On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA), Pub. L. No. 111-5. ARRA is a nearly $790 billion spending and tax cut package aimed at stimulating the sagging economy. This paper discusses the provisions of ARRA that affect:
- Public and private insurance extensions for the unemployed (ARRA, Division B§ 2002 and § 3001);
- Medicaid/Children?s Health Insurance Program (ARRA, Division B, §§ 5000 ? 5008); and
- Health information technology (ARRA, Division B, § 4201 and Division A, §§ 13101 -13424).
The full text of the bill is available at: http://www.recovery.gov. Legislative history is available at http://appropriations.house.gov (Joint Explanatory Statement of the Committee of Conference). Text and history are also available at http://thomas.loc.gov
Public and Private Insurance Extensions for the Unemployed
Emergency Unemployment Compensation Benefits, Medicaid Disregard?Section 2002.
Previous law enacted in 2008 extended unemployment insurance benefits through March 31, 2009 in recognition of the current economic climate and the difficulty that many job seekers are having in finding employment. Section 2002 of ARRA extends these ?emergency? unemployment insurance benefitsthrough December 31, 2009. The federal government assumes the cost of the extension. Beneficiaries will receive extended benefits at their current rates plus an additional $25 per week.
ARRA clarifies that the unemployment compensation paid under this section shall be disregarded when determining Medicaid or CHIP income eligibility. See ARRA, § 2002(h). Premium Assistance for COBRA Benefits?Section 3001.
Most individuals who leave the workplace are eligible for ?COBRA? coverage. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) amended portions of the Employee Retirement Income Security Act of 1974 (ERISA), the Internal Revenue Code, and the Public Health Service Act to allow a person to continue employment-based group health insurance at his own expense after leaving employment for reasons other than gross misconduct. When the employee leaves the employment or when certain other ?qualifying events? occur, the employer is required to provide the employee with notice of the right to continued health coverage under the employer?s plan. The former employee generally has 60 days to elect COBRA coverage. Both the former employee?s own insurance and that of certain dependents can be continued for at least 18 months.
For most people leaving employment without new employment, exercising COBRA coverage has been a financial impossibility. The continued coverage is premised upon the individual paying the entire health insurance premium, plus an allowable two percent administrative fee. This is simply not financially feasible for many people. Many will not qualify for Medicaid coverage and, thus, are uninsured. If they remain uninsured for more than 63 days, the next employer?s group health insurance may apply a pre-existing condition clause and deny coverage for medical expenses related to a pre-existing condition.
ARRA seeks to ameliorate the situation in this current economic crisis by providing an opportunity for individuals and families to continue group health insurance coverage after an insured worker loses his job. Group health coverage includes coverage provided by a former employer, a union or a multiemployer trust. See ARRA, § 3001(a)(1)(B).
Under the premium assistance provisions of ARRA, a person who is an ?assistance eligible individual? need only pay 35 percent of the premium, which she would otherwise need to pay to obtain COBRA coverage. Id. at § 3001(a)(1)(A). Employers receive the other 65 percent of the premium in the form of a credit or refund of payroll taxes. Id. (adding 26 U.S.C. § 6432(c)(1)). The reduced premium payment applies to premiums for a period of coverage beginning on or after February 17, 2009, the date of ARRA?s enactment. While ARRA discusses notice requirements, it does not require that a person receive notice before exercising her right to pay the reduced premium. Under the plain wording of ARRA, an eligible person could simply pay 35 percent of the premium amount on March 1 for the March health insurance premium, and she would be deemed to have paid the entire premium amount for the month. Alternatively, another person, other than the employer, may pay this amount on the COBRA beneficiary?s behalf. Id. Note that the 35 percent amount pertains to the total amount of the premium. ARRA does not discuss payment of the two percent administrative fee that the
employer may charge the individual. Presumably, this fee would need to be paid by the individual in addition to the 35 percent of the normal premium amount.
Premium assistance is available for up to nine months of extended coverage. See ARRA, § 3001(a)(2)(A)(ii). Premium assistance ends sooner if a person becomes eligible for other group coverage or if the individual?s coverage reaches the time limits under COBRA. Id. Since the period of coverage, according to ARRA, must begin on or after the date of enactment, the subsidy could not be applied retroactively or to a premium, which covers a period of time prior to February 17, 2009 and extends beyond that date.
An ?assistance eligible individual? is a person who was involuntarily terminated from her employment between September 1, 2008 and December 31, 2009, and who is eligible for and elects COBRA continuation coverage. ARRA, § 3001(a)(3). The continuation coverage is not available to an individual who has voluntarily left employment or became eligible through a qualifying event other than involuntary termination. If the individual did not elect COBRA coverage when it was first offered and the election period has run out, she can still take advantage of a new COBRA election period. See ARRA, § 3001(a)(4)(A). This new election period begins on February 17, 2009 and runs until 60 days after the individual receives notice of the new election period. Id. However, if the individual exercises COBRA coverage under this new election period, she can only get coverage beginning on or after February 17, 2009, and the COBRA coverage will last only as long as it would have had she elected COBRA coverage when she first became eligible. Id.
The new election period will require a new COBRA notice, and the Secretary of Labor is directed to prescribe a model notice by March 19, 2009. ARRA, § 3001(a)(7). Any COBRA notice issued between September 1, 2008 and December 31, 2009 that does not explain the availability of the premium reduction and the option to enroll in different coverage (if the employer permits this), is considered inadequate notice. The revised or additional notice must include forms for establishing eligibility for premium assistance, contact information for the plan administrator or other person regarding the premium assistance, a description of the extended election period, the beneficiary?s obligation to notify the administrator of the beneficiary?s eligibility for new group health coverage or Medicare, and any description of the option to enroll in another plan offered by the employer. Id.
