (3) were in foster care under the responsibility of the state on the date of attaining 18
years of age (or such higher age as the state has elected) and (4) were enrolled in the Medicaid
state plan or under a waiver while in such foster care. Health reform law also allows states to
make “presumptive eligibility” determinations for these individuals. The provision also adds this
new group of foster care youth to those exempt from enrollment in Medicaid benchmark plans
(even if such individuals also meet the definition of the “newly eligible” mandatory expansion
population). Benchmark and benchmark equivalent plans19 are permitted as an alternative to
regular Medicaid benefits under Section 1937 of the Social Security Act, and are nearly identical
to those offered through CHIP. This provision is effective as of January 1, 2014.
Protection for Recipients of Home and Community-Based Services Against
Spousal Impoverishment
(P.L. 111-148: §2404)
Generally, when a married individual applies to Medicaid, the combined income and assets of the
couple are considered together to determine program eligibility. Medicaid law contains special
rules, however, for situations in which one spouse applies for nursing home benefits under
Medicaid and the other spouse does not apply for Medicaid coverage. Under these rules, referred
to as spousal impoverishment protections, spouses remaining in the community do not have to
meet the same stringent income and asset tests as their counterparts. By allowing them to retain
higher amounts of income and assets, these protections are intended to better enable community
spouses to continue residing in their homes or other community-based settings. These protections
are also intended to prevent the impoverishment of those spouses who do not apply to Medicaid.
Under Medicaid law, states are required to apply spousal impoverishment protections to
applicants for Medicaid nursing home care. Under prior law, they were given the option to apply
these protections to applicants for certain home and community-based services (e.g., waivers
under Sections 1915(c) and (d), and Section 1115 of SSA). In addition, Medicaid law previously
19 For more information on benchmark and benchmark-equivalent coverage, including the recently enacted changes to
this coverage, see the Benefits section of this report.
Congressional Research Service
10
.
Medicaid and CHIP Provisions in PPACA
prohibited states from applying spousal impoverishment protections to people who qualify for
certain Medicaid-covered home and community-based services through an eligibility group
known as medically needy. The medically needy group allows for the enrollment in Medicaid of
certain persons with exceptionally high medical expenses.
The law makes three major changes to current Medicaid law. First, states are now required to
apply spousal impoverishment rules to applicants who apply to Medicaid to receive certain home
and community-based services (i.e., authorized under Sections 1915(c), (d), and (i) and under
Section 1115 of SSA). Second, states are now required to apply spousal impoverishment
protections when determining eligibility for medically needy individuals applying for certain
home and community-based services. These two changes will sunset after a five-year period
beginning on January 1, 2014. Third, another provision in the law states to use the HCBS state
plan benefit option (Section 1915 (i)) as an eligibility pathway for Medicaid for certain people
with long-term care needs. Spousal impoverishment rules will now apply to this new eligibility
pathway. See the description of these provisions entitled “Removal of Barriers to Providing Home
and Community-Based Services”.
Optional Eligibility Expansions
Non-elderly, Non-pregnant Individuals with Family Income Above 133% of
the FPL
(P.L. 111-148: §2001 as modified by §10201)
Beginning on January 1, 2014 the law creates a new optional Medicaid eligibility category for all
non-elderly, non-pregnant individuals (e.g., childless adults, and certain parents) who are
otherwise ineligible for Medicaid, or enrolled in an existing Medicaid eligibility group. States
have the option of covering these individuals up to a maximum level specified in the Medicaid
state plan (or waiver), and income eligibility for this new group will be determined based on
MAGI.20 States will be permitted to phase in Medicaid coverage to these new individuals based
on their income, as long as the state does not extend coverage to (1) individuals with higher
income before those with lower income, or (2) parents unless their child is enrolled in the state
plan, a waiver, or in other health coverage. States may rely on this state plan option to meet the
MOE requirements, as described in the Maintenance of Medicaid Income Eligibility (MOE)
provision above. The increased FMAP determined under the American Recovery and
Reinvestment Act of 2009 is not available for this new optional eligibility group.
State Eligibility Option for Family Planning Services
(P.L. 111-148: §2303)
“Family planning services and supplies” is a mandatory Medicaid benefit for the majority of
beneficiaries of childbearing age (including minors considered to be sexually active) who desire
such services and supplies. States are permitted to provide family planning services under
20 For individuals whose income will be determined using MAGI, the law also specifies that an income disregard in the
amount of 5% FPL be deducted from an individual’s income when determining Medicaid eligibility.
Congressional Research Service
11
.
Medicaid and CHIP Provisions in PPACA
Medicaid for populations who are not otherwise eligible for traditional Medicaid (e.g., non-
pregnant, non-disabled childless adults) through special waivers.
Health reform law adds a new optional categorically needy eligibility group to Medicaid. This
new group will be comprised of (1) non-pregnant individuals with income up to the highest level
applicable to pregnant women covered under the Medicaid or CHIP state plan, and (2) at state
option, individuals eligible under existing special waivers that provide family planning services
and supplies. Benefits will be limited to family planning services and supplies and will also
include related medical diagnosis and treatment services.
The new law also allows states to make a “presumptive eligibility” determination for individuals
eligible for such services through the new optional eligibility group. In addition, states will not be
allowed to provide Medicaid coverage through benchmark or benchmark-equivalent plans,21
which are permissible alternatives to traditional Medicaid benefits, unless such coverage includes
family planning services and supplies. This provision is effective upon enactment.
Removal of Barriers to Providing Home and Community-Based Services
(P.L. 111-148: §2402)
Under the Deficit Reduction Act of 2005 (P.L. 109-171, DRA), Congress gave states the option to
extend HCBS to Medicaid beneficiaries under the HCBS state plan option (Section 1915(i) of the
Social Security Act) without requiring a Secretary-approved waiver for this purpose (under
Sections 1915(c) or 1115 of the Social Security Act).
Eligibility
Federal law imposes certain limitations on the characteristics of beneficiaries who may obtain
these section 1915(i) services in a state. Some of these restrictions change under health reform
law. Specifically, according to prior law, this state plan option could only be extended to those
Medicaid beneficiaries whose income did not exceed 150% of poverty and who met a state’s
needs-based criteria. The needs-based criteria, defined by states, could be no less stringent than
the criteria the state uses to determine eligibility for institutional care in a nursing facility,
intermediate care facility for the mentally retarded (ICF/MR), or hospital.
The new law allows states to extend access to this benefit to persons with income up to 300% of
the SSI benefit rate who are receiving HCBS services under a home and community-based waiver
authorized under sections 1915 (c), (d) or (e) of the SSA, or under Section 1115 off SSA
(Research and Demonstration waivers). Furthermore, the law established section 1915(i) as a new
optional eligibility pathway into the program. Under the new law, states may also extend full
Medicaid benefits, as well as this HCBS state plan benefit, to this new eligibility group.
Targeting
Under prior law, states could target the section 1915(i) benefit to a selected population by
defining a single benefit package, either broadly or narrowly, specifying that needs-based criteria
21 For more information on benchmark and benchmark-equivalent coverage, including the recently enacted changes to
this coverage, see the Benefits section of this report.
Congressional Research Service
12
.
Medicaid and CHIP Provisions in PPACA
for access to the benefit as expansive or narrow, and extending coverage to geographic areas that
are either statewide or less than statewide. Prior law also allowed states to cap enrollment
numbers and create waiting lists for those above the cap.
The new law changes the way states can target specific populations in their states under section
1915(i). First, prior law allowed states the ability to use this benefit option to offer only a single
benefit package to a single target population. The new law allows states to offer different
packages of services to different target groups of beneficiaries. States can now elect to target the
provision of HCBS to specific populations and to differ the type, amount, duration or scope of the
benefits for each of these populations. Such elections will be for five-year periods (including an
initial five-year period and five-year renewal periods). Enrollment and/or the provision of
services can be phased-in, (as long as the phase-in is accomplished prior to the end of the initial
five-year period).
Second, under the new law, states are no longer allowed to cap the number of persons eligible for
this benefit.
Third, to help states contain enrollment, Medicaid law allows states to modify their needs-based
criteria without having to obtain prior approval from the Secretary, if actual enrollment in 1915(i)
exceeds states’ projected enrollment, and certain other requirements are met. Under prior law,
states that made their needs-based criteria more stringent were required to continue enrollment of
those individuals who would become ineligible based on the new criteria for at least 12 months.
Under the health reform law, such individuals will continue to be eligible until such time as the
individuals no longer meets the state’s former needs-based criteria.
Benefits
Under prior law, the HCBS state plan option allowed states to offer home and community-based
services from a list of services contained in statute. The new law expanded that list of services to
include state-selected services, other than room and board, that are approved by the Secretary.
Outreach and Enrollment Facilitation
Streamlining Procedures for Enrollment Through a Health Insurance Exchange
and Medicaid, CHIP, and Other Health Subsidy Programs
(P.L. 111-148: §1413)
Under health reform law, the Secretary is required to establish a system to ensure that individuals
who apply for health insurance coverage through an exchange and are found to be eligible for
Medicaid or CHIP are enrolled in Medicaid or CHIP. To do this, the Secretary is required to
develop and distribute a standard application form for all state health subsidy programs.
States will be permitted to develop and use their own application forms as long as they are
consistent with those issued by the Secretary, and/or to use supplemental or alternative enrollment
forms when household income is not used by the state in determining eligibility.
Applicants will be permitted to submit their forms online, by telephone, in person, or by mail to a
state exchange, Medicaid, or CHIP program. However, states will be required to develop a secure,
Congressional Research Service
13
.
Medicaid and CHIP Provisions in PPACA
electronic interface for eligibility for premium assistance for the purchase of health insurance
through an exchange based on the standard application form. States will also be required to verify
eligibility data supplied by an applicant when determining eligibility for a health subsidy program
in a manner consistent with specified standards (e.g., privacy, security, accuracy, and
administrative efficiency). Finally, the Secretary will be required to ensure that applicants receive
notice of eligibility for state health subsidy programs, or notice when they are determined
ineligible because information on their application is inconsistent with electronic verification
data, or is otherwise insufficient to determine eligibility. This provision is effective January 1,
2014.
Enrollment Simplification and Coordination with State Health Insurance
Exchanges
(P.L. 111-148: §2201)
As a condition of the Medicaid state plan and receipt of any federal financial assistance after
January 1, 2014, health reform law requires states to meet the following requirements:
(1) States will be required to establish procedures for
• enabling individuals to apply for, or renew enrollment in, Medicaid or CHIP
through an internet website allowing electronic signatures;
• enrolling individuals who are identified by an exchange as being eligible for
Medicaid or CHIP, without any further determination by the state;
• ensuring that individuals who apply for Medicaid and/or CHIP but are
determined ineligible for either program are screened for enrollment eligibility in
qualified plans offered through the exchanges, and if applicable, obtain premium
assistance for such coverage without having to submit an additional or separate
application;
• ensuring that the state Medicaid agency, CHIP agency, and the exchanges utilize
a secure electronic interface that allows for eligibility determinations and
enrollment in Medicaid, CHIP or premium assistance for a qualified plan as
appropriate;
• ensuring that Medicaid and/or CHIP enrollees who are also enrolled in qualified
health benefits plan through the exchanges are provided Medicaid medical
assistance and/or CHIP child health assistance that is coordinated with the
exchange coverage, including services related to Early and Periodic Screening,
Diagnostic and Treatment (EPSDT); and
• conduct outreach and enrollment of vulnerable populations such as
unaccompanied homeless youth, racial and ethnic minorities, and individuals
with HIV/AIDS;
(2) The state Medicaid and CHIP agencies may enter into an agreement with the exchanges under
which each agency may determine whether a state resident is eligible for premium assistance for
the purchase of a qualified health benefits plan under an exchange, so long as the agreement
meets specified requirements to reduce administrative costs, eligibility errors, and disruptions in
coverage;
Congressional Research Service
14
.
Medicaid and CHIP Provisions in PPACA
(3) The Medicaid and CHIP agency will be required to comply with the requirements for the
system established under §1413 (relating to streamlined procedures for enrollment through
exchanges, Medicaid and CHIP); and
(4) States are required to establish a website (not later than January 1, 2014) that links Medicaid
to the state exchanges. The website would allow individuals who are Medicaid-eligible and
eligible to receive premium assistance for the purchase of a qualified health benefits plan under
the exchanges to compare benefits, premiums, and cost-sharing. In the case of a child, the website
must allow individuals to compare benefits they will receive under Medicaid to the coverage
available through exchange plans (including any supplemental Medicaid benefits that are required
so the exchange coverage meets basic minimum standards established by the law). The law does
not limit or modify the states’ ability to assess an individual’s eligibility for home and
community-based services under the state plan or under a waiver.
Permitting Hospitals to Make Presumptive Eligibility Determinations for All
Medicaid Eligible Populations
(P.L. 111-148: §2202)
Under current law, states may enroll certain groups (i.e., children, pregnant women, and certain
women with breast and cervical cancer) for a limited period of time before completed Medicaid
applications are filed and processed, based on a preliminary determination by a Medicaid
provider of likely Medicaid eligibility. Such individuals must then formally apply for coverage
within a certain timeframe to continue receiving Medicaid benefits. Presumptive eligibility begins
on the date a qualified Medicaid provider determines that the applicant appears to meet eligibility
criteria and ends on the earlier of (1) the date on which a formal determination is made regarding
the individual’s application for Medicaid, or (2) in the case of an individual who fails to apply for
Medicaid following the presumptive eligibility determination, the last day of the month following
the month in which presumptive eligibility begins.
Health reform law allows states to permit all hospitals that participate in Medicaid to make
presumptive eligibility determinations, based on a preliminary determination of likely Medicaid
eligibility, for all Medicaid eligible populations. Such preliminary eligibility determinations are
subject to guidance established by the Secretary and will need to follow the same requirements as
currently apply to presumptive eligibility (i.e., for children, pregnant women, and certain women
with breast or cervical cancer) regardless of whether the state has opted to extend presumptive
eligibility to any of these groups. States are permitted to enroll such individuals for a limited
period of time before completed Medicaid applications are filed and processed. Beneficiary
claims submitted during the period of presumptive eligibility will not be included among those
reviewed to determine if improper payments were made based on errors in the state agency’s
eligibility determinations. The provision is effective on January 1, 2014.
Standards and Best Practices to Improve Enrollment of Vulnerable and
Underserved Populations
(P.L. 111-148: §2201)
The Children’s Health Insurance Program Reauthorization Act (CHIPRA) included provisions to
facilitate outreach and enrollment in Medicaid and CHIP. CHIPRA appropriated $100 million in
Congressional Research Service
15
.
Medicaid and CHIP Provisions in PPACA
outreach and enrollment grants above and beyond the regular CHIP allotments for fiscal years
2009 through 2013. Ten percent of the outreach and enrollment grants are directed to a national
enrollment campaign, and 10% will be targeted to outreach for American Indian and Alaska
Native children. The remaining 80% are distributed among state and local governments and to
community-based organizations for purposes of conducting outreach campaigns with a particular
focus on rural areas and underserved populations. Grant funds are also targeted at proposals that
address cultural and linguistic barriers to enrollment. CHIPRA also requires state plans to
describe the procedures used to reduce the administrative barriers to enrollment of children and
pregnant women in Medicaid and CHIP and to ensure that such procedures are revised as often as
the state determines is appropriate to reduce newly identified barriers to enrollment.
Health reform law requires the Secretary to work with stakeholders to develop and issue guidance
(that meets specified requirements) to states regarding standards and best practices to help
improve enrollment of vulnerable populations in Medicaid and CHIP. Vulnerable populations
include children, unaccompanied homeless youth, children and youth with special health care
needs, pregnant women, racial and ethnic minorities, rural populations, victims of abuse or
trauma, individuals with mental health or substance-related disorders, and individuals with
HIV/AIDS. Such guidance must be published no later than April 1, 2011. Not later than two years
after enactment and annually thereafter, the Secretary is required to review and report to Congress
on state progress in implementing the standards and best practices identified in the guidance, and
in increasing the enrollment of vulnerable populations under Medicaid and CHIP.
New Reporting Requirements
(P.L. 111-148: §2001 as modified by §10201)
Health reform law requires states to report on changes in Medicaid enrollment beginning January
2015, and every year thereafter. As a part of these reporting requirements, states must submit
enrollment estimates of the total number of “newly enrolled” individuals by fiscal year,
disaggregated by: (1) children, (2) parents, (3) non-pregnant childless adults, (4) disabled
individuals, (5) elderly individuals, and (6) such other categories or sub-categories of individuals
eligible for Medicaid as the Secretary may require. States are also required to report on their
outreach and enrollment processes, and any other data reporting specified by the Secretary to
monitor enrollment and retention in Medicaid. The Secretary is required to submit a report to the
appropriate Committees of Congress (beginning in April 2015 and every year thereafter) on total
new enrollment in Medicaid by state, as well as recommendations for improving Medicaid
enrollment.
Benefits
Medicaid standard benefits are identified in federal statute and regulations and include a wide
range of acute and long-term care services and supplies. Additional benefits include premium
payments for coverage provided through Medicaid managed care arrangements or for employer-
sponsored insurance, and Medicare premium and cost-sharing support for persons dually eligible
for both Medicare and Medicaid.
Congressional Research Service
16
.
Medicaid and CHIP Provisions in PPACA
Modifications to DRA Benchmark and Benchmark-Equivalent Coverage
(P.L. 111-148: §2001(c))
As an alternative to traditional benefits, the Deficit Reduction Act (DRA; P.L. 109-171) gave
states the option to provide Medicaid to state-specified groups through enrollment in benchmark
and benchmark-equivalent coverage similar to coverage available under the State Children’s
Health Insurance Program (CHIP). Benchmark coverage includes (1) the standard Blue
Cross/Blue Shield preferred provider option under the Federal Employees Health Benefits
Program (FEHBP), (2) the coverage generally available to state employees, and (3) the coverage
offered by the largest commercial HMO in the state. Benchmark-equivalent coverage must
include basic benefits (i.e., inpatient and outpatient hospital services, physician services, lab/x-
ray, well-child care including immunizations, and other appropriate preventive services
designated by the Secretary), and must include at least 75% of the actuarial value of coverage
under the selected benchmark option for specific additional benefits (i.e., prescription drugs,
mental health services, vision care and hearing services). Benchmark and benchmark-equivalent
coverage must include Early and Periodic Screening, Diagnostic and Treatment (EPSDT) services
(whether provided by the issuer of such coverage or otherwise) as well as access to services
provided by rural health clinics and federally qualified health centers.
Health reform law modifies benchmark and benchmark-equivalent benefit packages available
under Medicaid. Such packages will be required to provide at least essential benefits as of
January 1, 2014. Essential health benefits will include at least: (1) ambulatory patient services, (2)
emergency services, (3) hospitalization, (4) maternity and newborn care, (5) mental health and
substance use disorder services, including behavioral health treatment, (6) prescription drugs, (7)
rehabilitative and habilitative services and devices, (8) laboratory services, (9) preventive and
wellness services and chronic disease management, and (10) pediatric services, including oral and
vision care. For Medicaid benchmark-equivalent plans, prescription drugs and mental health
services will be added to the list of basic services that must be covered under the plan. Also, for
benchmark-equivalent coverage, states will be required to demonstrate that the coverage has an
actuarial value of at least 75% for vision and hearing services only.
In the case of any benchmark benefit package or benchmark-equivalent coverage offered by an
entity that is not a Medicaid managed care plan and that provides both medical and surgical
benefits and mental health or substance use disorder benefits, such plan will be required to ensure
that the financial requirements and treatment limitations applicable to such benefits comply with
the mental health services parity requirements of Section 2705(a) of the Public Health Services
Act in the same manner as these requirements apply to a group health plan. Coverage that
provides EPSDT services will be deemed to meet the mental health services parity requirement.
