Native Americans and Medicaid: Coverage and Financing Issues

Native Americans and Medicaid:Coverage and Financing Issues

Medicaid as Medicare Premium Assistance

The Medicare program provides health insurance coverage for the nation’s elderly and disabled.16 To enroll in Medicare Part B, which offers coverage for physician and other outpatient care, individuals must be 65 or older or must be disabled, and must pay a monthly premium. This monthly premium, which is generally deducted from an individual’s Social Security check, is $43.80 per month in 1997. The Balanced Budget Act of 1997 raises the Part B premium to $67.00 per month by 2002. To protect low-income Medicare beneficiaries against these monthly premium costs, all state Medicaid programs are required to pay the entire Part B premium amounts on behalf of certain groups of Medicare beneficiaries, including Native American Medicare beneficiaries:

  • Dual Eligibles. These are elderly or disabled individuals who are eligible for both Medicare and Medicaid benefits. State Medicaid programs are required to pay on behalf of these individuals the entire Medicare Part B monthly premium as well as Medicare deductibles and co-insurance requirements. Dual eligibles are also entitled to coverage of nursing home care, prescription drugs, and other Medicaid benefits that are not covered by Medicare.
  • QMBs. Qualified Medicare beneficiaries, or QMBs, are Medicare beneficiaries who are not also eligible for Medicaid benefits but who have incomes at or below 100 percent of the poverty line ($7,890 for an individual, $9,870 for a couple in 1997) and countable resources no greater than $4,000. Like dual eligibles, QMBs are entitled to have payment made by Medicaid on their behalf for the entire Medicare Part B monthly premium as well as Medicare deductibles and co-insurance requirements. Unlike dual eligibles, QMBs are not eligible for full Medicaid benefits and are not entitled to Medicaid coverage of nursing home care or prescription drugs.
  • SLIMBs. Specified Low-income Medicare Beneficiaries, or SLIMBs, are Medicare beneficiaries with income between 100 and 120 percent of the poverty line (up to $9,468 for an individual and $12,732 for a couple) and countable resources no greater than $4,000. SLIMBs are entitled to have payment made on their behalf by state Medicaid programs for the cost of the monthly Medicare Part B premium. Unlike QMBs, SLIMBs are not entitled to Medicaid payment of their Medicare deductible or coinsurance requirements. Unlike dual eligibles, SLIMBs are not entitled to Medicaid payment of nursing home care, prescription drugs, or other services that Medicaid covers.

    Under the Balanced Budget Act of 1997, states are required to pay some or all of the Medicare Part B premium on behalf of Medicare beneficiaries with incomes between 120 and 135 percent of the poverty line. A fixed amount of federal funding for this premium assistance is provided to each state for each of the next 5 years; no state is required to contribute any of its own funding. Unlike SLIMBs, these individuals are not entitled to premium assistance; states are required only to select individuals from qualified applicants on a first-come, first-served basis, up to the amount of federal funding available. Because the statute does not require that states notify near-poor Medicare beneficiaries of their potential eligibility for this assistance, the IHS and the tribes will, as a practical matter, frequently be the only source of information about this benefit for Native American Medicare beneficiaries.

Medicaid as a Source of Long-Term Care Coverage

Medicaid is the nation’s single largest purchaser of nursing home care. More than half of all nursing home revenues come from Medicaid. The program also covers a wide range of home- and community-based (HCBS) services for frail elderly and chronically ill disabled individuals who are at risk of nursing home care. The transition to managed care that is occurring in Medicaid’s purchase of acute care services has generally not reached the long-term care sector. Most Medicaid nursing home and HCBS services are still paid for on a fee-for-service basis.

Because nursing home care costs on average $40,000 per year, the availability of Medicaid coverage for nursing home and other long-term care services is a major source of financial protection for low- and moderate-income families. It is particularly important to Native American families because few IHS or tribally-operated facilities offer comprehensive long-term care services.17 Yet it is precisely the high cost of these services that has lead many states to impose restrictive income and resource eligibility requirements on elderly and disabled individuals and their spouses. In addition, federal law requires that states seek to recover the costs of Medicaid nursing home care from the estates of deceased beneficiaries and authorizes the states to impose liens in certain circumstances in order to carry out such recoveries. These restrictive eligibility and estate recovery rules have reportedly discouraged many otherwise eligible Native Americans from establishing eligibility for Medicaid nursing home coverage.

