CMS to states: Partial Medicaid expansion won't qualify for full funding

Acting CMS Administrator Marilyn Tavenner and other CMS officials announced on Monday that states which embark on a partial expansion of their Medicaid systems would not qualify for the full 100 percent funding under the Affordable Care Act’s Medicaid expansion provision.

The announcement by CMS puts to rest a lingering question from some states who sought to qualify for the full funding of a partial expansion.

“Some states have asked whether they can get the 100 percent federal match and expand Medicaid coverage to less than 133 percent of levels specified in the law. Consistent with the law, there is not an option for enhanced match for partial or phased in Medicaid expansion to 133 percent,” Tavenner said in a press conference. “We will consider waivers at the regular matching rate now and with enhanced match as part of a broad-based state innovation waiver in 2017.”

The all-or-nothing approach to providing the enhanced match for Medicaid expansion worries some, who believe it could lead a number of states to forego the expansion.

"I think there are a number of states – not just governors, but state legislators as well – for whom an all-or-nothing proposition, you may see some saying no," Matt Salo executive director of the National Association of Medicaid Directors told National Public Radio.

Government officials at both CMS and the U.S. Department for Health and Human Services feel that the 100 percent funding for the first three years of the program, eventually stepping down to 90 percent funding by 2020, is financially compelling enough to entice the states to go along with the expansion.

In a letter to governors sent yesterday from HHS Secretary Kathleen Sebelius, she noted that HHS continues to “encourage states to fully expand their Medicaid programs and take advantage of the generous federal matching funds to cover more of their residents.”

One issue concerning state officials with the planned Medicaid expansion is the cost of the so-called woodwork effect whereby people in the states who are eligible for Medicaid under current rules would sign up as a result of the publicity of the expansion. These enrollees, for whom states could only get the current Medicaid match in federal funds, could swell state Medicaid budgets even further.

But Cindy Mann, CMS deputy administrator and director of the Center for Medicaid and CHIP Services thinks this should not be a deterrent to expanding Medicaid to include single adults earning up to 138 percent of the federal poverty limit.

“Most observers, including the Congressional Budget Office and the Urban Institute who have looked at that say that people who are eligible, but currently not enrolled will likely come into coverage regardless, without regard to whether a state expands or not,” Mann said. “I think (the expansion) is very significant support for states and we are optimistic they will move forward.”