Premium Assistance
(P.L. 111-148: §2003 as modified by §10203(b))
Health reform law also permits states to offer premium assistance with wrap-around benefits (i.e.,
Medicaid covered services not included in employer plans) to Medicaid child populations when it
is cost-effective to do so. Premium assistance plans are determined cost effective if (1) the
amount of expenditures under the state CHIP plan (including administrative costs) that the state
would have made to provide comparable coverage of the children (or families) involved, or (2)
the aggregate amount of expenditures that the state would have made under CHIP (including
Congressional Research Service
17
.
Medicaid and CHIP Provisions in PPACA
administrative expenses) for providing coverage under the plan for all such children (or
families).22 However, beneficiaries will not be required to apply for enrollment in employer plans,
and individuals will be permitted to disenroll from such plans at any time. In addition, states will
be required to pay premiums and cost-sharing in excess of amounts permitted under current
Medicaid program rules (i.e., nominal amounts specified in regulations and inflation adjusted
over time, or higher amounts authorized in P.L. 109-171, the DRA). These provisions are
effective as if included in P.L. 111-3 (CHIPRA).
Birthing Centers
(P.L. 111-148: §2301)
Health reform law also requires Medicaid coverage of care provided in free-standing birthing
centers. In addition, states will be required to separately pay providers administering prenatal,
labor and delivery or postpartum care in freestanding birthing centers, such as nurse midwives
and birth attendants, as deemed appropriate by the Secretary. This provision is effective on the
date of enactment (except if state legislation is required, in which case additional time for
compliance is permitted).
Adult Preventive Care
(P.L. 111-148: §4106)
Currently, most Medicaid beneficiaries under age 21 are entitled to EPSDT services, which
include well-child visits, immunizations, laboratory tests, as well as vision, dental, and hearing
services at regular intervals. Also under prior law, some preventive services may be available to
Medicaid adults (persons age 21 and over) through an optional benefit covering “other diagnostic,
screening, preventive and rehabilitative services.” Under P.L. 111-148, the previously existing
Medicaid option to provide “other diagnostic, screening, preventive, and rehabilitation services”
will be explicitly expanded to include (1) any clinical preventive services recommended (i.e.,
assigned a grade of A or B) by the United States Preventive Services Task Force (USPSTF), and
(2) adult immunizations recommended by the Advisory Committee on Immunization Practices
(ACIP) and their administration. The effective date of this provision will be January 1, 2013.
For the purposes of this provision, non-pregnant adults under age 65 who qualify for Medicaid
are classified as either (1) newly eligible individuals (i.e., those ineligible for Medicaid based on
state eligibility criteria in place on December 1, 2009) or (2) formerly eligible individuals (i.e.,
those eligible for Medicaid based on state eligibility criteria in place on December 1, 2009).
Beginning January 1, 2013, the regular FMAP (which generally ranges between 50 to 76% in any
given fiscal year, depending on the state) will be explicitly available for adult preventive services
and immunizations. In addition, states will receive an increased FMAP for these services when
certain conditions are met. For the “newly eligible individuals” that receive adult preventive
services (including immunizations) for which cost-sharing is prohibited, states will receive a one
percentage point increase in their FMAP, in addition to the increased FMAP applicable to services
22 The cost effectiveness test for Medicaid state plan option for premium assistance for children was modified under
P.L. 111-148: §10203(b).
Congressional Research Service
18
.
Medicaid and CHIP Provisions in PPACA
provided to newly eligible mandatory individuals. Those increased FMAPs for adult preventive
services for newly eligible individuals will be 101% for each of 2014 through 2016, 96% in 2017,
95% in 2018, 94% in 2019, and 91% in 2010 and beyond.
For most formerly eligible individuals that receive adult preventive services (including
immunizations) for which cost-sharing is prohibited, states will receive the regular FMAP plus an
additional one percentage point.
Smoking Cessation Services for Pregnant Women
(P.L. 111-148: §4107)
Pregnancy-related services are a mandatory benefit for the majority of Medicaid beneficiaries.
Those services include prenatal, delivery, postpartum care, family planning services, as well as
services to ameliorate conditions that complicate pregnancy (e.g., those that threaten the carrying
the fetus to full-term or the safe delivery of the fetus). P.L. 111-148 adds counseling and
pharmacotherapy to promote cessation of tobacco use by pregnant women as a mandatory benefit
under Medicaid beginning on October 1, 2010. Such coverage includes prescription and non-
prescription tobacco cessation agents approved by the Food and Drug Administration (FDA).
Services will be limited to those recommended for pregnant women in “Treating Tobacco Use
and Dependence: 2008 Update: A Clinical Practice Guideline” (and if applicable, as subsequently
modified), as well as other related tobacco cessation services designated by the Secretary.23 Cost-
sharing for such counseling and pharmacotherapy for pregnant women will be prohibited, as is
true for other pregnancy-related services under Medicaid. Beginning January 1, 2013, states will
receive a one percentage point increase in their regular FMAP for these smoking cessation
services for pregnant women if they elect to cover the new optional adult preventive care benefit
(described above).
Scope of Coverage for Children Receiving Hospice Care
(P.L. 111-148: §2302)
States have the option to offer hospice services under Medicaid and nearly all states do so.
Medicaid beneficiaries who elect to receive such services must waive the right to all other
services related to the individual’s diagnosis of a terminal illness or condition, including
treatment. PPACA allows payment for services, as defined by the state, provided to Medicaid
children, also defined by the state, who have voluntarily elected to receive hospice services,
without foregoing coverage of and payment for other services that are related to the treatment of
the children’s condition for which a diagnosis of terminal illness has been made. This provision
also applies to CHIP, and is effective upon enactment.
Community First Choice Option
(P.L. 111-148: §2401 and P.L. 111-152: §1205)
23 States will be allowed to continue to exclude coverage of agents to promote smoking cessation for other Medicaid
beneficiaries, as permitted in prior law.
Congressional Research Service
19
.
Medicaid and CHIP Provisions in PPACA
Personal care attendants provide assistance with activities of daily living (ADL) and/or
instrumental activities of daily living (IADL) to individuals with a significant disability. ADLs
generally refer to eating, bathing and showering, using the toilet, dressing, walking across a small
room, and transferring (getting in or out of a bed or chair). IADLs include preparing meals,
managing money, shopping for groceries or personal items, performing housework, using a
telephone, among others. Under current law, states are permitted to cover personal care services,
including personal care attendant services, under a variety of optional statutory authorities such as
(1) the personal care state plan benefit; (2) self-directed personal care state plan benefit; (3) home
and community-based services state plan benefit (Section 1915(i)); (4) HCBS Waiver (Sections
1915(c)(d)(e)); and (5) Research and Demonstration Waivers (Section 1115). Although states
have significant flexibility to determine the amount and scope of these benefits, each statutory
authority includes a unique set of rules limiting the way in which a state may extend this benefit
to Medicaid beneficiaries.
Health reform law allows states to offer consumer-directed personal care attendant services under
a new statuary authority, and provides an increased match rate for doing so of 6 percentage
points. Beginning October 1, 2011, states can offer home and community-based attendant
services as an optional benefit to Medicaid beneficiaries whose income does not exceed 150% of
the federal poverty level, or if greater, the income level applicable for an individual who has been
determined to require the level of care offered in a hospital, nursing facility, or Intermediate Care
Facility for the Mentally Retarded (ICF/MR), or an institution for mental disease.
Services offered under this benefit option will include, among others, home and community-
based attendant services and supports to assist eligible individuals in accomplishing ADLs,
IADLs, and health-related tasks. Such services must be delivered under a person-centered plan of
care in which attendants are selected, managed, and dismissed by the individual (or his or her
representative). Services and supports may also include expenditures for transition costs, such as
from a nursing home to the community. Such costs might include first month’s rent and utilities,
bedding, and basic kitchen supplies, among others. Further, attendants must be qualified to
deliver such services and may include family members (as defined by the Secretary).
To obtain approval from the Secretary to offer this benefit, states must (1) collaborate with a
state-established Development and Implementation Council; (2) provide these services on a state-
wide basis and in the most integrated setting, as is deemed appropriate to meet the needs of the
individual; (3) in the first full fiscal year of operation, maintain or exceed the preceding fiscal
year’s level of state Medicaid expenditures for individuals with disabilities or elderly individuals;
and (4) establish and maintain a comprehensive, continuous quality assurance system, among
other requirements.
No later than December 31, 2013, the Secretary must submit to Congress an interim report on the
findings of the evaluation. A final report on the community-based attendant services and supports
option is due to Congress by December 31, 2015.
State Option to Provide Health Homes for Enrollees with Chronic Conditions
(P.L. 111-148: §2703)
A health home, also referred to as medical home, provides patients with access to a primary care
medical provider, and is thought to ultimately improve patient health outcomes. In theory, a
medical home would provide participants with access to a personal primary care physician, or
Congressional Research Service
20
.
Medicaid and CHIP Provisions in PPACA
specialist, with an office care team, who would coordinate and facilitate care. Physician-guided,
patient-centered care is expected to enhance patient adherence to recommended treatment and
avoid (1) hospitalizations, unnecessary office visits, tests, and procedures; (2) use of expensive
technology or biologicals when less expensive tests or treatments are equally effective; and (3)
patient safety risks inherent in inconsistent treatment decisions. In practice, medical homes are
physicians offices that, in exchange for a fee, provide care coordination and management to
patients.
PPACA establishes a new Medicaid state plan option, beginning January 1, 2011, under which
certain Medicaid enrollees with chronic conditions could designate a health home, as defined by
the Secretary.
In states that choose to offer this benefit option, individuals with chronic conditions will be
eligible. For the purpose of this benefit, chronic conditions include a mental health condition, a
substance abuse disorder, asthma, diabetes, heart disease, and a Body Mass Index over 25
(overweight). To be eligible, the patient would have, at a minimum, (1) at least two chronic
conditions; (2) one chronic condition and be at risk of having a second chronic condition; or (3)
one serious and persistent mental health condition. Higher eligibility requirements, however, can
be established by the Secretary.
To assemble their health home, patients can designate providers, teams of health care
professionals operating with providers, or health teams. A designated provider can be a physician,
clinical practice or clinical group practice, rural clinic, community health center, community
mental health center, home health agency, pediatrician, gynecologist, obstetrician or other
qualified entity, as determined by the state and approved by the Secretary. To be qualified, the
provider must offer services including comprehensive care management, care coordination, health
promotion, transitional care, patient and family support, referral to community and social support
services, and use of health information technology. In all cases, the Secretary will establish the
standards for qualification.
The health home state option will be funded though a federal/state matching program. States will
be reimbursed for payments by the federal government at a 90% FMAP for the first eight fiscal
quarters. States that choose to implement it will receive assistance according to the Federal
Medical Assistance Percentage (FMAP) after the first eight fiscal year quarters. States can use a
variety of payment schedules to reimburse providers. In addition, the state plan must provide
referrals from hospitals to providers; coordination across substance abuse, mental health, and
other services; various monitoring arrangements; and reports on the quality of the health home
option.
Beginning January 1, 2011, the Secretary may award planning grants to the states for developing
their health home programs. Each state must match the federal contribution using its normal
matching rate. The total payments made to the states will not exceed $25 million.
The Secretary is required to use an independent entity to evaluate this program. The evaluation
will focus on whether the program reduces hospital admissions, emergency room visits, and
admissions to skilled nursing facilities. The evaluation will first be presented to the Secretary and
then to Congress by January 1, 2017. By January 1, 2014, however, the Secretary must survey the
states that have participated in this program, and report to Congress on a variety of topics,
including the program’s effects on hospital admission rates, chronic disease management,
Congressional Research Service
21
.
Medicaid and CHIP Provisions in PPACA
coordination of care for individuals with chronic conditions, assessment of quality improvements,
estimates of cost savings, and other topics.
Changes to Existing Medicaid Benefits
Removal of Barriers to Providing Home and Community-Based Services
(P.L. 111-148: §2402)
See “Eligibility” section for provision description.
Clarification of The Definition of Medical Assistance
(P.L. 111-148: §2304)
The term “medical assistance” means payment of part or all of the cost of care and services
identified in federal statute. This term is repeated throughout Title XIX, Grants to States for
Medical Assistance Programs, of the SSA. PPACA clarifies that “medical assistance”
encompasses both payment for services provided and the services themselves. This provision is
effective upon enactment.
Financing
Financing for Medicaid is shared by the federal government and the states. The federal share for
most Medicaid expenses for benefits is determined by the Federal Medical Assistance Percentage
(FMAP). FMAP rates are based on a formula that provides higher federal reimbursement to states
with lower per capita income relative to the national average (and vice versa). FMAPs have a
statutory minimum of 50% and a maximum of 83%, although some Medicaid services receive a
higher federal match rate. FY2010 FMAPs ranged from a high of 75.67% in Mississippi to a low
of 50.00% in 10 other states. In February 2009, with passage of the American Recovery and
Reinvestment Act of 2009 (ARRA), states received temporary enhanced FMAP rates for nine
quarters beginning with the first quarter of FY2009 and running through the first quarter of
FY2011 (December 31, 2010).
State expenditures to administer Medicaid programs are generally matched by federal funding at
50%. Federal matching rates for administrative expenditures are the same for all states, although
some activities are matched at higher rates.
Payments to States
Additional Federal Financial Assistance Under Health Reform
(P.L. 111-148: §2001 as modified by §10201, and P.L. 111-152: §1201 and §1202)
Congressional Research Service
22
.
Medicaid and CHIP Provisions in PPACA
Federal Funding for Existing Eligibility Groups
Beginning in 2014, expansion states, (those that, as of March 23, 2010, offered full Medicaid
state plan benefits for parents and childless adults up to at least 100% FPL—see provision
definitions below) will get an increased FMAP for childless adults who were not newly eligible,24
rather than receiving the regular FMAP (or no federal funds, in the case of states that used state-
only funding for this population). The increase will be a certain percentage (i.e., “transition
percentage”)25 of the difference between the state’s regular FMAP and the FMAP it receives for
“newly eligibles” as illustrated in the last row of Table 1.
Between January 1, 2014 and December 31, 2015, specified expansion states will receive an
increase in their regular FMAP rate of 2.2 percentage points with respect to amounts expended
for medical assistance for individuals who are not “newly eligible” (as defined below). States
eligible for the 2.2 percentage point FMAP include (1) “expansion states” (as defined below); (2)
states that the Secretary determines would not receive additional federal matching funds for
“newly eligible” individuals based on the criteria described below; and (3) states that have not
been granted Secretary approval to divert a portion of such state’s Disproportionate Share
Hospitals (DSH) allotment for the purpose of providing medical assistance or other health
benefits coverage under a waiver in effect on July 2009. The FMAP increase described in this
provision will not apply to: (1) Disproportionate Share Hospital payments; (2) payments under
CHIP; and (3) payments under Medicaid that are based on the CHIP enhanced FMAP rate. The
only state that appears to qualify for the 2.2 percentage point increase is Vermont.
Federal Funding for “Newly Eligible” Populations
Under health reform law, states will receive 100% FMAP for the cost of providing benchmark or
benchmark-equivalent coverage to the “newly eligible” individuals (defined for the purposes of
this subsection below), from 2014 through 2016.26 For “newly eligible” individuals, the FMAP
rate will be 95% in 2017, 94% in 2018, 93% in 2019, and 90% afterward (see the first row of
Table 1 for a summary of the additional federal financial assistance that would be available under
PPACA). Finally, in the case of a state that requires a political subdivision within the state to
contribute the non-federal share of expenditures, such state would not be eligible for an increase
in its FMAP (under this provision or under the FMAP increases provided under the American
Recovery and Reinvestment Act of 2009) if it requires that political subdivisions pay a greater
percentage of the non-federal share of expenditures, or a greater percentage of the non-federal
share of payments under their DSH payment program than amounts that would have been
required as of December 31, 2009. Voluntary contributions would not be considered as “required”
contributions.
For the purposes of this financing provision:
24 Specifically, childless adults who would have been previously eligible for coverage in the state through a Section
1115 waiver.
25 50% in 2014, 60% in 2015, 70% in 2016, 80% in 2018, and 100% thereafter.
26 Federal financial participation for some of the Medicaid benefit-related provisions under PPACA (e.g., adult
preventive care, tobacco cessation services for pregnant women) are tied to the FMAP rates states will receive for
“newly eligible” populations. Federal financial participation for these provisions will also be impacted by the proposed
changes to the FMAP rates for “Newly Eligible” populations under the reconciliation bill.
Congressional Research Service
23
.
Medicaid and CHIP Provisions in PPACA
• “Newly eligible” individuals are defined as non-elderly, non-pregnant individuals
with family income below 133% FPL who (1) are not under the age of 19 (or
such higher age as the state may have elected), and (2) are not eligible under the
state plan (or a waiver) for full Medicaid state plan benefits or for Medicaid
benchmark or benchmark-equivalent coverage, or are eligible but not enrolled (or
are on a waiting list) in such coverage as of December 1, 2009.
• Full Medicaid state plan benefits are defined as medical assistance that includes
all services of the same amount, duration, and scope, or that is determined by the
Secretary to be substantially equivalent to the Medicaid state plan services
available to categorically eligible mandatory coverage groups.
• “Expansion states” are defined as states (as of March 23, 2010) that had health
benefits coverage (that includes inpatient hospital services) for parents and non-
pregnant childless adults with income of at least 100% FPL. Such health benefits
coverage may not be based on employer coverage or employment. While health
benefits coverage may be less comprehensive than Medicaid, the law requires
such coverage to be more than (1) premium assistance, (2) hospital-only benefits,
(3) a high deductible health plan, or (4) alternative benefits under a
demonstration program authorized under Section 1938 (health opportunity
accounts); and
• “Non-expansion states” are defined as states that, as of March 23, 2010, offer
minimal or no coverage of the “newly-eligible” population, or that offer health
benefits coverage to only parents or only non-pregnant childless adults.
Table 1. Federal Medicaid Medical Assistance Payment (FMAP) Rates for Required
Medicaid Expansions, Beginning 2014
2014 2015 2016 2017 2018 2019 2020+
“Newly
100% 100% 100% 95% 94% 93% 90%
eligible”
adults in
all states
Previously
75%-90% 80%-92% 85%-94% 86%-92% 90%-92.6%
93%
90%
eligible
childless
adults in
expansion
states
Source: Table prepared by CRS Specialist in Health Care Financing, Chris L. Peterson, based on provisions in
P.L. 111-148, as amended by P.L. 111-152.
Notes: “Expansion states” are those that, as of the date of PPACA’s enactment (March 23, 2010), had covered
parents and childless adults up to 100% FPL. Although the Department of Health and Human Services will make
the official determination of which states will be considered “expansion states” under PPACA and the HCERA,
existing Medicaid eligibility information suggests that 11 states and the District of Columbia meet this definition
including Arizona, Delaware, Hawaii, Maine, Massachusetts, Minnesota, New York, Pennsylvania, Vermont,
Washington, and Wisconsin. The FMAP ranges for previously eligible childless adults (i.e., individuals who would
have been previously eligible for full benefit coverage in the state) under PPACA and HCERA represent the
potential FMAP rate based on regular FMAPs ranging from the statutory minimum (50%) to 80%. (The highest
regular FMAP since 2000 was 77.08%, although FMAPs are permitted statutorily to go to 83%.)
Congressional Research Service
24
.
Medicaid and CHIP Provisions in PPACA
Incentives for States to Offer Home and Community-Based Services as a Long-
Term Care Alternative to Nursing Homes
(P.L. 111-148: §10202)
Under Medicaid, states make available a broad range of institutional and home and community-
based long-term care services to certain Medicaid enrollees. States are required to offer only some
of these services. For those services that are offered, states define them differently, using criteria
that place limits on the amount, duration, and scope of the benefits. States also restrict benefits to
just those persons who demonstrate medical necessity for the benefit. Under Medicaid,
institutional services are generally defined as care provided in nursing facilities, Intermediate
Care Facilities for People with Mental Retardation (ICFs/MR), inpatient hospital services and
institutions for mental diseases (IMDs). Home and community-based services are generally
defined as long-term care services offered under Medicaid’s mandatory home health state plan
benefit, and a variety of optional state plan benefits, including personal care, case management or
targeted case management, respiratory care for persons who are ventilator-dependent, Program of
All-inclusive Care for the Elderly (PACE), transportation, home and community-based services
(under section 1915(i) of the Social Security Act), and Medicaid home and community-based
1915(c) and (d) waivers.