III: Policy Issues For Native Ameircans In Managed Care

Policy Issues

The Medicaid program’s historic shift from fee-for-service to managed care presents critical policy issues for the IHS, for tribes and their health programs, and for urban Indian health programs. Because state Medicaid programs differ from one another, and because local circumstances vary considerably, these issues will take different forms in different communities. Many of the issues raised by Medicaid’s shift to managed care are not unique to eligible Native Americans but affect all Medicaid beneficiaries.18 There are, however, some issues unique to Native Americans that are also common to all state Medicaid programs:

  • Preserving Choice for Medicaid-Eligible Native Americans. The Balanced Budget Act of 1997 overrides the right to freedom of choice of provider for most Medicaid beneficiaries by giving the states express authority to require Medicaid beneficiaries to enroll in MCOs or PCCMs. However, states under this authority may only force eligible American Indians and Alaska Natives to enroll in MCOs or PCCMs if these managed care entities are operated by the IHS, by a “638” tribe, or by an urban Indian organization. The purpose of this limitation on state flexibility is not so much to assure that Native American Medicaid beneficiaries have choice of providers; they will generally have a choice because IHS and tribal providers cannot refuse to treat Indians who are eligible for their services. Instead, the purpose of this provision is to assure that, when these beneficiaries obtain care from IHS or tribal providers, the providers, rather than MCOs or PCCMs unaffiliated with the IHS or the tribes, receive Medicaid reimbursement for the covered services they deliver. The provision does not bar Medicaid-eligible Indians from voluntarily enrolling in an MCO or PCCM that is not affiliated with the IHS or a tribe.

    For many Native American Medicaid beneficiaries, the issue of choice of provider is more theoretical than practical, especially in sparsely-populated rural areas with few physicians or clinics or hospitals. Medicaid coverage that allows beneficiaries to choose from among all participating providers means little in underserved areas that have few providers of any kind, much less providers that participate in Medicaid. The movement toward Medicaid managed care has the potential to improve these circumstances and give Native American beneficiaries more choices. For example, if states opt to enroll all rural Medicaid beneficiaries in one MCO or PCCM, the resulting Medicaid market could potentially attract established, reputable managed care firms and give them an incentive to bring primary care physicians and other providers into these areas in order to be able to offer the necessary provider networks.

    However, the availability of more provider choices for Native American beneficiaries has potentially adverse consequences for traditional Native American delivery systems, whether operated by the IHS or by “638” tribes. If significant numbers of Native American beneficiaries elect to enroll in an MCO or PCCM unaffiliated with the IHS or a tribal facility, the Medicaid revenues of the IHS or tribal facilities will likely decline, undermining their capacity to deliver quality care to their remaining patients. The current law provision – prohibiting states from enrolling Indian beneficiaries in MCOs or PCCMs that are not operated by the IHS or tribal “638” contractors – is not a sufficient protection against this result. If the MCO or PCCM with which the state contracts does not in turn contract with the IHS or tribally-operated facilities in the area, the Indian beneficiaries who do not choose to enroll in the MCO or PCCM would continue to receive care on a fee-for-service basis from the IHS or tribal facility. This would tend to isolate both the Indian beneficiaries and the IHS or tribal facilities from the Medicaid patients and providers in the rest of the area – not necessarily a desirable outcome. This result could be avoided if MCOs or PCCMs that receive the Medicaid franchise for the rural area were required to allow any IHS or tribally-operated facility in the area meeting the entity’s quality standards to participate – if the facility so chooses – on terms at least as favorable as those offered to other facilities. In addition, the Secretary of HHS should consider not granting waivers that would allow states to require Native American beneficiaries to enroll in MCOs or PCCMs that have not incorporated IHS or tribal facilities into their provider networks.

  • Protecting IHS, Tribal, and Urban Indian Providers. Medicaid revenues can make the difference between a financially viable hospital or health clinic and a facility that must reduce the services it offers or close altogether. To the extent that Medicaid-eligible Indians enroll (or under waivers are enrolled by the state) in MCOs or PCCMs, the funding to pay for the provision of covered services to these patients will flow to the MCO or PCCM. Unless the IHS or tribal or urban Indian facility is affiliated with the MCO, either as an owner or as a subcontractor, or unless the facility has an arrangement with the state under which it will be reimbursed for treating Indian MCO enrollees who go “out of network,” the facility will lose some or all of the Medicaid revenues associated with these patients. The loss of these revenues can in turn undermine the capacity of the facility to deliver quality care to the Indian population that it is responsible for serving as well as any non-Indian patients it undertakes to serve.

