Limiting Cost-Sharing in Medicaid Funded Programs

Q. My state is considering implementing cost sharing for Medicaid beneficiaries, arguing that this will save money. The state wants to implement cost sharing above the nominal amounts listed in federal Medicaid regulations and to make payment of the copayments mandatory. It also wants to impose premiums on some Medicaid populations that exceed the premium amounts currently allowed in the Medicaid laws. We understand that the state is going to ask the federal Medicaid agency for approval of these changes. Are there arguments we can make against these cuts? Can you suggest evidentiary support for our legal position?
A. Yes. A recent decision from the Ninth Circuit Court of Appeals casts doubt on the state?s plan to impose the heightened cost sharing. Moreover, numerous studies have demonstrated that Medicaid cost sharing reduces utilization of necessary services and lowers enrollment. The imposition of premiums also implicates the maintenance of efforts requirements of the Affordable Care Act.
Medicaid cost sharing rules
Cost sharing requires a patient to pay part of the cost of health care services, such as enrollment fees, premiums, deductibles, coinsurance, copayments, or similar charges. Congress has been very clear about the options that it intends to make available to states that are implementing cost sharing. In fact, two Medicaid Act provisions deal exclusively with premiums and cost sharing.2
The first provision, 42 U.S.C. § 1396o, allows states to impose cost sharing within set limits.3 For the most part, enrollment fees, premiums and similar charges may not be imposed on categorically needy Medicaid beneficiaries.4 Nominal copayments or similar charges are allowed.5 Some coverage groups or services must be excluded, including children under age 18, pregnant women (for pregnancy-related services), outpatient drugs when used to promote cessation of tobacco use, family planning services, hospice services, services for institutionalized individuals who contribute most of their income to the cost of care, and services furnished to Indians through the Indian Health Services.6 Participating Medicaid providers cannot deny care because the deduction, cost sharing, or similar charge cannot be paid up front.7
States also have the option of imposing cost sharing pursuant to 42 U.S.C. § 1396o-1. This provision authorizes states to amend their state plans to impose premiums and cost sharing on certain groups of individuals and most types of services and to vary premiums without regard to Medicaid?s comparability requirements.8 It specifically allows states to establish higher cost sharing on non-preferred prescription drugs and non-emergency use of the emergency department.9 States may allow Medicaid providers to condition the provision of care on payment of the cost sharing amount.10 There are limits on states? authority under this section. For example, individuals with family incomes at or below the federal poverty level can only be charged nominal copayments.11 In addition, premiums and cost sharing (other than for nonpreferred prescription drugs) may not be imposed on certain vulnerable groups, including many categories of children, pregnant women, terminally ill individuals receiving hospice, and Native Americans, and for certain services, such as emergency and preventive services.12
If a state wants to impose cost sharing that differs from the rules outlined above, it must obtain permission from the Secretary of the U.S. Department of Health and Human Services (Secretary).13 The Secretary can approve heightened copayments through a waiver, only after public notice and comment, and only if the waiver meets five circumscribed criteria, including a two year time limit and testing of a previously untested use of copayments.14 In addition, the Secretary has granted states permission to impose heightened cost sharing under section 1115 of the Social Security Act, which authorizes the Secretary to approve ?experimental, pilot, or demonstration? projects that are ?likely to assist in promoting the objectives of the Medicaid Act.?15 Section 1115 authorizes the Secretary to waive Medicaid Act provisions contained in 42 U.S.C. § 1396a. The Secretary also claims a broader section 1115 authority, variously labeled by the Secretary as an ?expenditure authority? or ?expansion authority,? to allow states to use Medicaid funds to implement projects that the Secretary and a state agree upon, including projects that ignore the Medicaid Act cost sharing provisions.16
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