Health reform law allows qualifying states to receive bonus payments for increasing their share of
Medicaid long-term care spending on HCBS and reducing their share of Medicaid LTC spending
on institutional care. To receive payments, states will be required to meet certain target-spending
percentages. If the state’s spending on home and community-based services in FY2009 is less
than 25%, the state must achieve a 25% target on HCBS by October 1, 2015, to receive bonus
payments. Such states will receive an FMAP increase of 5 percentage points on eligible medical
assistance payments. Other states will be required to reach a target of 50% by October 1, 2015, to
qualify for payments. These states will receive an FMAP increase of 2 percentage points for
eligible payments. In no case may the aggregate amount of payments made by the Secretary to
states exceed $3 billion. The balancing incentive period begins October 1, 2011, and ends on
September 30, 2015.
To receive incentive payments, a state is required to submit an application that includes a
proposed budget detailing the state’s plan to expand and diversify medical assistance for non-
institutionally based long-term care services and supports during the balancing incentive period
and to achieve the target spending percentage applicable to the state. For states proposing to
expand the Section 1915(i) benefit, the application must include a description of the state’s
election to increase the eligibility level above 150% of the FPL to a percentage not exceeding
300% of the SSI benefit rate. Regarding a state’s structural changes, the application must include
a description of the new or expanded offerings of those services that the state will provide and the
projected costs of such services.
To qualify for payments, states may not apply more restrictive eligibility standards,
methodologies, or procedures then were in effect on December 31, 2010. In addition, states must
agree to use additional incentive payments for new or expanded offerings of HCBS services
under Medicaid. Further, states must agree to implement the following:
• no wrong door-single entry point system—a statewide system enabling
consumers to access all long-term care services through an agency, organization,
coordinated network, or portal;
Congressional Research Service
25
.
Medicaid and CHIP Provisions in PPACA
• conflict-free case management services—to develop a service plan, arrange for
services, support the beneficiary (and, if appropriate, the caregiver) in directing
his or her services, and conduct ongoing monitoring; and
• core standardized assessment—instruments for determining eligibility for non-
institutionally based long-term care services, uniformly used across the state, to
determine the beneficiary’s needs for training, support services, medical care,
transportation, and other services, and develop an individual service plan.
States must also collect data from providers and others on services, quality, and outcomes
measures.
Disproportionate Share Hospital Payments
(P.L. 111-148: §2551 as modified by §10201(e); P.L. 111-152: §1203)
Under Medicaid, states are required to make disproportionate share hospital (DSH) adjustments
to the payment rates of hospitals treating large numbers of low-income and Medicaid patients.
The DSH provision is intended to recognize the disadvantaged situation of those hospitals. States
must define, in their state Medicaid plans, hospitals that qualify as DSH hospitals and their DSH
payment formulas. DSH hospitals must include at least all hospitals meeting minimum criteria
and may not include hospitals that have a Medicaid utilization rate below 1%. The DSH payment
formula also must meet minimum criteria, and DSH payments for any specific hospital cannot
exceed a hospital-specific cap based on the unreimbursed costs of providing hospital services to
Medicaid and uninsured patients.
In claiming federal DSH matching dollars, states cannot exceed their state-specific allotment
amounts, calculated for each state based on a statutory formula. In determining these allotments
for states, special rules apply to “low DSH states” (those in which total DSH payments for
FY2000 were less than 3% of the state’s total Medicaid spending on benefits). For low DSH
states for FY2004 through FY2008, the allotment for each of these years was equal to 16% more
than the prior year’s amount. For years beginning in FY2009, DSH allotments for all states are
equal to the prior year amount increased by the change in the consumer price index for all urban
consumers (CPI-U). For FY2009, federal DSH allotments across states and the District of
Columbia totaled to nearly $10.6 billion. Provisions under ARRA provided additional temporary
DSH funding for states that increases total federal DSH allotments to nearly $10.9 billion.
Under prior law, some states that operate their Medicaid programs through waivers (i.e.,
Tennessee and Hawaii) have special statutory arrangements relating to their specific DSH
allotments. Tennessee’s allotment amount was set at $30 million for each of fiscal years 2009
through 2011, and one-quarter of that amount for the first quarter of FY2012. Hawaii’s DSH
allotment is set at $10 million for each of fiscal years 2009 through 2011, with an additional $2.5
million for the first quarter of FY2012.
P.L. 111-152 requires the Secretary to make aggregate reductions in Medicaid DSH allotments
equal to $500 million in FY2014, $600 million in FY2015, $600 million in FY2016, $1.8 billion
in FY2017, $5.0 billion in FY2018, $5.6 billion in FY2019, and $4.0 billion in FY2020.
To achieve these aggregate reductions, the Secretary will be required to:
(1) impose the largest percentage reduction on states that
Congressional Research Service
26
.
Medicaid and CHIP Provisions in PPACA
• have the lowest percentage of uninsured individuals (determined on the basis of
data from the Bureau of the Census, audited hospital cost reports, and other
information likely to yield accurate data) during the most recent fiscal year with
available data, or
• do not target their DSH payments to hospitals with high volumes of Medicaid
patients, and hospitals that have high levels of uncompensated care (excluding
bad debt);
(2) impose a smaller percentage reduction on low DSH states; and
(3) take into account the extent to which the DSH allotment for a state was included in the budget
neutrality calculation for a coverage expansion approved under a section 1115 waiver as of July
31, 2009.
For a state with a DSH allotment of $0 in the second, third and fourth quarters of FY2012, the
provision will set that state’s DSH allotments at $47.2 million, and for a state with a DSH
allotment of $0 in FY2013, the provision will set that state’s DSH allotment at $53.1 million.
These provisions apply to Tennessee.
Under PPACA, for the last three quarters of FY2012, Hawaii’s DSH allotment will be $7.5
million. For FY2013 forward, Hawaii’s annual DSH allotment will be increased in the same
manner applicable to low DSH states (i.e., adjusted by the percentage change in the Consumer
Price Index for All Urban Consumers, CPI-U, from year to year). The provision also prohibits the
Secretary from imposing a limit on payments made to hospitals under Hawaii’s QUEST Section
1115 demonstration project, except to the extent necessary to ensure that a hospital does not
receive payments in excess of its hospital specific cap, or that payments do not exceed the amount
that the Secretary determines is equal to the federal share of DSH within the budget neutrality
provision of the QUEST demonstration project.
Special FMAP Adjustment for States Recovering From a Major Disaster
(P.L. 111-148: §2006)
In recent years, the fiscal situation of the states has focused attention on the size of the state’s
share of Medicaid expenditures, as well as changes in the federal share of those expenditures. For
instance, under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (P.L. 108-27), all
states and the District of Columbia received a temporary increase in Medicaid FMAPs for the last
two quarters of FY2003 and the first three quarters of FY2004 as part of a fiscal relief package.
Medicaid FMAPs for the last two quarters of FY2003 and the first three quarters of FY2004 were
held harmless from annual declines and were increased by an additional 2.95 percentage points,
as long as states met certain other requirements. States’ FMAP rates returned to normal for the
last quarter of FY2004 and continued until the ARRA enhanced rates in FY2009.
During the most recent recession, Congress provided states additional economic stimulus
funding, including enhanced FMAP rates, when ARRA became law in February 2009.27 States,
the District of Columbia and the territories, received enhanced FMAP rates under ARRA for the
27 FY2011 FMAP rates for all states are available at http://aspe.hhs.gov/health/fmap.htm.
Congressional Research Service
27
.
Medicaid and CHIP Provisions in PPACA
recession period which began with the first quarter of FY2009 and continues through the first
quarter of FY2011 (December 31, 2010). Under ARRA, all states are held harmless from declines
in their normal FMAP rates beginning with FY2008 and continuing through the recession period.
States and the District of Columbia receive an across-the-board FMAP increase of 6.2 percentage
points, and qualifying states receive an additional unemployment-related increase. ARRA allowed
each territory a one time choice between an FMAP increase of 6.2 percentage points along with a
15% increase in its spending cap, or its regular FMAP along with a 30% increase in its spending
cap. All territories chose the 30% spending cap increase. In addition, DRA included provisions to
exclude certain Hurricane Katrina evacuees and their incomes from FMAP calculations, prevent
Alaska’s FY2006-FY2007 FMAPs from falling below the state’s FY2005 level, and provide $2
billion to help pay for (among other things) the state share of certain Katrina-related Medicaid
and CHIP costs.
PPACA Section 2006 provides for additional FMAP above the regular FMAP levels for
qualifying “disaster-recovery FMAP adjustment” states once the ARRA adjustment is no longer
in effect (January 1, 2011). To qualify for this adjustment, states must (1) have been declared by
the President as a major disaster area during the preceding seven fiscal years under Sec. 401 of
the Stafford Act for which every county or parish was determined to merit federal assistance, and
(2) for FY2011, have its regular FMAP be at least three percentage points lower than the state’s
highest regular FMAP since FY2008 (excluding the ARRA 6.2-point and unemployment
adjustments). Only three states will meet the second requirement—Louisiana (8.86 points),
Hawaii (4.71 points), and North Dakota (3.40 points). Of those, only Louisiana meets the first
requirement. For the portion of FY2011 not in the ARRA recession adjustment period (i.e., after
December 31, 2010), PPACA will provide Louisiana with an FMAP of 68.04% (rather than the
currently slated 63.61%). The FMAP of 68.04% will be 13.4-point drop from its latest ARRA
FMAP, which is still the second-largest drop (behind Hawaii’s 15.6-point drop) from the latest
ARRA-adjusted FMAPs.28 State eligibility for disaster relief would be re-determined annually. In
the future, other states may qualify for the special disaster relief FMAP increase if they meet both
requirements. This Section is effective January 1, 2011.
Payments to the Territories
(P.L. 111-148: §2005 as modified by §10201; P.L. 111-152: §1204)
Five territories (American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the
U.S. Virgin Islands) operate Medicaid programs under rules that differ from those applicable to
the states and the District of Columbia (hereinafter referred to as the states for the purposes of this
provision). The territories are not required to cover the same eligibility groups, and they use
different financial standards (income and asset tests) in determining eligibility compared to the
states. For example, states must cover certain mandatory groups such as pregnant women,
children, and qualified Medicare beneficiaries, but for the territories, these groups are optional. In
addition, Medicaid programs in the territories are subject to annual federal spending caps. All five
territories typically exhaust their caps prior to the end of the fiscal year. Once the cap is reached,
the territories assume the full costs of Medicaid services or, in some instances, may suspend
28 For more information on the federal medical assistance percentage (FMAP), see CRS Report RL32950, Medicaid:
The Federal Medical Assistance Percentage (FMAP), by Chris L. Peterson.
Congressional Research Service
28
.
Medicaid and CHIP Provisions in PPACA
services or cease payments to providers until the next fiscal year. Finally, the FMAP for all the
territories is set at 50%.
Health reform law permits the territories to establish exchanges (in accordance with the
exchange-related provisions in PPACA), not later than October 13, 2013. Out of funds not
otherwise appropriated, $1.0 billion is appropriated for the period between 2014 and 2019 for the
purpose of providing premium and cost-sharing assistance to residents of the territories to obtain
health insurance coverage through the exchanges. Of this amount, the Secretary is to allocate
$925 million for Puerto Rico, and a portion (as specified by the Secretary) of the remaining $75
million for any other territory that chooses establish exchanges. Under this provision, territories
are to be treated as states and required to structure their exchanges in a manner so there is no gap
in assistance between individuals eligible for Medicaid and those eligible for premium and cost
sharing assistance.
Territories that do not elect to establish a exchanges as of the specified date are entitled to an
increase in their existing Medicaid funding caps. For the period between July 1, 2011, and
September 30, 2019, $6.3 billion in total additional payments are available for distribution among
each territory in an amount that is proportional to the capped amounts available to the territories
under current law. Current law rules regarding funds spent on specified administrative activities
will apply, and the provision is effective July 1, 2011.
Payments for Primary Care Providers
(P.L. 111-152: §1202)
State Medicaid plans must provide methods and procedures to assure that payments are consistent
with efficiency, economy, and quality of care. They must also be sufficient to enlist enough
providers so that care and services are available at least to the extent that such care is available to
the general population in the geographic area. Additional requirements regarding payment rates
under Medicaid apply only to inpatient hospital and long-term care facility services. However,
within these guidelines, states have considerable flexibility to set provider reimbursement rates
independent of any national baseline or reference.
P.L. 111-148 did not have a provision addressing payments to primary care providers. However,
there was a provision in the Affordable Health Care for America Act (H.R. 3962), the health
reform bill passed by the House. Under the Reconciliation Act (P.L. 111-152), states will be
required to set Medicaid payments for primary care services [i.e., evaluation and management
(E&M) services defined by Medicare as of December 31, 2009, and as subsequently modified by
the Secretary, and services related to immunization administration for vaccines and toxoids]
relative to Medicare payment rates. Primary care services furnished in 2013 and 2014 by a
physician with a primary specialty designation of family medicine, general internal medicine, or
pediatric medicine will be paid at the Medicare rate for these services or higher (or if greater, the
Medicare 2009 payment rate will be applicable).
With respect to Medicaid managed care, P.L. 111-152 also requires that, in the case of E&M
services, these new payment rates will apply, regardless of the manner in which such payments
are made, including in the form of capitation or partial capitation (e.g., payments made on a “per
member per month” basis, rather than for each specific unit of service delivered).
Congressional Research Service
29
.
Medicaid and CHIP Provisions in PPACA
For services furnished in 2013 and 2014, the federal government will fully finance the portion of
primary care service payments by which the new minimum payment rates exceed the state’s
existing payment rates as of July 1, 2009. That is, the federal FMAP percentage for the additional
costs born by a state will equal 100% in those two years.
Payments to Providers for Health-Care Acquired Conditions
(P.L. 111-148: §2702)
Medicare uses a prospective payment system (PPS) to reimburse hospitals for inpatient care.
Medicare’s PPS classifies each hospital admission into severity adjusted diagnosis-related groups
(MS-DRG) based on the patient’s diagnosis and procedures performed.
The DRA required the Secretary to initiate a hospital-acquired condition (HAC) program.29
Beginning October 1, 2008, when Medicare patients were admitted with certain HACs identified
by the Secretary, then the presence of these conditions at admission would allow the hospital to
receive an additional MS-DRG payment if these conditions affected the patient’s treatment.
However, if a patient did not have one of the HACs at admission, but acquired one during their
stay, then the hospital could not receive an additional MS-DRG payment. In addition to the HAC
policy, CMS issued three national coverage determinations in January 2009 that prohibited
Medicare from reimbursing hospitals for certain serious preventable medical care errors. 30
Medicaid was not covered by DRA’s HAC policy or CMS’s national coverage decisions.
Although Medicaid was not specifically covered by the DRA requirements for Medicare, CMS
issued guidance in July 2008 to help states appropriately align Medicaid inpatient hospital
payment policies with Medicare’s HAC payment policies.31 CMS instructed state Medicaid
agencies to implement policies to avoid payment liability when dual eligible beneficiaries had
HACs. CMS also encouraged Medicaid agencies to implement policies to deny payment when
other Medicaid beneficiaries developed complications during hospitalizations. CMS directed
states to several Medicaid authorities to appropriately deny payment for HACs.
PPACA requires the Secretary to identify current state practices that prohibit payment for health
care-acquired conditions and to incorporate into regulations these practices or elements of the
practices that are applicable to Medicaid. The Secretary is required to issue regulations to prohibit
federal Medicaid matching payments for health care-acquired conditions by July 1, 2011. These
new regulations are to ensure that the prohibition on payments for health care-acquired conditions
does not result in Medicaid beneficiaries losing access to services. PPACA requires the Secretary
to define health care-acquired conditions consistent with Medicare’s HAC definition, but may
exclude certain conditions when they are inapplicable to Medicaid beneficiaries.
29 In creating the HAC program, the Secretary was to select conditions that (1) were high cost, high volume, or both;
(2) resulted in the assignment of a case to a DRG that has a higher payment when present as a secondary diagnosis; and
(3) were reasonably preventable through the application of evidence-based guidelines.
30 These preventable errors are sometimes called “never events.” Never events include surgery on the wrong body part
or mismatched blood transfusions which can cause serious injury or death to beneficiaries and result in increased costs
to the Medicare program to treat the consequences of the error.
31 See State Medicaid Director Letter, SMDL #08-004, July 31, 2008, at http://www.cms.hhs.gov/SMDL/downloads/
SMD073108.pdf.
Congressional Research Service
30
.
Medicaid and CHIP Provisions in PPACA
In implementing regulations governing Medicaid payment for health care acquired conditions, the
Secretary is required to apply Medicare’s regulations prohibiting hospital payments for HACs to
the Medicaid program. In addition, the Secretary is required, to the extent practicable, to publicly
report on measures for HACs utilized by CMS for adjustment of hospital payment amounts based
on hospital-acquired infections.
Prescription Drugs
Outpatient prescription drugs are an optional Medicaid benefit, but all states cover prescription
drugs for most beneficiary groups. Medicaid law requires prescription drug manufacturers who
wish to sell their products to Medicaid agencies to enter into rebate agreements with the Secretary
on behalf of states. Under these agreements, drug manufacturers pay a rebate to state Medicaid
agencies for drugs purchased for Medicaid beneficiaries, although purchases by Medicaid
managed care organizations (MMCO) are exempted from the rebates.32 In exchange for entering
into rebate agreements, state Medicaid programs must cover all drugs (except certain statutorily
excluded drug classes) marketed by those manufacturers. In 2004 CMS estimated that 550
pharmaceutical manufacturers participated in Medicaid’s drug rebate program.33
For each prescription drug purchased by Medicaid, participating drug manufacturers must report
two market prices to CMS—the average manufacturer price (AMP), which is the average price
drug makers receive for sales to retail pharmacies and mail-order establishments, and the lowest
transaction price, or best price, that manufacturers receive from sales to certain private buyers of
each drug. Those prices, which serve as reference points for determining manufacturers’ rebate
obligations, must be reported for each formulation, dosage, and strength of prescription drugs
purchased on behalf of Medicaid beneficiaries.
Prescription Drug Rebates
(P.L. 111-148: §2501)
For the purpose of determining rebates, Medicaid distinguishes between two types of drugs: (1)
single source drugs (generally, those still under patent) and innovator multiple source drugs
(drugs originally marketed under a patent or original new drug application but for which there
now are generic equivalents); and (2) all other, non-innovator, multiple source drugs.
Rebates for the first category of drugs—drugs still under patent or those once covered by
patents—have two components: a basic rebate and an additional rebate. Medicaid’s basic rebate is
determined by the larger of either a comparison of a drug’s quarterly AMP to the best price for the
32 Selected drug purchases are exempted from the calculation of state Medicaid rebates, such as drugs dispensed by
Medicaid managed care organizations (when prescription drugs are included in the capitation agreement), inpatient
drugs, and drugs dispensed in physicians’ or dentists’ offices (for Medicaid beneficiaries). Some states exclude or carve
out drug benefits from their Medicaid MCO contracts, in which case, managed care beneficiaries receive their
prescribed drugs through the fee-for-service delivery system, and states can claim manufacturer rebates for these
purchases.
33 Testimony of Dennis Smith, Director, Center for Medicaid and State Operations, Centers for Medicare and Medicaid
Services, before the House Energy and Commerce Committee, Subcommittee on Oversight and Investigations,
December 7, 2004.
Congressional Research Service
31
.
Medicaid and CHIP Provisions in PPACA
same period, or a flat percentage (15.1%) of the drug’s quarterly AMP. Drug manufacturers owe
an additional rebate when their unit prices for individual products increased faster than inflation.