    The federal government has a strong interest in the financial viability of IHS, tribal, and urban Indian health care providers. These providers enable the federal government to discharge in part its legal obligation to cover the cost of basic health care to Native Americans and to promote tribal self-determination. In addition, these providers are frequently the only practical source of health care for Indians and other Americans living in underserved rural areas. Because the federal government, on average, pays 57 percent of the cost of the Medicaid program, it also has an interest in assuring that Medicaid payment policies support rather than undercut the IHS, tribal, and urban health care programs that it funds with appropriated dollars.

    State Medicaid programs have a strong financial incentive to facilitate the use of IHS or “638” tribally-operated health facilities by Medicaid beneficiaries who are Native Americans. As noted above, under federal statute and a HCFA-IHS Memorandum of Agreement (MOA), the federal matching rate for state expenditures in such cases is 100 percent; the state is not required to contribute any of its own funds. However, if the beneficiary receives covered services from a non-IHS or non-tribal provider, the state must assume between 20 and 50 percent of the cost. If states are aware of their financial interest and take advantage of it, they will be seeking to work with IHS and tribal providers to maximize the use of those facilities by Native American beneficiaries, and the Medicaid revenues associated with those beneficiaries should improve the fiscal position of those facilities.

    The need to sustain an IHS and tribally-run health care infrastructure has a number of policy implications. It means that Medicaid fee-for-service payments made directly to Indian hospitals and clinics must be adequate to cover the costs of care. (The recent amendment phasing out cost-based payments to federally-qualified health centers (FQHCs) runs counter to this). Similarly, Medicaid payments to MCOs should be conditioned on the affiliation of MCOs with IHS, tribal, and urban health care programs that meet the MCO’s quality standards. State payment rates to MCOs for eligible Native American enrollees should be adequate to enable the MCOs to pay subcontracting programs their costs of treating Indian beneficiaries, and the MCOs should be required to pay the subcontractors at an adequate level in a timely fashion. Finally, the federal government (through the IHS or through a tribally-accountable entity subcontracting with the IHS) should make start-up capital and technical assistance available to tribal programs (or IHS facilities) that seek to become MCOs or PCCMs and contract with their state Medicaid programs to enroll Medicaid beneficiaries residing in their service areas.

  • Program Data. To date, the transition toward managed care has led to a decline in the quality of Medicaid program data available to the federal government and the tribes, among others.19 However, this transition has the potential of significantly improving the data available to tribes, to the IHS, and to federal and state policy-makers regarding the impact of Medicaid coverage on the use of health services by, and the health status of, Native Americans. To realize this potential, however, current reporting requirements will need to be significantly strengthened. Currently, neither the IHS nor the Health Care Financing Administration (HCFA) have reliable data on how many American Indians or Alaska Natives in each state are enrolled in Medicaid; how many of these individuals are enrolled in a Medicaid MCO or PCCM; and the average cost of covering these beneficiaries through fee-for-service or through managed care. As a condition of receipt of federal Medicaid funds, states could be required to report this data on a quarterly basis, broken down by category (non-disabled child under 19, disabled individual, aged individual, and non-disabled, non-elderly adult). In addition, MCOs or PCCMs contracting with state Medicaid programs should be required to report to the State Medicaid agencies encounter data with respect to Native American enrollees, including encounter data sufficient to monitor compliance with the early and periodic screening, diagnostic, and treatment (EPSDT) program for children. The State Medicaid agencies, in turn, should make this information (without individual patient identifiers) available to tribes and IHS available on request.


In the coming years, the IHS, Medicaid, and state welfare programs will continue to evolve in response to changes in the economy, changes in the health care system, and changes in budgetary and regulatory policy at the state and federal level. These changes will have profound implications for tribes and their health care programs and, ultimately, for the health status of Native Americans. In all likelihood, these changes will intensify the challenges described in this Policy Brief and create new ones. It is crucial that these developments be carefully monitored to identify problems as they arise and to give the tribes and the IHS the information they need to improve the access of Native Americans to quality health care services.


1. See Medicaid Facts: Medicaid Program at a Glance, November 1997; Medicaid Facts: Medicaid and Managed Care, November 1997; Medicaid Facts: Medicaid’s Role for Children, November 1997; Policy Brief: Restructuring Medicaid — Key Elements and Issues in Section 1115 Demonstration Waivers, May 1997.

2. For a general overview of these provisions, see Andy Schneider, Overview of Medicaid Provisions in the Balanced Budget Act of 1997, P.L. 105-33, Center on Budget and Policy Priorities, September 3, 1997,

3. See Kaiser Family Foundation, A Forum on the Implications of Changes in the Health Care Environment for Native American Health Care (1997).

