Q & A: Responding to Medicaid Home and Community Based Service Cutbacks Pt II

Executive Summary

Q&A clarifying that while states have flexibility under the Medicaid program to eliminate coverage of these services, the actions the state takes to eliminate or reduce services must be legal.

Q. The State Medicaid agency is citing fiscal constraints and considering ways to cut Medicaid, including home and community based services (HCBS) that enable people with disabilities to live in safe, high quality community settings. We are engaging in education and policy advocacy so that state officials will have a full understanding of how their decisions will affect people with disabilities; however, we are also interested in learning more about possible litigation options.
 
A. The Medicaid Act makes coverage of most HCBS, including HCBS waivers, optional. See 42 U.S.C. §§ 1396a(a)(10)(A), 1396d(a). This means that states have flexibility under the Medicaid program to eliminate coverage of these services. However, the actions the state takes to eliminate or reduce services must be legal, whether the services are mandatory or optional under the Medicaid Act.
Discussion
Since 2000, nearly 100 published state and federal court cases have discussed cutbacks in Medicaid coverage of HCBS. Compared to the cases prior to 2000, these decisions often involve more complicated facts and proof. A number of cases involve significant reductions in services after the state introduced special assessment tools and computer software to determine recipients? home-based needs and services. In some of these cases, the state has contracted with a private company whose utilization review technicians make the assessment and feed the results into company computers. The process for making coverage decisions has, thus, become more complex. Post-2000 cases also involve challenges to across-the-board reductions in Medicaid services that have resulted in confusion regarding continued eligibility and due process rights.

Regardless of the type of services affected or the methods used by the state to cut services, the state?s plans and actions must be consistent with what federal and state laws require, such as:

1. The branch of state government making the cutback must have the authority to do so.
Otherwise, the action by one government entity may violate constitutional separation of powers requirements or a statute that places the authority to make the changes with another branch of government. Compare McNeil-Terry v. Roling, 142 S.W.3d 628 (Mo. Ct. App. 2004) (holding that executive action to eliminate adult dental services violated a state statute that required the coverage) and Fisher v. Roling, 142 S.W.3d 836 (Mo. Ct. App. 2004) (same, regarding adult eyeglasses) with Hunter v. State, 865 A.2d 381 (Vt. S. Ct. 2004) (rejecting constitutional separation of powers argument and finding state legislature validly delegated authority to the Secretary of Administration to prepare and implement a plan to eliminate optional Medicaid services); id. at 392-93 (collecting cases).
2. A planned Medicaid cutback may need to be promulgated through the public notice and comment processes of the state Administrative Procedure Act (APA).
Most state Medicaid agencies are subject to the requirements of the state APA. State APAs generally define ?rules? to be regulations, standards or statements of policy issued by a state agency that are applied generally and that have the effect of law. In recent years and with mixed results, a number of cases have challenged policies cutting Medicaid services as violations of the state APA.

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