Under previous law, modifications to existing drugs—new dosages or formulations—generally
are considered new products for purposes of reporting AMPs to CMS. As a result, drug makers
sometimes can avoid incurring additional rebate obligations by making alterations to existing
products, sometimes called line-extensions, and releasing these as new products. For example,
manufacturers have developed new extended-release formulations of existing products which,
because they are considered new products under existing Medicaid drug rebate rules, are given
new base period AMPs. The new base period AMPs for line-extension products will be higher
than the original product’s AMP. For the line-extension product, the manufacturer is unlikely to
owe an additional rebate since the product’s AMP will not have risen faster than the rate of
inflation.
Public Health Service Act (PHSA) Sec. 340B requires pharmaceutical drug manufacturers that
enter into Medicaid drug rebate agreements to discount outpatient drugs purchased by certain
public health facilities (covered entities). In addition to other requirements, 340B hospitals and
other covered entities are prohibited from obtaining multiple discounts for individual drugs and
from diverting 340B drug purchases to other buyers.
Beginning January 1, 2010, with certain exceptions, PPACA increases the flat rebate percentage
used to calculate Medicaid’s basic rebate for single source and innovator multiple source
outpatient prescription drugs from 15.1% to 23.1% of AMP. The basic rebate percentage for
multi-source, non-innovator and all other drugs increases from 11% to 13% of AMP.34
PPACA also requires the Secretary to recover the additional funds states received from drug
manufacturers from increases in the basic Medicaid rebates. The Secretary is authorized to reduce
Medicaid payments to states for the additional prescription drug rebates that resulted from
increases in the minimum rebate percentages—the difference between 15.1% of AMP and 23.1%
of AMP for single source products and the difference between 11% and 13% for generic products.
PPACA requires the Secretary to estimate the additional rebate amounts to recover from states
based on utilization and other data. In addition, when it is determined that the recovered amount
from a state for a previous quarter under-estimated the actual rebate amount (state share) the
Secretary is required to make further adjustments to recover the additional rebates from states.
These state payment reductions are considered overpayments to the state and disallowed against
states’ regular Medicaid quarterly draw, similar to other overpayments. These disallowances are
not subject to reconsideration.
PPACA also requires drug manufacturers to pay rebates to states on drugs dispensed to Medicaid
beneficiaries who receive care through Medicaid MCOs, similar to the way rebates are required
under previous law for FFS beneficiaries. Medicaid capitation rates paid by states are to be
adjusted to include these rebates, and Medicaid MCOs are subject to additional reporting
requirements such as submitting data to states on the total number of units of each dose, strength,
and package size by National Drug Code for each covered outpatient drug. Medicaid MCOs can
utilize formularies as long as there is an exception process so that excluded drugs are available
34 States will receive a rebate of 17.1% for certain outpatient single source and innovator multiple source drugs. These
drugs include clotting factor drugs and outpatient drugs approved by the Food and Drug Administration exclusively for
pediatric indications.
Congressional Research Service
32
.
Medicaid and CHIP Provisions in PPACA
through a prior authorization process. Drugs discounted under 340B are excluded from the
requirements in this section (§2501 of P.L. 111-148).
With certain exceptions, PPACA requires that additional rebates for new formulations of single
source or innovator multiple source drugs be calculated as the greater of the basic rebate for new
product or the AMP of the new drug multiplied by highest additional rebate for any strength of
the original product (calculated for each dose and strength of the product).35 However, total rebate
liability for each dosage form and strength of an individual single source or innovator multiple
source drug is capped at 100% of that drug’s AMP. Other features of the drug rebate program,
such Medicaid’s best price requirement, are unchanged by PPACA. HCERA amended PPACA to
clarify that the calculation of the additional rebate for new formulations of existing drugs (line
extensions) applied to single source or innovator multiple source drugs only in oral solid dosage
forms. Changes in this provision begin January 1, 2010, except for the MMCO rebates which
begin March 23, 2010.
Elimination of Exclusion of Coverage of Certain Drugs
(P.L. 111-148: §2502)
Previous Medicaid law excludes coverage of 11 drug classes, including barbiturates,
benzodiazepines, and smoking cessation products. States had the option to cover excluded drugs,
and most states cover barbiturates, and benzodiazepines, and smoking cessation drugs. States
received FFP when they cover these drugs. Coverage of prescription drugs for full benefit dual
eligibles (individuals who are eligible for both Medicare and Medicaid) was transferred from
state Medicaid programs to Medicare when Part D was implemented in January 2006.
Barbiturates and benzodiazepines, two important drug classes for Medicaid beneficiaries, were
excluded from Part D formularies (were not covered by Medicare Part D). However, under the
Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, P.L. 110-275), Medicare
prescription drug plans and Medicare Advantage plans will be required to include
benzodiazepines and barbiturates in their formularies for prescriptions dispensed beginning
January 1, 2013. Barbiturates also will be required to be included in Medicare formularies for
epilepsy, cancer, or chronic mental health disorders.
PPACA requires that smoking cessation drugs, barbiturates, and benzodiazepines be removed
from Medicaid’s excluded drug list. When this provision takes effect beginning January 1, 2014,
states that cover prescription drugs will be required to cover barbiturates, benzodiazepines, and
smoking cessation products for most Medicaid beneficiaries.
Providing Adequate Pharmacy Reimbursement
(P.L. 111-148: §2503)
Medicaid law requires the Secretary to establish upper limits on federal share of payments for
prescription drugs. These limits are intended to encourage substitution of lower-cost generic
equivalents for more costly brand-name drugs. When applied to multiple source drugs, those
35 New orphan drug formulations are exempted from the additional rebate requirements, regardless of whether the
market exclusivity period has expired. Orphan drugs, as designated by Sec. 526 of the Federal Food, Drug, and
Cosmetic Act, are used to treat individuals suffering from rare diseases.
Congressional Research Service
33
.
Medicaid and CHIP Provisions in PPACA
limits are referred to as federal upper payment limits (FUL). CMS calculates FULs and
periodically publishes these prices. DRA required the Secretary to use a new formula for FULs
beginning January 1, 2007. The new FUL formula was to equal 250% of the average
manufacturer price (AMP) of the least costly therapeutic equivalent. AMP was defined under
DRA to be the average price paid to the manufacturer by wholesalers for drugs distributed to the
retail pharmacy class of trade. DRA also reduced the number of multiple source products rated by
the FDA as therapeutic and pharmaceutically equivalent from three to two. Manufacturers are
required to report AMP to CMS. Previous law allows the Secretary to contract for a survey of
retail prices that represent a nationwide average consumer drug price, net of all discounts and
rebates.
National pharmacy associations challenged the legality of the DRA’s FUL methodology published
in a proposed rule CMS issued in 2007 because they claimed that for community pharmacies, the
new FULs would be below drug acquisition costs. The court issued an injunction on December
19, 2007 which prohibited CMS from setting FULs for Medicaid covered generic drugs based on
AMP, and from disclosing AMP data except within HHS or to the Department of Justice. The
court’s 2007 injunction was for an indefinite period and remains in place. In addition to the court
injunction against using AMP to calculate Medicaid FULs, Section 203 of MIPPA imposed a
moratorium on the use of AMP to set FULs and prohibited CMS from making AMP data
available until October 1, 2009. MIPPA Section 203 authorized CMS to set FULs based on the
pre-DRA methodology—150% of the lowest published price (i.e., wholesale acquisition cost,
average wholesale price, or direct price) for each dosage and strength of generic drug products—
until September 30, 2009. In general, these published prices are significantly higher than AMPs.
Under previous law, CMS lacked authority to use the pre-DRA formula (expired September 30,
2009) for setting FULs or the DRA authority (prohibited by MIPPA). In addition, CMS is bound
by the court’s injunction preventing the use of the DRA formula. On September 25, 2009, prior to
the expiration of authority to use the pre-DRA formula, CMS issued a list of multiple source drug
FULs to establish the federal maximum that states may pay under Medicaid. However, most
states also use Medicaid Acquisition Costs (MACs) to set their own ceiling prices, and these
prices often are less than FULs.
PPACA requires the Secretary to set FULs at 175% or more of the weighted average (determined
on the basis of utilization) of the most recently reported monthly AMPs.36 PPACA restores the
pre-DRA definition of multiple source drugs as three therapeutic and pharmaceutically equivalent
products. PPACA also includes technical changes to the FUL formula such as a smoothing
process for average manufacturer prices to reduce short-term volatility and clarification that AMP
excludes the following:
1. customary prompt pay discounts to wholesalers;
2. bona fide service fees paid by manufacturers to wholesalers and RCPs, such as
distribution service fees, inventory management fees, product stocking
allowances, and administrative services agreements and patient care programs
(medication compliance and patient education programs);
36 FULs are set for pharmaceutically and therapeutically equivalent multiple source drugs available nationally through
commercial pharmacies.
Congressional Research Service
34
.
Medicaid and CHIP Provisions in PPACA
3. reimbursement by manufacturers for recalled, damaged, expired, or unsaleable
returned goods;
4. payments received from, and rebates or discounts to, large purchasers such as
pharmacy benefit managers, managed care organizations, health maintenance
organizations, insurers, hospitals, clinics, mail order pharmacies, long-term care
providers, manufacturers, or any other entity that does not conduct business as a
wholesaler or a retail community pharmacy.
Further, PPACA revises the definition of a multiple source drug from one marketed in a state
during the rebate period to a product marketed during the period in the United States. Moreover,
PPACA expands drug pricing disclosure requirements to include monthly weighted average
AMPs and retail survey prices. Manufacturers are required to report within 30 days of the end of
each month of a rebate period the total number of units sold and used by the manufacturer to
calculate the AMP for each covered outpatient drug. Assuming the court injunction is lifted,
Section 2503 takes effect the first day of the first calendar quarter that begins at least six months
after PPACA’s enactment, regardless of whether final regulations were issued (January 1, 2011).
340B Prescription Drug Discount Program Expansion37
(P.L. 111-148: §7101-7103 as modified by P.L. 111-152: §2302)
Under Section 340B of the PHSA, pharmaceutical drug manufacturers that participate in the
Medicaid drug rebate program are required to enter into pharmaceutical pricing agreements where
they agree to discount covered outpatient drugs purchased by public health and related entities
(covered entities). Covered entities include hospitals owned or operated by state or local
government that serve a higher percentage of Medicaid beneficiaries, as well as federal grantees
such as Federally Qualified Health Centers (FQHCs), FQHC look-alikes, family planning clinics,
state-operated AIDS drug assistance programs, Ryan White CARE Act grantees, family planning
and sexually transmitted disease clinics, and others, as identified in the PHSA. Covered entities
do not receive discounts on inpatient drugs under the 340B program.
PPACA and HCERA expand the list of covered entities eligible to receive 340B discounts to
include (1) certain children’s and free-standing cancer hospitals excluded from the Medicare
prospective payment system, (2) critical access and sole community hospitals, and (3) rural
referral centers. PPACA requires the Secretary to develop systems to improve compliance and
program integrity activities for manufacturers and covered entities, as well as administrative
procedures to resolve disputes. Further, within 18 months of enactment (September 23, 2011), the
Government Accountability Office (GAO) is required to submit to Congress a report that
examines, among other issues, whether individuals receiving services through 340B covered
entities receive optimal health care services. With the exception of the GAO report, the 340B
changes are effective and apply to drug purchases that began January 1, 2010.38
37 For more information on the PHSA Sec. 340B provisions, see CRS Report R40943, Public Health, Workforce,
Quality, and Related Provisions in the Patient Protection and Affordable Care Act (P.L. 111-148), coordinated by
C. Stephen Redhead and Erin D. Williams.
38 PPACA expanded 340B discounts to inpatient drugs for hospital entities, but this provision was repealed in HCERA.
Similarly, PPACA required hospital entities to issue credits to Medicaid programs for inpatient drugs purchased for
Medicaid beneficiaries. This provision was also repealed in HCERA.
Congressional Research Service
35
.
Medicaid and CHIP Provisions in PPACA
Program Integrity
Program integrity (PI) initiatives are designed to combat fraud, waste, and abuse. This includes
processes directed at reducing improper payments, as well as activities to prevent, detect,
investigate, and ultimately prosecute health care fraud and abuse. More specifically, PI ensures
that correct payments are made to legitimate providers for appropriate and reasonable services for
eligible beneficiaries.
The federal government and states contribute equally to fund most Medicaid and CHIP activities
to combat waste, fraud, and abuse, although for some activities, the federal government provides
additional funds through enhanced matching rates. All states (and the District of Columbia)
receive the same federal match rate for administrative expenditures, including most PI activities,
which is generally 50%. States receive higher federal matching rates for selected administrative
activities such as 90% for the design, development, and installation of required claims processing
and information retrieval systems—Medicaid Management Information Systems (MMIS); 75%
for the operation of MMIS; 90% for the start up of Medicaid Fraud Control Units (MFCUs); and
75% for ongoing MFCU operation.
Congress provided additional dedicated funding for Medicaid program integrity activities in the
Deficit Reduction Act of 2005, (DRA, P.L. 109-171). Under DRA, among many other changes,
Congress established a Medicaid Integrity Program (MIP) that included annual appropriations
reaching $75 million. This MIP funding was to support and enhance state PI efforts by expanding
and sustaining national PI activities in the areas of provider audits, overpayment identification,
and payment integrity and quality of care education.
PPACA created additional requirements to increase uniformity, and bolster Medicare, Medicaid
and CHIP PI activities. For instance, PPACA introduced additional provider screening
requirements that are applicable to Medicare, Medicaid, and CHIP. PPACA creates an integrated
Medicare and Medicaid data repository to enhance PI data sharing to be available to federal and
state agencies and law enforcement officials. Moreover, PPACA established a recovery audit
contractor (RAC) requirement for Medicaid (described below), similar to Medicare’s RAC
program.
Expansion of the Recovery Audit Contractor (RAC) Program
(P.L. 111-148: §6411)
RACs are private organizations that contract with CMS to identify and collect improper payments
made in Medicare’s FFS program. In the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA, P.L. 108-173), Congress required the Secretary to conduct a
three-year demonstration of RACs. In December 2006, Congress passed the Tax Relief and
Health Care Act of 2006 (TRHCA, P.L. 109-432) which made the RAC program permanent and
mandated its expansion nationwide by January 1, 2010. The TRHCA RAC expansion still applied
only to Medicare Parts A and B, excluding managed care under Medicare Part C and prescription
drug coverage under Part D. CMS began the national rollout of the permanent RAC program in
19 states in March 2009.
PPACA requires states to establish by December 31, 2010 contracts, consistent with state law, and
similar to the contracts the Secretary has established for the Medicare RAC program, with one or
Congressional Research Service
36
.
Medicaid and CHIP Provisions in PPACA
more RACs. These state RACs are to identify underpayments, overpayments, and recoup
overpayments made for services provided under state Medicaid plans as well as waivers. The
state Medicaid RAC program is subject to exceptions and requirements the Secretary may
establish for the state RAC program. In addition, states are required to make certain assurances
for their RAC programs, including that the RAC (1) operates on a contingency basis; (2) has an
appeal process for adverse determinations in place; (3) recoveries are subject to quarterly
expenditure estimates; and (4) states coordinate with other PI organizations such as federal and
state law enforcement agencies.
Termination of Provider Participation Under Medicaid if Terminated Under
Medicare or Other State Health Care Program
(P.L. 111-148: §6501)
Under previous Medicaid law, subject to certain exceptions, the Secretary is required to exclude
providers or individuals from Medicare or Medicaid that (1) have been convicted of a criminal
offense related to the delivery of an item or service under Medicare or under any state health care
program; (2) have been convicted, under federal or state law, of a criminal offense relating to
neglect or abuse of patients in connection with the delivery of a health care item or service; (3)
have been convicted of a felony conviction related to health care fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial misconduct; or (4) have been convicted of a
felony relating to the unlawful manufacture, distribution, prescription, or dispensing of a
controlled substance.
The Secretary also may exclude providers or individuals from Medicare or Medicaid participation
who are involved in prohibited activities, such as program-related convictions, license revocation,
failure to supply information, and default on loan or scholarship obligations. CMS is required to
promptly notify the Department of Health and Human Services Office of the Inspector General
(HHS/OIG) if it receives Medicare or Medicaid program participation applications that identify
providers who have engaged in prohibited activities.
In this Section, PPACA requires states to terminate individuals or entities (or individuals or
entities who owned, controlled, or managed entities) from their Medicaid programs if the entities
had unpaid Medicaid overpayments (as defined by the Secretary), were suspended, excluded or
terminated from Medicaid or Medicare participation, or were affiliated with individuals or entities
who had been terminated from Medicaid. The changes in this provision are effective January 1,
2011.
Medicaid Exclusion from Participation Relating to Certain Ownership,
Control, and Management Affiliations
(P.L. 111-148: §6502)
Previous Medicaid law requires states to exclude individuals or entities from Medicaid
participation when states are directed to do so by the Secretary, and to deny payment for any item
or service furnished by the individual or entity. States are required to exclude these individuals
and deny payment for a period specified by the Secretary.
Congressional Research Service
37
.
Medicaid and CHIP Provisions in PPACA
PPACA requires Medicaid agencies to exclude individuals or entities from Medicaid participation
if the entity or individual owns, controls, or manages an entity that (1) has unpaid or unreturned
overpayments during the period as determined by the Secretary or the state; (2) is suspended,
excluded, or terminated from participation in any Medicaid program; or (3) is affiliated with an
individual or entity that has been suspended, excluded, or terminated from Medicaid participation
during the period. This provision is effective January 1, 2011 (see §6508, General Effective Date
below).
Billing Agents, Clearinghouses, or Other Alternate Payees Required to
Register Under Medicaid
(P.L. 111-148: §6503)
As a condition of participation, certification, or recertification in Medicaid, the Secretary requires
disclosing entities to supply upon request, either to the Secretary or the state Medicaid agency,
information on the identity of each person with ownership or control interests in the entity or
subcontractor that is equal to 5% or more of such entity. Disclosing entities include providers of
service, independent clinical laboratories, renal disease facilities, managed care organizations or
health maintenance organizations, entities (other than individual practitioners or groups of
practitioners) that furnish or arrange for services, carriers or other agencies, or organizations that
act as fiscal intermediaries or agents for service providers. Federal rules applicable to Medicaid
state plans also require states to exclude individuals or entities from Medicaid participation when
a state is directed to do so by the Secretary and to deny payment for any item or service furnished
by the individual or entity.
This provision in PPACA requires any agents, clearinghouses, or other alternate payees that
submit claims on behalf of Medicaid health care providers to register with the state and the
Secretary in a form and manner the Secretary is required to specify. This provision is effective
January 1, 2011 (see §6508, General Effective Date below).
Requirement to Report Expanded Set of Data Elements Under MMIS to Detect
Fraud and Abuse
(P.L. 111-148: §6504)
To administer their state Medicaid plans, states are required to operate an automated claims
processing system and data base known as a Medicaid Management Information System (MMIS).
The Secretary approves states’ MMISs and determines if they have met requirements including
compatibility with Medicare claims processing and information systems and consistency with
uniform coding systems for claims processing and data interchange. MMISs also are required to
be capable of providing timely and accurate data, meet other specifications as required by the
Secretary, and provide for electronic transmission of claims data as well as be consistent with
Medicaid Statistical Information Systems (MSIS) data formats. MSIS is an analytical database
derived from MMIS claims level data. MMIS data primarily captures claims data when Medicaid
beneficiaries receive their care on a FFS basis. For most states, managed care encounter data or
managed care claims level data generally are not reported or otherwise captured by state MMIS
systems. Medicaid managed care organizations (MMCO) are paid a capitated (fixed fee)
regardless of the amount of care required by beneficiaries. Encounter data reporting requirements
Congressional Research Service
38
.
Medicaid and CHIP Provisions in PPACA
under state contracts with MMCOs vary. Medicaid agencies also do not report claims level
managed care data to CMS through their MMISs.
