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Current Flexibility in Medicaid: An Overview of Federal Standards and State Options

Issue Brief
  1. The federal medical assistance percentage (FMAP) is determined by a statutory formula based on state per capita income, which varies across states and adjusts over time. The federal government has temporarily increased the matching rate to provide fiscal relief to states during economic downturns and established an enhanced matching rate for some purposes, including the Affordable Care Act (ACA) Medicaid expansion to low-income adults.

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  2. The minimum is 133% of poverty, but the law includes a standard income disregard of five percentage points of the federal poverty level, which effectively raises this limit to 138% FPL.

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  3. Ibid.

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  4. To be eligible for SSI, beneficiaries must have low incomes, limited assets, and an impaired ability to work at a substantial gainful level as a result of old age or significant disability.

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  5. As of 2015, 10 states elect the § 209(b) option to use disability or financial eligibility standards that are more restrictive than the federal SSI rules, so long as the state’s rules are not more restrictive than those in effect in January 1972. Section 209(b) states must allow SSI beneficiaries to establish Medicaid eligibility through a spend-down by deducting unreimbursed out-of-pocket medical expenses from their countable income. Section 209(b) states also must provide Medicaid to children who receive SSI and who meet the state’s financial eligibility rules for the AFDC program as of July 16, 1996.

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  6. There are 3 Medicare Savings Programs: Medicaid pays Medicare premiums and cost-sharing for Qualified Medicare Beneficiaries (up to 100% FPL). Medicaid pays Medicare premiums for Specified Low-Income Medicare Beneficiaries (100-120% FPL) and Qualified Individuals (up to 135% FPL). There also are asset limits for these programs.

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  7. States can cover “Katie Beckett” children through a state plan option or HCBS waiver; waiver coverage allows enrollment to be capped.

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  8. States electing the medically needy coverage option must cover certain groups of people, such as pregnant women and children, and also can choose to extend medically needy coverage to other groups, such as seniors and people with disabilities.

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  9. Additionally, as of 2016, six states are offering HCBS to people at risk of institutionalization through Section 1115 managed long-term care waivers.

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  10. Kaiser Commission on Medicaid and the Uninsured, Medicaid’s New ‘Health Home’ Option (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, January 2011), https://www.kff.org/health-reform/issue-brief/medicaids-new-health-home-option/.

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  11. States can offer HCBS through their traditional Medicaid state plan benefit package or through a waiver; waivers allow enrollment to be capped.

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  12. Steve Eiken, Kate Sredl, Brian Burwell, and Paul Saucier, Medicaid Expenditures for Long Term Services and Supports (LTSS) in FY 2014, (Bethesda, MD: Truven Health Analytics, April 2016), https://www.medicaid.gov/medicaid-chip-program-information/by-topics/long-term-services-and-supports/downloads/ltss-expenditures-2014.pdf.

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  13. Certain groups are exempt from mandatory enrollment in an alternative benefit plan and instead must have access to the traditional state plan benefit package. These include mandatory pregnant women, mandatory parents, and those who are medically frail (including individuals with disabilities or special medical needs, dual eligible beneficiaries, and people with long-term care needs). MaryBeth Musumeci, The Affordable Care Act’s Impact on Medicaid, Eligibility, Enrollment, and Benefits for People with Disabilities (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, April 2014), https://www.kff.org/health-reform/issue-brief/the-affordable-care-acts-impact-on-medicaid-eligibility-enrollment-and-benefits-for-people-with-disabilities/.

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  14. 42 C.F.R. § 440.330.

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  15. Joan Alker, Sean Miskell, MaryBeth Musumeci, and Robin Rudowitz, Medicaid Premium Assistance Programs: What Information is Available About Benefit and Cost-Sharing Wrap-Around Coverage? (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, December 2015), https://www.kff.org/report-section/medicaid-premium-assistance-programs-what-information-is-available-about-benefit-and-cost-sharing-wrap-around-coverage-introduction/ (citing United States Government Accountability Office, Medicaid and CHIP: Enrollment, Benefits, Expenditures, and Other Characteristics of State Premium Assistance Programs (Washington, DC: United States Government Accountability Office, Jan. 19, 2010), http://www.gao.gov/new.items/d10258r.pdf).

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  16. Iowa had waiver approval for and implemented a premium assistance program for some Medicaid expansion enrollees, but the program was discontinued by the state.

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  17. Kaiser Commission on Medicaid and the Uninsured, Deficit Reduction Act of 2005, (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, February 2006), https://www.kff.org/medicaid/issue-brief/deficit-reduction-act-of-2005-implications-for/.

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  18. Ibid.

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  19. Institutional providers (hospitals) and nursing facilities: States are required to publish payment methodologies for public review and comment and payments are subject to upper payment limits for these providers based on what Medicare would have paid in aggregate. Physicians, other providers and managed care organizations: States are required to pay rates that are sufficient to ensure access equal to the rest of the area population. For MCOs, payment mush be actuarially sound. Federally Qualified Health Centers (FQHCs): Under legislation enacted in 2001, states are required to pay these health centers and clinics based on a prospective payment system that relies on costs in a base year and trended forward. Prescription Drugs: Federal law requires that drug manufacturers enter into rebate agreements with HHS to provide their drugs through Medicaid.

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  20. Stephen Zuckerman, Laura Skopec, and Kristen McCormack, Reversing the Medicaid Fee Bump: How Much Could Medicaid Physician Fees for Primary Care Fall in 2015? (Washington, DC: Urban Institute, December 2014), http://www.urban.org/research/publication/reversing-medicaid-fee-bump-how-much-could-medicaid-physician-fees-primary-care-fall-2015.

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  21. Vernon K. Smith et al., Implementing Coverage and Payment Initiatives: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2016 and 2017 at 47 (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, October 2016) (citing 23 states using private health plans to deliver LTSS), https://www.kff.org/medicaid/report/implementing-coverage-and-payment-initiatives-results-from-a-50-state-medicaid-budget-survey-for-state-fiscal-years-2016-and-2017/. In addition, Vermont uses a state entity acting as a prepaid health plan to deliver MLTSS on an at-risk basis.

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  22. Kaiser Commission on Medicaid and the Uninsured, The State Innovation Models (SIM) Program: A Look at Round 2 Grantees (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, September 2015), https://www.kff.org/medicaid/fact-sheet/the-state-innovation-models-sim-program-a-look-at-round-2-grantees/.

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  23. Vernon K. Smith et al., Implementing Coverage and Payment Initiatives: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2016 and 2017 (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, October 2016), https://www.kff.org/medicaid/report/implementing-coverage-and-payment-initiatives-results-from-a-50-state-medicaid-budget-survey-for-state-fiscal-years-2016-and-2017/.

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  24. Centers for Medicare and Medicaid Services, Medicaid & CHIP Strengthening Coverage, Improving Health (Baltimore, MD: Centers for Medicare and Medicaid Services, January 2017), https://www.medicaid.gov/medicaid/program-information/downloads/accomplishments-report.pdf.

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  25. Centers for Medicare and Medicaid Services, Medicaid & CHIP Strengthening Coverage, Improving Health (Baltimore, MD: Centers for Medicare and Medicaid Services, January 2017), https://www.medicaid.gov/medicaid/program-information/downloads/accomplishments-report.pdf.

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