Role of State Law in Limiting Medicaid Changes

Executive Summary

This paper describes the changes made by the Deficit Reduction Act of 2005 and state authority to make Medicaid changes.

The Deficit Reduction Act of 2005 (DRA) (P. L. 109-171) revises important provisions of the Medicaid statute in ways that are likely to have substantial impact on Medicaid beneficiaries and the safety-net providers that serve them. Among other things, the Act provides states with the authority to impose new premium and cost-sharing requirements on certain groups of Medicaid beneficiaries, while simultaneously permitting the states to substantially redefine and limit the covered services and benefits to which Medicaid-enrolled persons are entitled. These statutory amendments have the potential to impact almost all groups of beneficiaries, including children, the elderly and those with disabilities, which in turn will result in a financial strain on the rest of the health care system, and certainly on health centers as they continue to serve these patients.
One characteristic of the DRA amendments is that they allow states to implement service, premium and cost-sharing changes simply by amending their state Medicaid plans. Prior to the DRA, states seeking such sweeping alterations to their programs had to get approval of a Section 1115 demonstration waiver from the U.S. Secretary of Health and Human Services. The DRA establishes these potential service and cost-sharing restrictions as legitimate state options within the federal law and allows a state to adopt these changes as a matter of course, simply by amending its state Medicaid plan.
While federal Medicaid law may now allow states to revise their services and costsharing requirements for certain Medicaid populations more easily, individual states may be constrained in making such changes as a result of their own state laws. For example, a particular state may have Medicaid legislation that specifies the services that will be provided in its Medicaid program or the cost-sharing limits that may be imposed on recipients; or it may have a general requirement that mandates state legislative approval before the state Medicaid agency can amend its state plan or before it can make substantive changes in its Medicaid program that will have a certain financial impact on over-all state expenditures in a fiscal year. If such mandates and/or limitations are written into state law, then the state agency cannot implement a DRA-enacted option unless the relevant state law is first amended by the state legislature or the state complies with the procedural requirements established by the state legislation.
The National Health Law Program (NHeLP) and the National Association of Community Health Centers (NACHC) have researched the relevant laws in the 50 states and the District of Columbia to determine which jurisdictions currently have legislation that may restrict the ability of their State Medicaid agencies to implement the service and cost-sharing options in the DRA. We have also examined state laws regarding Medicaid family planning benefits. Our research is reflected in attached Charts 1 and 2.
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