Beginning in January 1, 2011, PPACA requires states to collect and submit through their MMISs
managed care data as identified by the Secretary for program integrity, program oversight, and
administration. The Secretary is to determine the data needed and how frequently these data are
required to be submitted. In addition, for contract years beginning after January 1, 2010, MMCOs
are required to submit data elements as determined necessary by the Secretary for program
integrity, program oversight, and administration.
Prohibition on Payments to Institutions or Entities Located Outside of the
United States
(P.L. 111-148: §6505)
Under previous Medicaid law, there were no specific prohibitions or limitations which prevent
Medicaid payments to institutions or entities located outside the United States. This provision in
PPACA prohibits states from making any payments for items or services supplied to beneficiaries
under a Medicaid state plan or waiver to any financial institution or entity located outside of the
United States. This Section is effective January 1, 2011 (see §6508, General Effective Date
below).
Overpayments
(P.L. 111-148: §6506)
Previous Medicaid law requires states to repay promptly the federal share of Medicaid
overpayments when the state discovers overpayments occurred. States had 60 days after
discovery of an overpayment to recover, or attempt to recover, the overpayment before an
adjustment was made to their federal matching payment. Adjustments in federal payments were
made at the end of the 60 days, whether or not states had recovered the funds. When states were
unable to recover overpayments because the debts were discharged in bankruptcy or were
otherwise uncollectable, federal matching payments were not adjusted.
Beginning with enactment, PPACA extends the time period for states to repay overpayments due
to fraud to one year when the uncollectible debt (or any part) was an overpayment within one
year of discovery because a determination of the amount of the overpayment was not made due to
an ongoing judicial or administrative process, including the appeal of a judgment. When these
overpayments due to fraud are pending, state repayments of the federal portion are not due until
30 days after the date of the final judgment (including a final appeal determination). PPACA
requires the Secretary to issue regulations for states to use in adapting MMIS edits, conducting
audits, or other appropriate actions to identify and correct recurring or ongoing overpayments.
This provision went into effect March 23, 2010.
Mandatory State Use of National Correct Coding Initiative
(P.L. 111-148: §6507)
Congressional Research Service
39
.
Medicaid and CHIP Provisions in PPACA
Working through health insurance contractors, CMS processes Part B Medicare claims which
include payments for physician, laboratory, and radiology services. In 1996, to help ensure
correct payment for these claims, CMS initiated a national correct coding initiative (NCCI).
Under NCCI, CMS’ contractors screen Medicare Part B claims with automated pre-payment
edits. The software edits used by Medicare contractors are designed to detect anomalies that
indicate a claim has incorrect information. For example, NCCI edits can detect claims with
duplicate services delivered to the same beneficiary on the same date of service. Medicaid law
does not require the use of NCCI prepayment edits, but individual states conduct medical review
and other pre- and post-payment reviews designed to detect fraud, waste, and abuse.
Beginning with claims submitted on October 1, 2010, PPACA requires states to add to their
MMISs pre-payment edits to correct and control improper coding, similar to the NCCI edits used
by Medicare contractors. By September 1, 2010, the Secretary is required to (1) identify NCCI
methodologies compatible with Medicaid claims, and (2) identify methodologies applicable to
Medicaid, but for which no Medicare NCCI methodologies had been established. Further, the
Secretary is required to notify states of NCCI methodologies (or successor initiatives) applicable
to Medicaid that were identified and how states are to incorporate those methodologies into their
Medicaid claims processing systems. Moreover, the Secretary is required to submit a report to
Congress by March 1, 2011 that includes the notice to states about the NCCI methodologies, and
an analysis that supports the identification of NCCI methodologies to be applied to Medicaid
claims.
General Effective Date for Medicaid and CHIP Program Integrity Activities
(P.L. 111-148: §6508)
States are be required to implement PPACA’s Medicaid program integrity Sections by January 1,
2011, regardless of whether final regulations were issued. In situations where the Secretary
determined that state legislation would be required (other than appropriation legislation) to amend
the state plan or child health plan, then states will have additional time to comply with these
requirements.
Other Program Integrity and Related Provisions Applicable
to Medicaid
Provider Screening and Other Enrollment Requirements under Medicare,
Medicaid, and CHIP
(P.L. 111-148: §6401 as amended by §10603)
The process for enrolling providers and suppliers in Medicare, Medicaid, and CHIP is different
depending on the program and the type of provider, although Medicaid and CHIP requirements
are similar. PPACA requires the Secretary, in consultation with the HHS/OIG, to establish similar
procedures for screening providers and suppliers enrolling in the Medicare, Medicaid, and CHIP
programs. These procedures are required to include processes for screening providers, enhanced
oversight measures, disclosure requirements, moratoriums on enrollment, and requirements for
developing compliance programs.
Congressional Research Service
40
.
Medicaid and CHIP Provisions in PPACA
By January 1, 2011, the Secretary is required to develop procedures, which apply to both new and
current providers. The Secretary is required to implement these requirements within three years.
Further, the Secretary is required to determine the level of screening for providers depending on
the provider’s fraud risk category (as determined by the Secretary). At a minimum, all providers
and suppliers are subject to licensure checks, including checks across states.
The Secretary has authority to impose additional screening requirements such as criminal
background checks, fingerprinting, unannounced site visits, database checks, and periods of
enhanced oversight if necessary. To cover the costs of the screening, new institutional providers
and suppliers are subject to application fees, with some hardship exceptions and waivers for
certain Medicaid providers when states can demonstrate that imposition of the fees might
jeopardize beneficiaries’ access to services. Fees start at $500 for institutional providers and are
adjusted for inflation thereafter; individual providers are exempt from application fees. The
Secretary also has authority to impose a temporary moratorium on enrolling new providers if
necessary. Further, PPACA requires Medicare, Medicaid, and CHIP providers and suppliers,
within a particular industry or category, to establish compliance programs that adhere to standards
established by the Secretary and the HHS/OIG.
Enhanced Medicare and Medicaid Program Integrity Provisions
(P.L. 111-148: §6402, as modified by P.L. 111-152: §1304)
PPACA requires the Secretary to enhance existing Medicare, Medicaid, and CHIP program
integrity initiatives. As part of these enhancements, the Secretary is required to apply some of the
same requirements to Medicare, Medicaid, and CHIP.
• Data Matching. Under previous law, claims and payment data for Medicare and
Medicaid are housed in multiple databases. CMS is in the process of consolidating
information stored in these databases into an Integrated Data Repository (IDR). This
provision in PPACA requires CMS to include in the IDR claims and payment data
from the following programs: Medicare (Parts A, B, C, and D), Medicaid, CHIP,
health-related programs administered by the Departments of Veterans Affairs (VA)
and Defense (DOD), Social Security Administration, and the Indian Health Service
(IHS). The priority is to be given to integration of Medicare and Medicaid claims and
payment data. Other program data, including CHIP, will be integrated as appropriate.
• Access to Data. Inspectors General have substantial independence and power to carry
out their mandate to combat waste, fraud, and abuse, including relatively unlimited
authority to access all records and information of an agency. This provision in
PPACA grants the HHS/OIG and the DOJ explicit access to Medicare, Medicaid, and
CHIP payment and claims data (including Medicare Part D data) to conduct law
enforcement and oversight activities. This provision further grants the HHS/OIG the
authority to obtain information from providers, suppliers, beneficiaries (as long as
privacy protections are observed) including supporting documentation necessary to
valid payment claims, such as medical records, but also any records necessary for
evaluation of the economy, efficiency, and effectiveness of Medicare and Medicaid
programs.
• Beneficiary Participation in Health Care Fraud Scheme. This provision in PPACA
requires the Secretary to impose administrative penalties on beneficiaries entitled to
or enrolled in Medicare, Medicaid, or CHIP if they knowingly participate in health
Congressional Research Service
41
.
Medicaid and CHIP Provisions in PPACA
care fraud offenses. In addition, beneficiaries are required to return overpayments
within 60 days of receipt of those payments or be subject to enforcement action.
• National Provider Identifier (NPI). Health care providers often have multiple
provider numbers, one number for billing each private insurance plan or public health
care program. The administrative simplification provisions of Health Insurance
Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191) required the
adoption and use of a standard unique identifier for health care providers or NPI. All
health care providers who are considered covered entities under HIPAA were
required to obtain and submit claims using an NPI as of May 2007. This provision
requires the Secretary to issue regulations before January 1, 2011 mandating that all
Medicare and Medicaid providers include NPIs on all payment claims and enrollment
applications.
• Withholding of Federal Matching Payments for States that Fail to Report Enrollee
Encounter Data in the Medicaid Statistical Information System (MSIS). The
Secretary is permitted to withhold federal matching payments for services provided
to Medicaid beneficiaries if states do not report encounter data to MSIS (as
determined by the Secretary) for those beneficiaries in timely manner (as determined
by the Secretary).
• Permissive Exclusions. HHS/OIG has the authority to exclude health care providers
from federal health care program participation. Exclusions are mandatory in some
circumstances, and permissive in others (i.e., HHS/OIG has discretion in whether to
exclude an entity or individual). This provision subjects individuals or entities that
make false statements or misrepresentations on applications to enroll or participate in
federal health care programs to the OIG’s permissive exclusion authority. PPACA
explicitly applies to Medicare Advantage plans, Prescription Drug Plans, and
MMCOs as well as these entities’ participating providers and suppliers.
• Civil Monetary Penalties (CMPs). Previous law authorized the imposition of CMPs
on individuals, organizations, agencies, or other entities that engage in improper
conduct under federal health care programs. PPACA provides for CMPs of up to
$10,000 for each false claim submitted, $15,000 or $50,000 under other
circumstances, and an assessment of up to three times the amount claimed. PPACA
also adds additional actions that are subject to CMPs. Among other changes, the
following individuals are subject to CMPs: those who have been excluded from a
federal health care program, but who order or prescribe an item or service; those who
make false statements on enrollment applications, bids, or contracts; and those who
know of an overpayment and do not return the overpayment.
• Testimonial Subpoena Authority. Under PPACA, the Secretary has authority to issue
subpoenas and require the attendance and testimony of witnesses and the production
of any other evidence that relates to matters under investigation or in question by the
Secretary. The Secretary also can delegate this authority to the HHS/OIG and the
CMS administrator for program exclusion investigations.
• Increased Medicare and Medicaid Integrity Program Funding. Under the Medicare
Integrity Program, CMS contracts with private entities to conduct a variety of
activities designed to protect Medicare from fraud, waste, and abuse. Activities
include auditing providers, identifying and recovering improper payments, educating
providers about fraudulent providers, and instituting a Medicare-Medicaid data
matching program.
Congressional Research Service
42
.
Medicaid and CHIP Provisions in PPACA
DRA established the a comparable program for Medicaid, the Medicaid Integrity Program (MIP).
The Medicaid MIP provides dedicated resources to contract with entities to reduce fraud, waste,
and abuse. PPACA requires both Medicare and Medicaid Integrity Program contractors to supply
the Secretary and the HHS/OIG with performance statistics, including the number and amount of
overpayments recovered, the number of fraud referrals, and the return on investment for these
activities. The Secretary also is required to conduct evaluations of eligible entities at least every
three years. Within six months of each fiscal year end, the Secretary is required to submit a report
to Congress that describes the use and effectiveness of MIP funds.
Section 6402 of PPACA increased Health Care Fraud and Abuse Control (HCFAC) account
funding. HCFAC funds are used for a number of health care fraud and abuse activities, but the
majority of the funds are used for Medicare activities. HCERA (Sec. 1304) further increases those
HCFAC funds, bringing them up to the levels proposed in the House health care reform bill, the
Affordable Health Care for American Act (H.R. 3962). In addition, HCERA amended PPACA and
increased MIP funding by indexing MIP funds to annual changes in the consumer price index,
beginning with FY2010.
Improving Nursing Home Transparency, Enforcement, and Staff Training
(P.L. 111-148: §6101-§6107, §6111-§6114, and §6121)
Previous Medicare and Medicaid law requires skilled nursing facilities (SNF) and nursing
facilities (NF) to be administered in a manner that will ensure residents’ well-being. The
Secretary was required to establish SNF and NF requirements to protect the safety, health,
welfare, and rights of residents. Facilities undergo regular survey and certification inspections to
ensure their compliance with these standards. SNF and NF inspections identify deficiencies
where facilities fail to meet federal standards. Deficiencies can range from minor problems to
major safety and life-threatening conditions. State and federal officials may impose civil
monetary penalties on facilities that fail to meet standards or fail to correct deficiencies. In
extreme cases, federal and state officials can install new facility management, assume control of
facilities, or even close SNF or NFs that jeopardize residents’ well-being.
PPACA enhances certain accountability requirements for Medicare certified SNFs and Medicaid
certified NFs. The changes in these sections require SNFs and NFs to maintain and make
available additional information on facility ownership and organizational structure, as well as to
establish new staff compliance and ethics training programs. Further, these sections require the
Secretary to establish additional requirements for SNFs and NFs to develop and implement
compliance and ethics programs.
The Secretary is required to enhance the SNF and NF information available on the Medicare
Nursing Home Compare website, and to ensure that information is prominent, easily accessible,
searchable, and readily understandable to long-term care (LTC) consumers. SNFs are required to
report wage and benefit expenditures for direct care staff. In addition, the Secretary, in
consultation with private sector experts, is required to redesign Medicare and Medicaid cost
reports to capture wage and benefit reporting by SNFs and NFs. The Secretary is required to
develop a new standardized complaint form that facilities and states are required to make
available to all stakeholders and consumers. The changes in these sections require SNFs and NFs
to electronically report direct staffing information to the Secretary following specifications the
Secretary establishes in consultation with stakeholders. GAO is required to conduct a study of
CMS’ nursing home Five-Star rating system. PPACA establishes additional civil money penalties
Congressional Research Service
43
.
Medicaid and CHIP Provisions in PPACA
that both the Secretary and states have authority to impose on SNFs or NFs found to have quality
of care issues and other deficiencies that jeopardized residents’ safety. The Secretary is required
to develop, test, and implement a national independent monitoring demonstration for large
interstate and intrastate SNF and NF chains.
Further, PPACA establishes new requirements for SNF and NF administrators to inform residents
and their representatives, as well as the Secretary, states, and other stakeholders of planned
facility closures. SNF and NF administrators who fail to comply with the closure notice
requirements are subject to penalties up to $100,000 and exclusion from federal health program
participation. The Secretary also is required to conduct demonstration projects on best practices
for culture change and use of information technology in SNFs and NFs. Moreover, PPACA
requires the Secretary to revise initial nurse aide training, competency, and evaluation
requirements to include dementia and abuse prevention. Finally, PPACA authorizes the Secretary
to revise dementia management training and patient abuse prevention in ongoing nurse training,
competency, and evaluation requirements.
Demonstrations and Grant Funding
Money Follows the Person
(P.L. 111-148: §2403)
Under the Money Follows the Person (MFP) Rebalancing Demonstration, the Secretary awarded
competitive grants to states to meet the following objectives: (1) increase the use of home and
community-based, rather than institutional, long-term care (LTC) services; (2) eliminate barriers
that prevent or restrict the flexible use of Medicaid funds to support services for individuals in
settings of their choice; (3) increase Medicaid’s ability to assure home and community-based LTC
services to individuals transitioning from institutions to a community settings; and (4) ensure that
procedures are in place to provide quality assurance home and community-based LTC services.
To participate, individuals must be (1) residing in, and have been residing in for not less than six
months and not more than two years, an inpatient facility; (2) receiving Medicaid benefits for
inpatient services furnished by such inpatient facility; and (3) continuing to require the level of
care provided in an inpatient facility, among other requirements.
P.L. 111-148 extends the MFP Rebalancing Demonstration through September 30, 2016 and
extends the deadline for the submission of the final evaluation report to September 30, 2016. The
provision also changes the demonstration’s eligibility rules by requiring that individuals reside in
an inpatient facility for not less than 90 consecutive days, and by removing the maximum length
of stay for eligibility purposes. The provision excludes Medicare-covered short-term
rehabilitative services from counting toward the 90-day period. This provision become effective
30 days after enactment.
Demonstration Project to Evaluate Integrated Care Around Hospitalization
(P.L. 111-148: §2704)
There is no related provision in prior law. The law establishes a Medicaid demonstration that will
evaluate whether quality can be improved and Medicare payments reduced by making bundled
Congressional Research Service
44
.
Medicaid and CHIP Provisions in PPACA
payments to hospitals and physicians for the delivery of integrated care. Such payments will be
made for episodes of care that include beneficiaries’ hospital stays and concurrent physician
services. Under the demonstration, bundled payments will be based on the beneficiary’s severity
of illness, among others requirements. States can target selected categories of beneficiaries, such
as those with particular diagnoses, or those in particular geographic regions. Finally, participating
hospitals will be required to have, or to establish, robust discharge planning programs that
appropriately place beneficiaries in, or ensure that they have access to, post-acute care settings.
This demonstration project is limited to eight states, and is required to begin on January 1, 2012
and end on December 31, 2016.
Medicaid Global Payment System Demonstration Project
(P.L. 111-148: §2705)
Under Medicaid fee-for-service, the state directly (or through a fiscal intermediary) pays for each
covered service received by a Medicaid beneficiary. All states pay Medicaid-certified hospitals
using a prospectively determined payment system for each case or day of hospitalization.
Aggregate Medicaid payments vary based on the number of cases.
Under P.L. 111-148, the Secretary, in coordination with the proposed Center for Medicare and
Medicaid Innovation is required to establish the Medicaid Global Payment System Demonstration
Project in no more than five states. The demonstration is required to be operational from FY2010
through FY2012. Under the project, payments to an eligible safety net39 hospital system or
network will be adjusted from a FFS payment structure to a global, capitated payment model (a
fixed-dollar payment for patient care, which does not vary by the amount of services delivered).
The Secretary will have the authority to modify or terminate the project during an initial testing
period, and will be required to submit an evaluation by the Innovation Center, as well as
recommendations for legislative and administrative action, no later than 12 months after the
demonstration’s completion. The law authorizes to be appropriated such sums as necessary to
finance this demonstration project.
Pediatric Accountable Care Organization Demonstration Project
(P.L. 111-148: §2706)
Accountable care organizations (ACOs) are defined by experts as groups of providers (e.g.
combinations of one or more hospitals, physician groups, and/or other health care providers) that
are jointly responsible, through shared bonuses or penalties, for the quality and cost of health care
services for a given population of beneficiaries. Under the Medicare Shared Savings Program
established under P.L. 111-148, groups of providers who voluntarily meet certain statutory
criteria, including quality measurements, will be recognized as ACOs and be eligible to share in
the cost-savings they achieve for the Medicare program. Under the new program, an eligible
ACO is defined as a group of providers and suppliers who have an established mechanism for
joint decision-making, and participate in the shared savings program for a minimum of three
years, among other requirements. An ACO will include practitioners (physicians - regardless of
39 Safety net hospitals are defined as hospitals that accept patients regardless of their ability to pay, and a substantial
share of their patient mix consists of the uninsured and Medicaid patients.
Congressional Research Service
45
.
Medicaid and CHIP Provisions in PPACA
specialty, nurse practitioners, physician assistants, and clinical nurse specialists) in group practice
arrangements; networks of practices; and partnerships or joint-venture arrangements between
hospitals and practitioners; among others.
Health reform law also establishes the Pediatric Care Organization demonstration project, where
participating states are authorized to allow pediatric medical providers who voluntarily meet
certain statutory criteria, including quality measurement criteria, to be recognized as ACOs. Such
ACOs are also authorized to share in the cost-savings they achieve for the Medicaid program, in
the same manner as an ACO is recognized and provided with incentive payments under the newly
established Medicare Shared Savings Program. ACOs can include pediatric physicians in group
practice arrangements, or in networks of practices, and those in joint-venture arrangements with
hospitals, among others. To receive an incentive payment, qualified ACOs will be required to
meet both quality performance guidelines created by the Secretary, in consultation with states and
pediatric providers, and a minimum annual savings level, as established by a participating state,
for expenditures on items and services covered under Medicaid and CHIP. The Secretary is
responsible for determining the amount of the annual incentive payment, which will be a portion
of savings and can establish an annual cap on total incentive payments. The law authorizes an
appropriation of such sums as may be necessary to finance this demonstration project.