4. U.S. Department of Health and Human Services, Indian Health Service, Regional Differences in Indian Health 1996.

5. These figures were reached by a CBPP analysis of unpublished data from March 1997 CPS, Bureau of the Census. The percentages sum to more than 100 percent because some Native Americans had multiple sources of insurance coverage.

6. Indian Health Service, IHS Medicare and Medicaid Eligibility Data Current as of August 12, 1997, compiled September 23, 1997.

7. At its Winter, 1996 meeting, the National Governors’ Association adopted the following policy: “States do not have treaty-based trust responsibilities to provide health care to Native American peoples and, consequently, have no proper role in the financial support or operation of Indian Health Service facilities.”

8. “Indians and other native Americans are entitled under the Fifth and Fourteenth Amendments to the Constitution of the United States, and title VI of the Civil Rights Act for 1964, to equal access to State, local, and Federal programs to which other citizens are entitled.” Department of Health, Education and Welfare (HEW), Memorandum of Agreement, January 7, 1975.

9. In a case involving a dispute over the entitlement of Indians living off the reservation to federal benefits, the Supreme Court in Morton v. Ruiz, 415 U.S. 199 (1974) recognized that “[an Indian thus is entitled to social security and state welfare benefits equally with other citizens of the State.” Id. at 209, n. 11 (citing State ex rel. Williams v. Kamp, 106 Mont. 444, 449, 78 P.2d 585, 587 (1938); U.S. Dept. of the Interior, Federal Indian Law 287, 516 (1958)).

10. In Morton, the Supreme Court also noted that “[a]ny Indian, whether living on a reservation or elsewhere, may be eligible for benefits under the various social security programs in which his State participates and no limitation may be placed on social security benefits because of an Indian claimant’s residence on a reservation.” Morton, 415 U.S. at 209.

11. Under section 1115 of the Social Security Act, the Secretary of Health and Human Services is authorized to waive many of the requirements of federal Medicaid law to enable states to receive federal Medicaid matching funds for carrying out demonstration projects that in the Secretary’s judgment, “is likely to assist in promoting the objectives of [the Medicaid program].” See Kaiser Medicaid Commission Policy Brief, Medicaid: Key Elements and Issues in Section 1115 Demonstration Waivers (May 1997).

12. Peter J. Cunningham, “Health Care Utilization, Expenditures, and Insurance Coverage for American Indians and Alaska Natives Eligible for the Indian Health Service,” Changing Numbers, Changing Needs: American Indian Demography and Public Health, National Research Council, 1996, at 291.

13. A further complication occurs if an MCO or PCCM is not owned or operated by the IHS or by a tribe or tribal organization, but subcontracts with IHS or tribal facilities or programs to deliver services covered under Medicaid risk contract with the state. It is not clear if the capitation payments to the MCO on behalf of Indian beneficiaries are subject to 100 percent matching if the beneficiary uses the IHS or tribal subcontractor.

14. This and the following examples of current arrangements are described in Mim Dixon, Case Studies of Managed Care in Indian Health, National Indian Health Board. February, 1997. pp. 28-40.

15. See Sara Rosenbaum and Ann Zuvekas, Integrating Indian Health Programs into Medicaid Managed Care Systems: A Round Table Sponsored by the Indian Health Service, Final Summary Report, April 25, 1996.

16. For an overview of Medicare, see Harriet Komisar, James A. Reuter, Judith Feder, and Patricia Neuman, Medicare Chart Book, The Kaiser Medicare Policy Project, June, 1997. For a study of issues affecting low-income Medicare beneficiaries, see Patricia B. Nemore, Variations in State Medicaid Buy-in Practices for Low-Income Medicare Beneficiaries, Henry J. Kaiser Family Foundation, November, 1997. For a summary of these issues, see Medicaid’s Financial Protections for Medicare’s Poor and Near-Poor, Henry J. Kaiser Family Foundation, November 1997.

17. Indian Health Service. National Resource Directory for American Indian and Alaska Native Elders. June 1996.

18. For more information on Medicaid and managed care, see Medicaid Facts: Medicaid and Managed Care, Kaiser Commission on the Future of Medicaid, November 1997. Schneider, et al, Background Paper: Medicaid and Managed Care, Henry J. Kaiser Family Foundation, December 1997.

19. David Liska et al., Medicaid Expenditures and Beneficiaries, National and State Profiles and Trends, 1990-1995, Kaiser Commission on the Future of Medicaid, November, 1997, Authors’ Note, p. xiii. Return to top

Native Americans and Medicaid: Coverage and Financing Issues
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