Medicaid Emergency Psychiatric Demonstration Project
(P.L. 111-148: §2707)
Medicaid does not reimburse for services provided to residents of institutions for mental disease
(IMD), except to those individuals who are under age 21 receiving inpatient psychiatric care and
to individuals age 65 and over. IMDs are defined under Medicaid statute as hospitals, nursing
facilities, or other institutions with more than 16 beds that are primarily engaged in providing
diagnosis and treatment of persons with mental diseases.
Federal law requires that hospital-based IMDs which have emergency departments provide a
medical screening examination to individuals for whom an examination or treatment for a
medical condition is requested. In such cases, the hospital-based IMD must provide for an
appropriate medical screening examination to determine whether or not a medical emergency
exists. If a medical emergency exists, then the hospital-based IMD must provide, within the staff
and facilities available at the hospital, for further medical examination and treatment as may be
required to stabilize the medical condition, or to transfer the individual to another medical facility,
subject to certain limitations.
The new law establishes a three-year Medicaid demonstration project in which eligible states are
required to reimburse certain IMDs that are not publicly owned or operated for services provided
to Medicaid eligibles, aged 21 through 64, who require medical assistance to stabilize a
psychiatric emergency medical condition, as defined by the provision. A participating state is
required to establish a mechanism for in-stay review (to be applied before the third day of the
inpatient stay) to determine whether the patient has been stabilized, as defined by the provision.
Eligible states will be selected by the Secretary based on geographic diversity. Out of funds not
otherwise appropriated, the provision provides budget authority in advance of appropriations in
an amount equal to $75 million for FY2011. Such funds will remain available for obligation for
five years through December 31, 2015.
Congressional Research Service
46
.
Medicaid and CHIP Provisions in PPACA
The Secretary is required to conduct an evaluation to determine the impact of this demonstration
project. The evaluation will include an assessment of access to inpatient mental health services,
average lengths of stays, emergency room utilization, discharge planning, impact on other mental
health service costs, and a recommendation regarding whether the project should be continued
beyond December 31, 2013 and expanded on a national basis. The Secretary is required to submit
a final report to Congress no later than December 31, 2013.
Grants for School-Based Health Centers
(P.L. 111-148: §4101(a))
P.L. 111-148 creates a grant program to support the establishment of school-based health centers.
This new law appropriates $50 million for each fiscal year from FY2010 through FY2013, for a
total of $200 million, to remain available until expended. The use of such funds is prohibited for
any service that is not authorized or allowed by federal, state, or local law. The Secretary is
required to establish criteria and application procedures for awarding grants under this program.
The Secretary will give preference in awarding grants to school-based health centers serving a
large population of children eligible for Medicaid or CHIP. Eligible entities must use these grant
funds only for expenditures for facilities, equipment or similar costs. No grant funds can be used
for personnel or health care expenditures. (Another provision, described in a separate CRS
report,40 provides grants under the Public Health Service Act for the operation of school-based
health centers.)
Incentives for Prevention of Chronic Diseases in Medicaid
(P.L. 111-148: §4108)
The Secretary is authorized to award grants to states to provide incentives for Medicaid
beneficiaries to participate in programs to promote healthy lifestyles. These programs must be
comprehensive and uniquely suited to address the needs of Medicaid eligible beneficiaries, and
have demonstrated success in helping individuals lower cholesterol and/or blood pressure, lose or
control weight, quit smoking and/or manage or prevent diabetes, and may address co-morbidities,
such as depression, associated with these conditions. The purpose of this initiative is to test
approaches that may encourage behavior modification and determine scalable solutions.
The provision authorizes the appropriation of $100 million in funding for these grants during a
five-year period. Under the new law, the Secretary is required to award grants beginning on
January 1, 2011, or the date on which the Secretary develops program criteria, whichever is
earlier. These criteria are to be developed using relevant evidence-based research including the
Guide to Community Preventive Services, the Guide to Clinical Preventive Services, and the
National Registry of Evidence-Based Programs and Practices. The state initiatives must last at
least three years of the five-year program spanning January 1, 2011, through January 1, 2016.
After the Secretary develops and institutes an outreach and education campaign to make states
aware of the grants, states may submit a proposal and apply for funds to provide incentives to
40 For information about this related provision, see CRS Report R40943, Public Health, Workforce, Quality, and
Related Provisions in the Patient Protection and Affordable Care Act (P.L. 111-148), coordinated by C. Stephen
Redhead and Erin D. Williams.
Congressional Research Service
47
.
Medicaid and CHIP Provisions in PPACA
Medicaid enrollees who successfully complete healthy lifestyle programs. States are permitted to
collaborate with community-based programs, non-profit organizations, providers, and faith-based
groups, among others. States awarded such grants will be required to conduct an outreach and
education campaign aimed at Medicaid beneficiaries and providers. They will also be required to
establish a system to track beneficiary participation and validate changes in health risk and
outcomes; establish standards and health status targets for participating Medicaid beneficiaries;
evaluate the effectiveness of the program and provide the Secretary these evaluations; report to
the Secretary on processes that have been developed and lessons learned; and report on
preventive services as part of reporting on quality measures of Medicaid managed care programs.
A state that is awarded a grant will be required to submit semi-annual reports, including
information on the specific use of the funds, an assessment of program implementation, quality
improvements and clinical outcomes, and an estimate of cost savings resulting from the program.
This provision exempts states from the requirement 1902(a)(1) of the SSA, which relates to the
statewide accessibility for medical assistance programs.
The Secretary is required to enter into a contract with an independent entity or organization to
conduct an evaluation of the initiatives. This report should address the effect of the state initiative
of the utilization of health care services, the extent to which special populations, such as adults
with disabilities, are able to participate in the program, the level of satisfaction experienced by the
Medicaid beneficiaries, and the additional administrative costs incurred as a result of providing
the incentives.
The Secretary is required to submit an initial report to Congress before January 1, 2014. This
initial report should include an interim evaluation based on information provided by states and
recommendations on whether funding for expanding or extending the initiatives should continue
beyond January 1, 2016. The Secretary is then required to submit a final report before July 1,
2016 that will include the independent contractor assessment together with recommendations for
appropriate legislative and administrative actions.
Any incentives received by a beneficiary will not be considered for the purpose of determining
eligibility for, or benefits under any program funded whole or in part with federal funds, such as
Medicaid.
Funding of Childhood Obesity Demonstration Project
(P.L. 111-148: §4306)
CHIPRA included several provisions designed to improve the quality of care under Medicaid and
CHIP. Among other quality initiatives, this law directed the Secretary of HHS to initiate a
demonstration to develop a comprehensive and systematic model for reducing child obesity. A
total of $25 million was authorized to be appropriated over FY2009 through FY2013. P.L. 111-
148 replaces the authorization in current law with an appropriation of $25 million for fiscal years
2010 through 2014, to carry out the comprehensive demonstration project for reducing childhood
obesity.
State Children’s Health Insurance Program (CHIP)
CHIP provides health care coverage to low-income, uninsured children in families with income
above Medicaid income standards. States may also extend CHIP coverage to pregnant women
Congressional Research Service
48
.
Medicaid and CHIP Provisions in PPACA
when certain conditions are met. In designing their CHIP programs, states may choose to expand
Medicaid, create a stand-alone program, or use a combined approach. Federal CHIP
appropriations are currently provided through FY2013.
Like Medicaid, CHIP is a joint federal-state program. For each dollar of state spending, the
federal government makes a matching payment drawn from CHIP allotments. A state’s share of
program spending for Medicaid is the percentage not paid by the federal government through the
FMAP. But for CHIP, the federal share is higher. That is, the enhanced FMAP (E-FMAP) for
CHIP lowers the state’s share of CHIP expenditures by 30% compared to the regular Medicaid
FMAP. Although uncommon, certain types of CHIP expenditures are reimbursed at a rate
different than the E-FMAP, and certain types of Medicaid expenditures are reimbursed at the E-
FMAP rate. For FY2010, the E-FMAP for CHIP ranges from 65% to 83%.
Beneficiary cost-sharing varies depending upon how a state designs its CHIP program. For CHIP
Medicaid expansions, nominal amounts may apply as specified under the Medicaid program. For
CHIP stand-alone programs, higher amounts may apply based on income level. In both cases,
preventive services are exempt from all cost-sharing, and aggregate cost-sharing for all
individuals is capped at 5% of family income.
P.L. 111-148 makes a number of changes to CHIP for future years. These changes are described
below. (Other provisions affecting both Medicaid and CHIP are described in other sections of this
report.)
Additional Federal Financing Participation for CHIP
(P.L. 111-148: §2101 as modified by §10203(c); P.L. 111-152: §1004(b)(2))
P.L. 111-148 maintains the current CHIP structure, and provides CHIP appropriations through
FY2015. In the event that future federal CHIP allotments are insufficient to provide coverage to
all eligible CHIP children, states will be required to establish procedures to ensure that such
children not eligible for Medicaid receive coverage through certified plans in state-established
exchanges.
Under P.L. 111-148, states will receive a 23 percentage point increase in the CHIP match rate (E-
FMAP), subject to a cap of 100%, for FY2016 through FY2019 (although no CHIP
appropriations are provided for those years). The 23 percentage point increase will not apply to
certain expenditures.41
Upon enactment, states will be required to maintain income eligibility levels for CHIP through
September 30, 2019 as a condition of receiving payments under Medicaid (notwithstanding the
lack of corresponding federal appropriations for FY2016 through FY2019). Specifically, with the
exception of waiting lists for enrolling children in CHIP or enrolling CHIP-eligible children in
certified exchange plans when federal CHIP funding is no longer available, states can not
implement eligibility standards, methodologies, or procedures that are more restrictive than those
41 Certain expenditures include translation services, CHIP-enrolled children above 300% FPL outside New Jersey and
New York, expenditures for administration of citizenship documentation/verification, expenditures for administration
of payment error rate measurement or PERM, and Medicaid coverage of certain breast or cervical cancer patients.
Congressional Research Service
49
.
Medicaid and CHIP Provisions in PPACA
in place on the date of enactment. However, states can expand their current income eligibility
levels—that is, states can enact less restrictive standards, methodologies or procedures.
In the event that federal CHIP allotments are not available after September 30, 2015, the only
exchange plans available to children who would have been eligible for CHIP will be those that
have been certified by the Secretary. With respect to such certification, not later than April 1,
2015, for each state, the Secretary will be required to review the benefits offered for children and
the associated cost-sharing for exchange plans, and must certify that such plans have been
determined to be at least comparable to the benefits and cost-sharing protections provided under
each state’s CHIP plan. States will be required to establish procedures to ensure that such children
are screened for eligibility for Medicaid (under the state plan or a state waiver), and if found
eligible, enrolled in Medicaid. In the case of children who, as a result of such screening, are
determined to not be eligible for Medicaid, the state will be required to establish procedures to
ensure that those children are enrolled in a certified exchange plan.
Prior to PPACA, for FY2009 through FY2013, states can receive bonus payments when their
Medicaid enrollment among children exceeds a defined baseline, and they also implement certain
outreach and enrollment activities. Under P.L. 111-148, the Medicaid enrollment bonuses
included in CHIPRA (P.L. 111-3) will not apply beyond the current authorization period; bonus
payments will not be available after FY2013.
Beginning January 1, 2014, states will be required to use modified adjusted gross income (MAGI)
to determine Medicaid and CHIP eligibility (excluding Express Lane determinations), premiums
and cost-sharing. States will be required to treat as CHIP children those who are determined to be
ineligible for Medicaid due to the new provision eliminating income disregards based on expense
or type of income. In addition, the CHIP benefit package and cost-sharing rules will continue as
under current law.
Finally, a new Medicaid section added by P.L. 111-148 regarding Medicaid programs’
coordination with state health insurance exchanges will also apply to CHIP programs.
Distribution of CHIP Allotments Among States
(P.L. 111-148: §2101 as modified by §10203(d))
Prior to PPACA, federal CHIP allotments were appropriated through FY2013, with an allotment
formula that was similar for all recent odd-numbered years and for all recent even-numbered
years. PPACA extends federal CHIP allotments by two years and makes the allotments for
FY2014 and FY2015 similar to how they were to occur in FY2012 and FY2013 under prior law.
In particular, based on prior law, for FY2012, the allotment for a state (or territory) will be
calculated as the prior-year allotment and any prior-year Contingency Fund spending (for states
that experience shortfalls of federal CHIP funds; described in further detail below), multiplied by
the state’s growth factor for the year.42 Under PPACA, this will also be the basis for states’
FY2014 allotments.
42 For the FY2009 allotment formula, the state’s growth factor, called the “allotment increase factor,” was the product
of (a) 1 plus the percentage increase (if any) in the projected per capita spending in the National Health Expenditures
for 2009 over 2008, and (b) 1.01 plus the percentage change in the child population in each state (except for the
(continued...)
Congressional Research Service
50
.
Medicaid and CHIP Provisions in PPACA
Based on prior law for FY2013, the allotment for a state (or territory) will be “rebased,” based on
prior year spending. This will be done by multiplying the state’s growth factor for the year by the
new base, which will be the prior year’s federal CHIP spending. Under PPACA, this will also be
the basis for states’ FY2015 allotments.
As per prior law, the Child Enrollment Contingency Fund (created under CHIPRA) was
established to prevent states from experiencing shortfalls of federal CHIP funds. This fund
receives an appropriation separate from the national CHIP allotment amounts. For FY2009, its
appropriation was 20% of the CHIP available national allotment. For FY2010 through FY2013,
the appropriation will be such sums as are necessary for making payments to eligible states for
the fiscal year, as long as the annual payments do not exceed 20% of that fiscal year’s CHIP
available national allotment. Direct payments from the Contingency Fund can be made to
shortfall states for the federal share of expenditures for CHIP children above a target enrollment
level.
P.L. 111-148 extends the authority for the Child Enrollment Contingency Fund through FY2015.
For FY2013 through FY2015, the appropriation for the Fund will be such sums as are necessary
for making payments to eligible states for the fiscal year, as long as the annual payments do not
exceed 20% of that fiscal year’s CHIP available national allotment. Direct payments from the
Contingency Fund can be made to shortfall states for each of FY2013 through FY2015 for the
federal share of expenditures for CHIP children above a target enrollment level.
Finally, prior CHIP statute permitted 11 early expansion “qualifying states” to draw some CHIP
funds for Medicaid children above 133% of poverty level. P.L. 111-148 extends this authority
through FY2015.
Extension of Funding for CHIP Through FY2015 and Other Related Provisions
(P.L. 111-148: §10203(a), §10203(b), and §10203(d))
Revisions to the Child Health Quality Measurement Initiative
Under prior law, a child health quality measurement initiative was established for both Medicaid
and CHIP. Among several requirements, this initiative includes the establishment of a pediatric
quality measurement program that will engage in a number of activities. In general, the purpose
of this program is to improve and strengthen core child health quality measures, expand on
existing pediatric quality measures used by public and private health care purchasers and advance
the development of new and emerging quality measures, and increase the portfolio of evidence-
based, consensus pediatric quality measures available to public and private purchasers of
children’s health services, providers and consumers.
(...continued)
territories, for which the national amount is used) from July 1, 2008, to July 1, 2009, based on the most recent
published estimates of the Census Bureau. For future fiscal years, the growth factor is calculated in the same way, but
uses updated projected per capita spending in the National Health Expenditures for each such fiscal year, and the
percentage change in the child population in each state (except for the territories, for which the national amount is used)
from July 1 of the previous calendar year, to July 1 of the applicable calendar year, based on the most recent published
estimates of the Census Bureau.
Congressional Research Service
51
.
Medicaid and CHIP Provisions in PPACA
Under P.L. 111-148, the Secretary is required to establish by regulation the criteria for certifying
health plans as qualified health plans generally available through the exchange. A number of
criteria for such certification are outlined, including, for example, plans must at a minimum
utilize a uniform enrollment form for both qualified individuals and employers for enrolling in
qualified health plans offered through the exchanges, and utilize a standard format for presenting
health plan benefit options. PPACA also requires exchange plans seeking certification to report to
the Secretary at least annually (and in a manner specified by the Secretary) these pediatric quality
reporting measures.
Participation in, and Premium Assistance for, Employer-Sponsored
Health Plans
Under current law states are permitted to purchase family coverage under a group health plan or
health insurance that includes CHIP children (through what is called a family coverage variance
program), if such coverage is cost-effective relative to (1) the amount of expenditures under the
state CHIP plan (including administrative costs) that the state would have made to provide
comparable coverage of the children or families involved (as applicable), or (2) the aggregate
amount of expenditures that the state would have made under CHIP (including administrative
expenses) for providing coverage under the plan for all such children or families. In addition, the
coverage must not otherwise substitute for health insurance coverage that would be provided to
such children but for the purchase of family coverage, and states must ensure that CHIP minimum
benefits are provided, CHIP cost-sharing ceilings are met, and the children to be enrolled have not
had group coverage for a specified period of time (typically four to six months)43
Under Medicaid law, including a Medicaid expansion CHIP program, states may implement a
premium assistance program if the employer plan is comprehensive and cost-effective for the
state. Under prior Medicaid law, an individual’s enrollment in an employer plan was considered
cost-effective if paying the premiums, deductible, coinsurance and other cost-sharing obligations
of the employer plan was less expensive than the state’s expected cost of directly providing
Medicaid-covered services. To meet the comprehensiveness test under Medicaid, current law
requires states to provide coverage for those Medicaid-covered services that are not included in
the private plans. In other words, states must provide “wrap-around” benefit coverage.
CHIPRA created a new state plan option to offer premium assistance for Medicaid and CHIP-
eligible children and/or parents of Medicaid and/or CHIP-eligible children where the family has
access to employer-sponsored insurance (ESI) coverage, if the employer pays at least 40% of the
total premium, the employer’s group health plan qualifies as “creditable coverage”44 (as defined
by the Public Health Service Act), and the coverage is offered to all individuals in a
nondiscriminatory way (as defined by the Internal Revenue Code of 1986). Under CHIPRA, a
state offering premium assistance may not require CHIP eligible individuals to enroll in an
employer’s plan; individuals eligible for CHIP and for employment-based coverage may choose
to enroll in regular CHIP rather than the premium assistance program. The premium assistance
subsidy will generally be the difference between the worker’s out-of-pocket premium that
43 CHIP premium assistance programs approved under state plan authority are referred to as family coverage variance
programs. As of June 7, 2007, there were two states—New Jersey and Massachusetts—with operational family
coverage variance programs under CHIP.
44 Benefits provided under a health flexible spending arrangement or a high deductible health plan are specifically
excluded as credible health coverage under CHIPRA.
Congressional Research Service
52
.
Medicaid and CHIP Provisions in PPACA
included the child(ren) versus only covering the employee. For employer plans that do not meet
CHIP benefit requirements, a wrap-around is required. The law also stipulates that the premium
assistance provisions under Medicaid, not CHIP, will apply to children enrolled in a Medicaid
expansion CHIP program.
Under prior law (as enacted under CHIPRA), for the child’s coverage using premium assistance,
no cost-effectiveness test was required regarding the cost of the private coverage (plus any
necessary wrap-around) relative to regular CHIP coverage. CHIPRA established a separate test
for family coverage. If the CHIP cost of covering the entire family in the employer-sponsored
plan was less than regular CHIP coverage for the eligible individual(s) alone, then the premium
assistance subsidy could be used to pay the entire family’s share of the premium.
P.L. 111-148 applies the cost-effectiveness definition used under the CHIP family coverage
variance authority to (1) the coverage of Medicaid beneficiaries in employer-sponsored group
health plans, (2) the premium assistance option for children under Medicaid, and to (3) the new
CHIPRA state plan option to offer premium assistance for Medicaid and CHIP-eligible children
and/or parents of Medicaid and/or CHIP-eligible children.
Definition of CHIP Eligible Children
Section 2110(b) of the Social Security Act defines “targeted low-income child” for CHIP
purposes. Generally, such children are not otherwise insured, and live in families with income
above Medicaid applicable levels, up to 50 percentage points above that level. (Some states have
set higher income standards via waiver authority or by disregarding “blocks of income” in
determining financial eligibility, for example). The law also defines two groups of children as
being ineligible for CHIP: (1) children who are inmates of public institutions or are patients in an
institution for mental disease, and (2) children in families for whom a member is eligible for
health benefits coverage under a state health benefits plan through the family member’s
employment with a public agency in the state.
P.L. 111-148 makes two exceptions to the CHIP exclusion of children of employees of a state
public agency. First, children of state employees may be enrolled in CHIP if annual agency
expenditures made on behalf of an employee enrolled in a state health plan with dependent
coverage (for the most recent state fiscal year) is at least the amount of such expenditures made
for state FY1997, adjusted for medical inflation for such preceding year. Second, children of state
employees may be enrolled in CHIP if the state determines, on a case-by-case basis, that the
annual aggregate amount of premiums and cost-sharing applicable to the family of the child
would exceed 5% of the family’s income for the year involved.
CHIP Annual Allotments
Prior to PPACA, federal statute provided yearly total allotments for CHIP. Specific annual
amounts were appropriated for fiscal years starting with FY1998 ($4.295 billion) through
FY2012 ($14.982 billion). For FY2013 only, two semi-annual allotments were made available.
For the first half of the fiscal year, $2.85 billion was to be available, and for the second half of the
fiscal year, another $2.85 billion. In addition, a “one-time appropriation” of $11.706 billion was
added to the half-year amounts provided for FY2013. These provisions for FY2013 were intended
to annually reduce by the “one-time appropriation” the amount of allotments assumed by the
Congressional Budget Office (CBO) for fiscal years after FY2013.
Congressional Research Service
53
.
Medicaid and CHIP Provisions in PPACA
P.L. 111-148 strikes the current law language that provides semi-annual allotments for FY2013,
and replaces that language with an appropriation of $17.406 billion for FY2013. The new law
also provides an appropriation of $19.147 billion for FY2014, and establishes two semi-annual
allotments for FY2015. For the first half of FY2015, $2.85 billion will be made available, and for
the second half of FY2015, another $2.85 billion. P.L. 111-148 also modifies this section of the
CHIP statute to provide a one-time appropriation of $15.361 billion to be added to the half year
amounts provided for FY2015.
Prior law appropriated $100 million in outreach and enrollment grants above and beyond the
regular CHIP allotments for FY2009 through FY2013. Ten percent of the allocation is to be
directed to a national enrollment campaign, and 10% will be targeted to outreach for Native
American children. The remaining 80% is to be distributed among state and local governments
and to community-based organizations for purposes of conducting outreach campaigns with a
particular focus on rural areas and underserved populations. Grant funds are also targeted at
proposals that address cultural and linguistic barriers to enrollment.
P.L. 111-148 expands the time period for the outreach and enrollment grants through FY2015.
This provision also changes the appropriation level to $140 million for FY2009 through FY2015.
Technical Corrections to the CHIP Statute
(P.L. 111-148: §2102)
CHIPRA was signed into law on February 4, 2009, to extend and improve CHIP (e.g., to provide
federal CHIP allotments to states from FY2009 through FY2013), and for other purposes. The
American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) was signed into law on
February 17, 2009, making supplemental appropriations for job preservation and creation,
infrastructure investment, energy efficiency and science, assistance to the unemployed, and state
and local fiscal stabilization, for fiscal year ending September 30, 2009, and for other purposes.
PPACA corrects selected provisions in CHIPRA and ARRA, including (1) making an adjustment
to the FY2010 CHIP allotments for certain previously approved Medicaid expansion programs;
(2) clarifying a reference to certain lawfully residing immigrants in CHIP statute; (3) deleting a
reference to CHIP funds set aside for coverage of certain Medicaid non-pregnant childless adult
waivers when those funds are not expended by September 30, 2011 (this block grant was not
included in the final version of P.L. 111-3); (4) for comparing the Current Population Survey
(CPS) and the American Community Survey (ACS), using estimates of “high performing states”
(i.e., those in the lowest one-third of states in terms of their percentage of uninsured, low-income
children); and (5) stipulating that the alternative premiums and cost-sharing provision in
Medicaid will not supersede or prevent the application of premium and cost-sharing protections
for American Indians under Medicaid and CHIP as established in P.L. 111-5. All of these changes
are effective as if they were included in the enactment of P.L. 111-3 and P.L. 111-5.
Miscellaneous
Medicaid Improvement Fund Rescission
(P.L. 111-148: §2007)
Congressional Research Service
54
.
Medicaid and CHIP Provisions in PPACA
In the Supplemental Appropriations Act, 2008 (P.L. 110-252), Congress directed the Secretary to
establish a Medicaid Improvement Fund (MIF) to be used by CMS to improve the management
of the Medicaid program, including improved oversight of contracts and contractors and
evaluation of demonstration projects. MIF funding was to be available in addition to existing
CMS budget authority and was to total $100 million in FY2014, and $150 million in each
FY2015-FY2018. The Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA, P.L.
110-173) revised funding for Physician Assistance and Quality Initiative and these funds were to
be used for MIF activities. In December 2009, the Department of Defense Appropriations Act,
2010 (P.L. 111-118) was passed. P.L. 111-118 reduced the amount of funding available for MIF in
2014 from $22.3 billion to $20.7 billion. PPACA rescinds any unobligated MIF funds (as of the
date of enactment) for FYs 2014 through 2018.
Removal of Barriers to Providing Home and Community-Based Services
(P.L. 111-148: §2402)
Secretary is required to promulgate regulations to ensure that all states develop service systems
designed to: (1) allocate resources for services in a manner that is responsive to the changing
needs of long-term care beneficiaries receiving home and community-based services and that
maximizes their independence; (2) provide the support for such beneficiaries to design an
individualized self-directed, community-supported life; and (3) improve coordination among
providers to achieve more consistent administration of policies and procedures across federally
and state-funded programs, among others.
Funding to Expand State Aging and Disability Resource Centers
(P.L. 111-148: §2405)
Established under the Older Americans Act (OAA), Aging and Disability Resource Centers
(ADRCs) provide information and assistance to elderly persons and individuals with physical
disabilities, serious mental illness, and/or developmental/intellectual disabilities. ADRCs also
serve as a single point of entry for enrollment in publicly administered LTC services, including
those funded by Medicaid and OAA. Out of any funds in the Treasury not otherwise appropriated,
the law appropriates to the Secretary, acting through the Assistant Secretary of Aging, $10 million
for each of FY2010 through FY2014 to carry out ADRC initiatives.
Sense of the Senate Regarding Long-Term Care
(P.L. 111-148: §2406)
The law expresses the sense of the Senate that the 111th Congress should comprehensively
address long-term services and supports in a way that guarantees elderly and disabled individuals
the care they need, and that makes long term services and supports available in the community as
well as in institutions.
Five-Year Period for [Dual Eligible] Demonstration Projects
(P.L. 111-148: §2601)
Congressional Research Service
55
.
Medicaid and CHIP Provisions in PPACA
Some elderly and disabled individuals, referred to as dual eligibles, qualify for health insurance
under both Medicare and Medicaid. These dual eligible individuals qualify for Medicare Part A
and/or Parts B and D and are eligible for Medicaid because they have limited income and assets.
Previous federal law gives the Secretary authority to waive selected Medicaid and Medicare
requirements, as well as approve waivers to reach individuals who otherwise would be ineligible
for Medicaid. Some projects have been approved that waive both Medicare and Medicaid rules to
implement statewide initiatives to coordinate service delivery, benefit packages, and
reimbursement for dual eligibles. Initially, waivers can be approved for periods ranging from two-
to five-year periods and renewed for additional periods of up to five years.
PPACA authorizes the Secretary to initially approve Medicaid waivers for up to five years. This
authority applies to demonstrations as well as home- and community-based waivers for
coordinating care of dual eligibles (and for non dual eligible beneficiaries if they were included
under the waiver). In addition, the Secretary has authority to approve Medicaid waiver extensions
for additional five-year periods when requested by states, unless the waivers did not meet the
conditions for the previous period, or the waiver was no longer cost effective, efficient, or
consistent with Medicaid policy.
Federal Coverage and Payment Coordination for Dual Eligible Beneficiaries
(P.L. 111-148: §2602)
There are no specific requirements under previous Medicare and Medicaid law or regulations for
the programs to coordinate care for dual eligible individuals. PPACA requires the Secretary to
establish a federal coordinated health care office (CHCO) within CMS by March 1, 2010. CMS’s
Administrator will appoint the CHCO director, who also will report to the CMS Administrator.
The CHCO’s purpose is to “bring together” Medicare and Medicaid program staff at CMS for
purpose of (1) integrating benefits and (2) improving care coordination for dual eligible
beneficiaries. The CHCO established under PPACA has the following goals:
1. to provide dual eligible individuals full access to the benefits to which they are
entitled under the Medicare and Medicaid programs;
2. to simplify the processes for dual eligible individuals to access the items and
services they are entitled to under the Medicare and Medicaid programs;
3. to improve the quality of health care and long-term care services for dual eligible
individuals;
4. to increase beneficiaries’ understanding of, and satisfaction with, coverage under
the Medicare and Medicaid programs;
5. to eliminate regulatory conflicts between rules under the Medicare, and Medicaid
programs;
6. to improve care continuity and ensure safe and effective care transitions;
7. to eliminate cost-shifting between the Medicare and Medicaid programs and
among related health care providers; and
8. to improve the quality of performance of providers of services and suppliers
under the Medicare and Medicaid programs.
Congressional Research Service
56
.
Medicaid and CHIP Provisions in PPACA
PPACA also assigns the CHCO the following specific responsibilities:
1. to provide states, specialized Medicare Advantage plans for special needs
individuals—special needs plans, physicians, and other entities or individuals
qualified to develop programs, with the education and tools necessary to develop
programs that align benefits for duals under Medicare and Medicaid;
2. to support state efforts to coordinate contracting and oversight by states and CMS
on the integration of Medicare and Medicaid programs consistent with CHCO
goals;
3. to support state and CMS efforts to coordinate contracting and oversight for
integrating Medicare and Medicaid programs;
4. to consult with the MedPAC and MACPAC on enrollment and benefit policies
for dual eligible individuals; and
5. to study the provision of drug coverage for new full-benefit dual eligibles and to
monitor and report on total annual expenditures, health outcomes, and access to
benefits for all dual eligibles.
Under PPACA, the Secretary is required to submit a report to Congress under the annual budget
transmittal. The report is required to contain recommendations for legislation that could improve
care coordination and benefits for dual eligible individuals.
Adult Health Quality Measures
(P.L. 111-148: §2701)
P.L. 111-148 adds a federal initiative to collect and report quality of care data for adults enrolled
in Medicaid. Among several activities, the Secretary will publish a recommended core set of adult
health quality measures, including such measures in use under public and privately sponsored
health care coverage arrangements, or that are part of reporting systems that measure both the
presence and duration of health insurance coverage over time. The Secretary is required to
publish an initial core set of measures by January 1, 2012. Also, no later than January 1, 2013, the
Secretary, in consultation with the states, is required to develop a standardized format for
reporting information based on this initial core measurement set. States will be encouraged to use
these measures to voluntarily report such data.
As with existing law regarding quality of care reporting for Medicaid children, before January 1,
2014, and every three years thereafter, the Secretary is required to submit a report to Congress
that describes the Secretary’s efforts to improve, for example, the duration and stability of
coverage for adults under Medicaid, the quality of care of different services for such individuals,
the status of voluntary state reporting of such data, and any recommendations for legislative
changes needed to improve quality of care provided to Medicaid adults.
Within one year after the release of the recommended core set of adult health quality measures,
the Secretary is required to establish a Medicaid Quality Measurement Program (MQMP). To this
end, the Secretary is required to award grants and contracts for developing, testing, and validating
emerging and innovative evidence-based measures applicable to Medicaid adults. Not later than
two years after the establishment of the MQMP, the Secretary is required to publish
recommended changes to the initial core set of adult health quality measures based on the results
Congressional Research Service
57
.
Medicaid and CHIP Provisions in PPACA
of testing, validation, and the consensus process for development of these measures. P.L. 111-148
does not restrict coverage under Medicaid or CHIP to only those services that are evidence-based.
The new law also includes annual state reporting requirements to include, for example, state-
specific adult health quality measures, including information collected as part of external quality
reviews of managed care organizations and through benchmark plans (if applicable). The
Secretary will be required to collect, analyze and make publicly available the information
reported by states, before September 30, 2014, and annually thereafter.
Finally, to carry out these activities, P.L. 111-148 appropriates $60 million for each of fiscal years
2010 through 2014. These funds will remain available until expended.
MACPAC Assessment of Policies Affecting All Medicaid Beneficiaries
(P.L. 111-148: §2801, and §10607)
CHIPRA established a new federal commission called the Medicaid and CHIP Payment and
Access Commission, or MACPAC. This commission will review program policies under both
Medicaid and CHIP affecting children’s access to benefits, including (1) payment policies, such
as the process for updating fees for different types of providers, payment methodologies, and the
impact of these factors on access and quality of care; (2) the interaction of Medicaid and CHIP
payment policies with health care delivery generally; and (3) other policies, including those
relating to transportation and language barriers. The commission will make recommendations to
Congress concerning such payment and access policies. MACPAC is similar to MedPAC which
reviews Medicare program policies.
Beginning in 2010, the commission will submit an annual report to Congress containing the
results of these reviews and MACPAC’s recommendations regarding these policies. The
commission will also submit annual reports to Congress containing an examination of issues
affecting Medicaid and CHIP, including the implications of changes in health care delivery in the
U.S. and in the market for health care services.
MACPAC must also create an early warning system to identify provider shortage areas or other
problems that threaten access to care or the health care status of Medicaid and CHIP
beneficiaries.
P.L. 111-148 makes a number of changes to the federal statute that established MACPAC. For
example, MACPAC’s review and assessment of payment policies under Medicaid and CHIP will
be expanded to include how factors affecting expenditures and payment methodologies enable
beneficiaries to obtain services, affect provider supply, and affect providers that serve a
disproportionate share of low-income and other vulnerable populations. Additional topics that
MACPAC will be required to review and assess include policies related to eligibility, enrollment
and retention, benefits and coverage, quality of care, and interactions between Medicaid and
Medicare and how those interactions affect access to services, payments and dual eligibles.
MACPAC is also required to report to Congress on any Medicaid and CHIP regulations that affect
access, quality and efficiency of health care.
MACPAC must also conduct an independent review of the alternatives to current tort litigation
under new state demonstration grants established for this purpose under this new law. This review
will assess the impact of such alternatives on the Medicaid and CHIP programs and their
Congressional Research Service
58
.
Medicaid and CHIP Provisions in PPACA
beneficiaries, including an analysis of the impact of these alternatives on the efficiency and
effectiveness of these two programs. A report on these tort reform activities, including findings
and recommendations, is due to Congress no later than December 31, 2016.
In carrying out its duties, MACPAC is authorized to obtain necessary data from any state agency
responsible for administering Medicaid or CHIP. The provision of these state data is a condition
for receiving federal matching funds under either program. P.L. 111-148 requires MACPAC to
seek state input and review state data, and to consider state information in its recommendations
and reports. Both MACPAC and MedPAC are required to coordinate and consult with the Federal
Coordinated Health Care Office (established under §2081 of this new law) before making
recommendations regarding Medicare beneficiaries who are dually eligible. Changes to Medicaid
policy affecting dual eligibles are the responsibility of the MACPAC.
For FY2010, P.L. 111-148 appropriates $11 million for MACPAC. Of this total, $9 million will
come from the Treasury out of any funds not otherwise appropriated, and $2 million will come
from FY2010 CHIP funds, and will remain available until expended. Funding in subsequent years
is not addressed in this provision. This provision is effective upon enactment.
Protections for American Indians and Alaska Natives
(P.L. 111-148: §2901)
The Indian Health Service (IHS), an agency in HHS, provides health care for eligible American
Indians/Alaska Natives through a system of programs and facilities located on or near Indian
reservations and in certain urban areas. These programs, which may be operated by Indian Tribes
(ITs) or Tribal Organization (TOs), are eligible to receive reimbursements from Medicare,
Medicaid, CHIP, state programs, and third parties such as private insurance. Facilities are
permitted to retain these reimbursements and use them to increase available services.45 Prior to
PPACA, IHS, an IT, or a TO was only considered the payor of last resort for contract health
services—services that these facilities purchase through contract, with providers in instances
where the facility or program cannot provide the needed care. PPACA designates programs
operated by IHS, an IT, TO, or an urban Indian organization (UIO) as the payer of last resort for
services provided to eligible American Indians and Alaska Natives, including services covered by
Medicaid and CHIP. IHS funds are limited and tribal members have raised concerns about which
program is considered the payor of last resort.46 This provision will clarify such issues, and, as a
result, may provide additional funding to programs operated by the IHS, ITs, TOs, or UIOs.
Under a newly permitted option enacted under the Children’s Health Insurance Reauthorization
Act (CHIPRA, P.L. 111-3), states may facilitate Medicaid enrollment—including under certain
conditions, automatically enrolling those eligible—by relying on a finding of eligibility from
specified “Express Lane” agencies (e.g., those that administer programs such as Temporary
45 CRS Report R41152, Indian Health Care Improvement Act Provisions in the Patient Protection and Affordable Care
Act (PPACA), by Elayne J. Heisler and Roger Walke. PPACA makes a number of changes to health care provided by
IHS, ITs, and TOs within the Indian Health Care Improvement provisions within the bill. Provisions described in this
report may also relate to these facilities receiving reimbursements from Medicaid and CHIP.
46 U.S. Congress, Senate Committee on Indian Affairs, OVERSIGHT HEARING on Promises Made, Promises Broken:
The Impact of Chronic Underfunding of Contract Health Services, 111th Cong., 1st sess., December 3, 2009. See
statement by Connie Whidden, Health Director, Seminole Tribe of Florida.
Congressional Research Service
59
.
Medicaid and CHIP Provisions in PPACA
Assistance for Needy Families, Medicaid, CHIP, and food stamps); however, IHS, ITs, TOs, and
UIOs were not among the specified “Express Lane” agencies in CHIPRA. American Indians and
Alaska Natives face a number of barriers to enrolling in Medicaid and CHIP. GAO found that
some tribes have the ability to determine Medicaid eligibility for some of their tribal members,
which can facilitate Medicaid enrollment.47 PPACA permits IHS, ITs, TOs, and UIOs to serve as
“Express Lane” agencies; this may increase Medicaid and CHIP enrollment among American
Indians and Alaska Natives.
American Indians and Alaska Natives receiving services through IHS programs or at IHS
facilities may not be charged premiums, cost-sharing or similar charges in Medicaid. PPACA also
prohibits cost-sharing for American Indians and Alaska Natives enrolled in a qualified health plan
offered through the newly established exchanges. American Indians and Alaska Natives are not
charged for services provided by IHS, an IT, or a TO.48 Given this, there may be few incentives to
enroll in a private health insurance plan that charges premiums or copayments. This exclusion
should facilitate American Indian and Alaska Native enrollment in private health insurance
offered through the exchanges.49
Establishment of Center for Medicare and Medicaid Innovation within CMS
(P.L. 111-148: §3021 as modified by §10306)
Under Medicaid and Medicaid law, the Secretary has broad authority to develop research and
demonstration projects that test new approaches to paying providers, deliver health care services,
or provide benefits to Medicare and Medicaid beneficiaries. This section of PPACA requires the
Secretary to establish a CMI within CMS by January 1, 2011. The CMI is to test innovative
payment and service delivery models to reduce Medicare, Medicaid, and CHIP program
expenditures, while preserving or enhancing the quality of care furnished to beneficiaries.
The Secretary is required to identify and select payment and service delivery models that also
improve the coordination, quality, and efficiency of health care services. In addition, the Secretary
is required to select models that address a defined population for which there are deficits in care
leading to poor clinical outcomes, and may include models which allow states to test and evaluate
fully integrating care for beneficiaries eligible for both Medicare and Medicaid (dual eligibles),
including the management and oversight of all funds, as well as to test and evaluate all-payer
payment systems that include dual eligibles. Under PPACA, the Secretary has authority to limit
the testing of models to selected geographic areas.
Further, the Secretary is required to conduct an evaluation of each model tested, and make the
results of these evaluations available publicly. PPACA authorizes an appropriation of $5 million
for the design, implementation, and evaluation of models for FY2010; $10 billion for FY2011
47 U.S. Government Accountability Office, Medicare and Medicaid: CMS and State Efforts to Interact with the Indian
Health Service and Indian Tribes , 08-724, July 11, 2008.
48 Ibid. UIOs may charge copayments, and PPACA permits ITs and TOs to charge some copayments. See Indian
Health Care Improvement Act Provisions in the Patient Protection and Affordable Care Act (P.L. 111-148), by Elayne
J. Heisler and Roger Walke.
49 See CRS Report R40942, Private Health Insurance Provisions in the Patient Protection and Affordable Care Act
(PPACA), by Hinda Chaikind et al., for description of the exchanges.
Congressional Research Service
60
.
Medicaid and CHIP Provisions in PPACA
through FY2019; and $10 billion for each subsequent 10 fiscal year period beginning with 2020.
Beginning in 2012, and at least every other year thereafter, the Secretary is required to submit a
report to Congress on the CMI.
GAO Study and Report on Causes of Action
(P.L. 111-148: §3512)
Under this provision, GAO is required to conduct a study to determine if the development,
recognition, or implementation of guidelines or other standards under selected provisions in the
law might result in new causes of action or claims. The GAO study will include three Medicaid-
related and 11 other non-Medicaid related provisions in the law as shown in Table 2.
Table 2. Law Sections to be Included in GAO Study on Causes of Action.
Section
Number
Section Title
Medicaid Related Provisions
Sec. 2701
Adult Health Quality Measures
Sec. 2702
Payment Adjustments for Health Care-Acquired Conditions
Sec. 3021
Establishment of Center for Medicare and Medicaid
Innovation
Non-Medicaid Provisions
Sec. 3001
Hospital Value-Based Purchase Program
Sec. 3002
Improvements to the Physician Quality Reporting Initiative
(PQRI)
Sec. 3003
Improvements to the Physician Feedback Program
Sec. 3007
Value-based Payment Modifier Under Physician Fee Schedule
Sec. 3008
Payment Adjustment for Conditions Acquired In Hospitals
Sec. 3013
Quality Measure Development
Sec. 3014
Quality Measurement
Sec. 3025
Hospital Readmission Reduction Program
Sec. 3501
Health Care Delivery System Research, Quality
Improvement
Sec. 4003
Task Force on Clinical and Preventive Services
Sec. 4301
Research to Optimize Delivery of Public Health Services
Source: PPACA, Titles II, III, and IV, Strengthening Quality, Affordable Health Care for All Americans.
GAO is required to submit the study on causes of action to appropriate congressional committees
within two years of enactment of PPACA (March 23, 2012).
Public Awareness of Preventive and Obesity-Related Services
(P.L. 111-148: §4004(i))
Congressional Research Service
61
.
Medicaid and CHIP Provisions in PPACA
Health reform law requires the Secretary to provide guidance and relevant information to states
and health care providers regarding preventive and obesity-related services that are available to
Medicaid enrollees, including obesity screening and counseling for children and adults. Each state
will be required to design a public awareness campaign to educate Medicaid enrollees regarding
availability and coverage of such services. The Secretary is required to report to Congress on
these efforts, beginning no later than January 1, 2011, and every three years thereafter, through
January 1, 2017. The provision authorizes to be appropriated such sums as necessary to carry out
these activities.
Section 1115 Waiver Transparency
(P.L. 111-148: §10201)
Section 1115 of the Social Security Act authorizes the Secretary to waive certain statutory
requirements for conducting research and demonstration projects that further the goals of Titles
Medicaid and CHIP. States submit proposals outlining the terms and conditions of the
demonstration program to the Centers for Medicare & Medicaid Services (CMS) for approval
prior to implementation. In 1994, CMS issued program guidance that impacts the waiver approval
process and includes the procedures states are expected to follow for public involvement in the
development of a demonstration project. States were required to provide CMS a written
description of their process for public involvement at the time their proposal was submitted.
Public involvement requirements for the waiver approval process continued through the early
2000s. In a letter to state Medicaid directors issued May 3, 2002, CMS listed examples of ways a
state may meet requirements for public involvement (e.g., public forums, legislative hearings, a
website with information and a link for public comment).
Health reform law imposes statutory requirements regarding transparency in the application and
renewal of Medicaid and CHIP Section 1115 demonstration programs that impact eligibility,
enrollment, benefits, cost-sharing, or financing. Not later than 180 days after the date of
enactment of this subsection, the Secretary is required to promulgate regulations that provide for
(1) a process for public notice and comment at the state level, including public hearings,
sufficient to ensure a meaningful level of public input; (2) requirements relating to (a) the goals of
the program to be implemented or renewed under the demonstration project; (b) the expected
state and federal costs and coverage projections of the demonstration project; and (c) the specific
plans of the state to ensure that the demonstration project is in compliance with SSA Titles XIX
and XXI; (3) a process for providing public notice and comment after the application is received
by the Secretary, that is sufficient to ensure a meaningful level of public input; (4) a process for
the submission to the Secretary of periodic reports by the state concerning the implementation of
the demonstration project; and (5) a process for the periodic evaluation by the Secretary of the
demonstration project. The Secretary is required to submit an annual report to Congress
concerning actions taken by the Secretary with respect to applications for demonstration projects
under this section.
Congressional Research Service
62
.
Medicaid and CHIP Provisions in PPACA
Appendix. Statutory References for Medicaid and
CHIP provisions
Tables A-1 through A-7 track statutory changes made to the Social Security Act by titles II, IV,
VI, and X in P.L. 111-148 followed by changes made in P.L. 111-152. The provision descriptions
in the tables are grouped by subject matter into the following categories: eligibility, benefits,
financing, program integrity, demonstrations and grant funding, CHIP and miscellaneous.
Table A-1. Health Reform Law: Statutory References for
Medicaid Changes to Eligibility
Provision
P.L. 111-148
P.L. 111-152
Title II,
Title X,
Amendments to
Amendments to
SSA
Title II
Amendments to P.L. 111-148
Medicaid Coverage for the
Sec. 2001
Sec. 10201
Sec. 1004 and Sec. 1201
Lowest-Income Populations
Financial
Eligibility Sec. 2001
Sec. 10201
Sec. 1004
Requirements for
‘Newly Eligible’ and
Other Non-Elderly
Populations
Determined Using
Modified Adjusted
Gross Income
(MAGI)
Financial
Eligibility
Sec. 2001 and Sec.
Sec. 10201
n/a
Requirements for
2002
Certain Populations
Eligible Under Prior
Law
Medicaid
Benefit
Sec. 2001
Sec. 10201
n/a
Coverage for The
New Mandatory
Eligibility Group
Maintenance
of
Sec. 2001
Sec. 10201
n/a
Medicaid Income
Eligibility (MOE)
Medicaid Coverage for
Sec. 2004
Sec. 10201
n/a
Former Foster Care
Children
Health Care Power
Sec. 2955
n/a
n/a
of Attorney
Protection for Recipients of
Sec. 2404
n/a
n/a
Home- and Community-
Based Services Against
Spousal Impoverishment
Congressional Research Service
63
.
Medicaid and CHIP Provisions in PPACA
Provision
P.L. 111-148
P.L. 111-152
Title II,
Title X,
Amendments to
Amendments to
SSA
Title II
Amendments to P.L. 111-148
Optional Expansion: Non-
Sec. 2001
Sec. 10201
n/a
Elderly, Non-Pregnant
Individuals with Family
Income Above 133% of the
FPL
Optional Expansion: State
Sec. 2303
n/a
n/a
Eligibility Option for Family
Planning Services
Optional Expansion:
Sec. 2402
n/a
n/a
Removal of Barriers to
Providing Home- and
Community- Based Services
Outreach and Enrollment
Sec. 1413
n/a
n/a
Facilitation: Streamlining
Procedures for Enrollment
Through a Health Insurance
Exchange and Medicaid,
CHIP, and Other Health
Subsidy Programs
Outreach and Enrollment
Sec. 2202
n/a
n/a
Facilitation: Enrollment
Simplification and
Coordination with State
Health Insurance Exchanges
Outreach and Enrollment
Sec. 2202
n/a
n/a
Facilitation: Permitting
Hospitals to Make
Presumptive Eligibility
Determinations for All
Medicaid Eligible Populations
Outreach and Enrollment
Sec. 2201
n/a
n/a
Facilitation: Standard and
Best Practices to Improve
Enrollment of Vulnerable
and Undeserved Populations
Outreach and Enrollment
Sec. 2001
Sec.10201
n/a
Facilitation: New Reporting
Requirements
Source: Prepared by CRS based on provisions in P.L. 111-148, as amended by P.L. 111-152.
Congressional Research Service
64
.
Medicaid and CHIP Provisions in PPACA
Table A-2. Health Reform Law: Statutory References for
Medicaid Changes to Benefits
Provision
P.L. 111-148
P.L. 111-152
Title II, IV,
Title X,
Amendments
Amendments to
to SSA
Title II, IV
Amendments to P.L. 111-148
Modifications to DRA
Sec. 2001(c)
n/a
n/a
Benchmark and Benchmark-
Equivalent Coverage
Premium Assistance
Sec. 2003
Sec. 10203(b)
n/a
Birthing Centers
Sec. 2301
n/a
n/a
Smoking Cessation Services for
Sec. 4107
n/a
n/a
Pregnant Women
Adult Preventive Care
Sec. 4106
n/a
n/.a
Scope of Coverage for Children
Sec. 2302
n/a
n/a
Receiving Hospice Care
Community First Choice Option
Sec. 2401
n/a
n/a
State Option to Provide Health
Sec. 2703
n/a
n/a
Homes for Enrollees with
Chronic Conditions
Changes to Existing Medicaid
Sec. 2402
n/a
n/a
Benefits: Removal of Barriers to
providing Home- and
Community- Based Services
Changes to Existing Medicaid
Sec. 2304
n/a
n/a
Benefits: Clarification of the
Definition of Medical Assistance
Source: Prepared by CRS based on provisions in P.L. 111-148, as amended by P.L. 111-152.
Congressional Research Service
65
.
Medicaid and CHIP Provisions in PPACA
Table A-3. Health Reform Law: Statutory References for
Medicaid Changes to Financing
Provision P.L.
111-148 P.L.
111-152
Title II,
Title X,
Amendments
Amendments to
to SSA
Title II
Amendments to P.L. 111-148
Payments to States: Additional
Sec. 2001
Sec. 10201
Sec. 1201 and Sec. 1202
Federal Financial Assistance
Under Health Reform
Payments to States: Incentives
n/a Sec.
10202
n/a
for States to Offer Home and
Community-Based Services as
Long-Term Care Alternative to
Nursing Homes
Payments to States:
Sec. 2551
Sec.10201(e)
Sec. 1203
Disproportionate Share
Hospital Payments
Payments to States: Special
Sec. 2006
n/a
n/a
FMAP Adjustment for States
Recovering from a Major
Disaster
Payments to The Territories
Sec. 2005
Sec. 10201
Sec. 1204
Payments for Primary Care
n/a
n/a
Sec. 1202
Providers
Payments to Providers for
Sec. 2702
n/a
n/a
Health Care- Acquired
Conditions
Prescription Drugs: Prescription
Sec. 2501
n/a
n/a
Drug Rebates
Prescription Drugs: Elimination
Sec. 2502
n/a
n/a
of Exclusion of Coverage of
Certain Drugs
Prescription Drugs: Providing
Sec. 2503
n/a
n/a
Adequate Pharmacy
Reimbursement
Prescription Drugs: 340B
Sec. 7101-7103
n/a
Sec. 2302
Prescription Drug Discount
Program Expansion
Source: Prepared by CRS based on provisions in P.L. 111-148, as amended by P.L. 111-152.
Congressional Research Service
66
.
Medicaid and CHIP Provisions in PPACA
Table A-4. Health Reform Law: Statutory References for CHIP and
Medicaid Changes to Program Integrity
Provision
P.L. 111-148
P.L. 111-152
Title VI,
Title X,
Amendments
Amendments to
to SSA
Title VI
Amendments to P.L. 111-148
Expansion of the Recovery
Sec. 6411
n/a
n/a
Audit Contractor (RAC)
Program
Termination of Provider
Sec. 6501
n/a
n/a
Participation Under Medicaid of
Other State Health Care
Program
Medicaid Exclusion from
Sec. 6502
n/a
n/a
Participation Relating to Certain
Ownership, Control, and
Management Affiliations
Billing Agents, Clearinghouses,
Sec. 6503
n/a
n/a
or Other Alternate Payees
Required to Register Under
Medicaid
Requirement to Report
Sec. 6504
n/a
n/a
Expanded Set of Data Elements
Under MMIS to Detect Fraud
and Abuse
Prohibition on Payments to
Sec. 6505
n/a
n/a
Institutions or Entities Located
Outside of the United Sates
Overpayments Sec.
6506
n/a
n/a
Mandatory State Use of
Sec. 6507
n/a
n/a
National Correct Coding
Initiatives
General Effective Date for
Sec. 6508
n/a
n/a
Medicaid and CHIP Program
Integrity Activities
Other Program Integrity and
Sec. 6401
Sec. 10603
n/a
Related Provisions Applicable to
Medicaid: Provider Screening
and Other Enrollment
Requirements under Medicare,
Medicaid and CHIP
Other Program Integrity and
Sec. 6402
n/a
Sec. 1302
Related Provisions Applicable to
Medicaid: Enhanced Medicare
and Medicaid Program Integrity
Provisions
Other Program Integrity and
Sec. 6101-6107
n/a n/a
Related Provisions Applicable to
Medicaid: Improving Nursing
Sec. 6111-6114
Home Transparency,
Sec. 6121
Enforcement and Staff Training
Source: Prepared by CRS based on provisions in P.L. 111-148, as amended by P.L. 111-152.
Congressional Research Service
67
.
Medicaid and CHIP Provisions in PPACA
Table A-5. Health Reform Law: Statutory References for Medicaid Changes to
Demonstrations and Grant Funding
Provision
P.L. 111-148
P.L. 111-152
Title II, IV,
Title X,
Amendments
Amendments to
to SSA
Title II, IV
Amendments to P.L. 111-148
Money Follows the Person
Sec. 2403
n/a
n/a
Demonstration Project to
Sec. 2704
n/a
n/a
Evaluate Integrated Care
Around Hospitalization
Medicaid Global Payment
Sec. 2705
n/a
n/a
System Demonstration Project
Pediatric Accountable Care
Sec. 2706
n/a
n/a
Organization Demonstration
Project
Medicaid Emergency Psychiatric
Sec. 2707
n/a
n/a
Demonstration Project
Grants for School-Based Health
Sec. 4104(a)
n/a
n/a
Centers
Grants for Prevention of
Sec. 4108
n/a
n/a
Chronic Disease
Funding of Childhood Obesity
Sec. 4306
n/a
n/a
Demonstration Project
Source: Prepared by CRS based on provisions in P.L. 111-148, as amended by P.L. 111-152.
Table A-6. Health Reform Law: Statutory References for Changes to CHIP
Provision
P.L. 111-148
P.L. 111-152
Title II,
Title X,
Amendments
Amendments to
to SSA
Title II
Amendments to P.L. 111-148
Additional Federal Financing
Sec. 2101
Sec. 10203(c)
n/a
Participation for CHIP
Distribution of CHIP al otments
Sec. 2101
Sec. 10203(d)
n/a
Among States
Extension of Funding for CHIP
n/a Sec.
10203(a)
n/a
Through FY2015 and Other
Related Provisions
Sec. 10203(b)
Sec. 10202(d)
Source: Prepared by CRS based on provisions in P.L. 111-148, as amended by P.L. 111-152.
Congressional Research Service
68
.
Medicaid and CHIP Provisions in PPACA
Table A-7. Health Reform Law: Statutory References for
Miscellaneous Changes to Medicaid
Provision
P.L. 111-148
P.L. 111-152
Title II,
Title X,
Amendments
Amendments to
to SSA
Title II
Amendments to P.L. 111-148
Medicaid Improvement Fund
Sec. 2007
n/a
n/a
Rescission
Removal of Barriers to
Sec. 2402
n/a
n/a
Providing Home- and
Community- Based Services
Funding to Expand State Aging
Sec. 2405
n/a
n/a
and Disability Resource
Centers
Sense of the Senate Regarding
Sec. 2406
n/a
n/a
Long-Term Care
Five-Year Period for [Dual
Sec. 2601
n/a
n/a
Eligible] Demonstration
Projects
Federal Coverage and Payment
Sec. 2602
n/a
n/a
Coordination for Dual Eligible
Beneficiaries
Adult Health Quality Measures
Sec. 2701
n/a
n/a
MACPAC Assessment of
Sec. 2801
n/a n/a
Policies Affecting All Medicaid
Sec. 399V-4
Beneficiaries
Protections for American
Sec. 2901
n/a
n/a
Indians and Alaska Natives
Establishment of Center for
Sec. 3021
Sec. 10306
n/a
Medicare and Medicaid
Innovation within CMS
GAO Study and Report on
Sec. 3512
Sec. 3512
n/a
Causes of Action
Public Awareness of
Sec. 4004(i)
n/a
n/a
Preventive and Obesity-
Related Services
Section 1115 Waiver
n/a Sec.
10201
n/a
Transparency
Source: Prepared by CRS based on provisions in P.L. 111-148, as amended by P.L. 111-152.
Congressional Research Service
69
.
Medicaid and CHIP Provisions in PPACA
Author Contact Information
Julie Stone, Coordinator
Elayne J. Heisler
Specialist in Health Care Financing
Analyst in Health Services
jstone@crs.loc.gov, 7-1386
eheisler@crs.loc.gov, 7-4453
Evelyne P. Baumrucker
Kelly Wilkicki
Analyst in Health Care Financing
Presidential Management Fellow
ebaumrucker@crs.loc.gov, 7-8913
Cliff Binder
Alexandra J. Rothenburger
Analyst in Health Care Financing
Analyst in Health Policy
cbinder@crs.loc.gov, 7-7965
arothenburger@crs.loc.gov, 7-5956
Elicia J. Herz
Specialist in Health Care Financing
eherz@crs.loc.gov, 7-1377
Acknowledgments
Other CRS contributors include Chris L. Peterson, Specialist in Health Care Financing, and Emilie
Stoltzfus and Adrienne Fernendez, Specialists in Social Policy.
Key Policy Staff
Area of Expertise
Name
Phone
E-mail
Eligibility/Financing: Payments to
Territories/Payments to States/CHIP
Evelyne Baumrucker
7-8913
ebaumrrucker@crs.loc.gov
Financing: Prescription Drugs; 340B
Program/Health Care Acquired
Conditions/Program Integrity/Other
Program Integrity: Improved Nursing
Cliff Binder
7-7965
cbinder@crs.loc.gov
Home Transparency/Miscellaneous:
Dual Eligibles, Center for Medicare and
Medicaid Innovation
Medicaid and CHIP coverage of
American Indians and Alaska Natives
Elayne J. Heisler
7-4453
eheisler@crs.loc.gov
Benefits/Financing: Payment to States
and Providers/CHIP
Elicia Herz
7-1377
eherz@crs.loc.gov
Benefits/Long-Term Care
Julie Stone
7-1386
jstone@crs.loc.gov
Congressional Research Service
70