For people who were entitled to elect COBRA prior to enactment, group health plan administrators must provide notice of the new election period within 60 days of enactment. Id. If the notice is not issued in a timely manner, the individual?s right to elect the coverage begins with enactment of the legislation and ends 60 days after receiving the notice; thus, a late notice lengthens, rather than shortens, the individual?s election period. ARRA, § 3001(a)(4)(A), (a)(7)(C). However, if an individual has not enrolled in COBRA coverage to which he was entitled prior to February 17, 2009, under ARRA he can only begin his COBRA coverage with the first period of coverage after enactment, and the continuation coverage can continue only as long as the COBRA coverage would have continued had he elected the continuation coverage when it became available before enactment. Id. at § 3001(a)(4)(B).
COBRA premium assistance is available to people of all income levels. For low-income people who may be receiving public benefits, ARRA specifically excludes the premium assistance from consideration as income or a resource under any federal,state, or local program. ARRA, § 3001(a)(6). Thus, the subsidy is completely exempt from consideration for Medicaid eligibility and should have no effect on the amount of TANF or other benefits that an individual or family is entitled to receive. For Medicaid beneficiaries, there should be no need to report the amount of the subsidy, since it has no bearing on eligibility; however, if a beneficiary elects COBRA coverage, as with any other private insurance, she must report the additional coverage to the state Medicaid agency because Medicaid is a secondary payer to other insurance. See 42 U.S.C. § 1396a(a)(25). For individuals with income above $125,000, or $250,000 if filing jointly, premium assistance is also available, but the premium subsidies will be recouped from these individuals through their federal income taxes. ARRA, § 3001 (adding 26 U.S.C. § 139C(b)(1)).
Moreover, if the employer offers health insurance options other than the one in which the assistance eligible individual was enrolled and the premium coststhe same or less, the employer can agree to allow the individual to enroll in the other health plan. Individuals would need to elect this option, if available, within 90 days of receiving the new COBRA notice. See ARRA, § 3001(a)(1)(B). However, the other plan option cannot be a flexible spending arrangement, coverage at an on-site medical facility maintained by the employer, or coverage that only covers dental, vision, counseling, or referral services (or any combination of those services). Id. This provision could be beneficial to individuals who had more expensive coverage while employed, but in order to stay insured at a more reasonable price, choose to switch to less expensive, yet still useful and comprehensive health coverage.
Individuals who use the COBRA premium assistance subsidy also receive additional protection from application of pre-existing condition exclusions. ARRA, § 3001(a)(4)(C).
Currently, an individual who loses group health insurance and obtains new group health insurance within 63 days is protected from application of pre-existing condition exclusions in the new group health insurance policy. ARRA essentially adds the time from the qualifying event, i.e. the involuntary termination, until the end of the coverage allowed under ARRA to the 63-day period. Thus, even if an individual did not elect COBRA coverage when it first became available but does elect COBRA coverage under ARRA, at the end of his coverage period, he would have a new 63-day period in which to obtain new insurance without the application of a pre-existing condition exclusion.
Finally, if a group health plan denies an individual?s request to be treated as eligible for the COBRA premium assistance made available through ARRA, the individual is entitled to an expedited review of the denial. ARRA, § 3001(a)(5). The appeal is made to the Secretary of Labor, or in the case of non-ERISA plans, to the Secretary of Health and Human Services. The appropriate Secretary must make a de novo determination within 15 business days of receipt of the request for review. That determination may be appealed, though the court must grant deference to the Secretary?s determination. Id.
Medicaid State Fiscal Relief
Title V of ARRA concerns Medicaid. Besides providing ?fiscal relief to States in a period of economic downturn[,]? the Medicaid funding authorized by ARRA should serve to
?protect and maintain State Medicaid programs ?, including by helping to avert cuts to provider payment rates and benefits or services, and to prevent constrictions of income eligibility requirements for such programs, but not to promote increases in such requirements.? ARRA, § 5000.
While there are a number of Medicaid provisions in ARRA, the House of Representatives included a couple of provisions in its bill, H.R. 1, that were not included in the final bill: (1) a temporary option allowing states to extend Medicaid coverage to certain unemployed and uninsured adults and their dependents, with a 100 percent federal match; and (2) an option allowing states to extend Medicaid coverage of family planning services to women who would otherwise not qualify.
Temporary Increase in Medicaid FMAP and Maintenance of Effort?Section 5001.
Medicaid FMAP Increases
The Federal Medical Assistance Percentage (FMAP)is a federal payment to the state for Medicaid services covered by the state. The amount of the state?s FMAP is adjusted annually and depends on the per capita income of the state. States with lower per capita incomes receive a higher FMAP, which can range from 50 percent to 83 percent. See 42 U..S.C. § 1396b(a).
ARRA augments states? FMAPs for a ?recession adjustment period? from October 1, 2008 through December 31, 2010. ARRA, § 5001. The increased FMAP only applies to
Medicaid-covered items and services furnished through calendar year 2010. Id. at § 5001(i). States must report to the Secretary of the Department of Health and Human Services (DHHS) on how the increased FMAP funds were expended by the end of September 2011. Id. at § 5001(g)(1).
The FMAP increases will be determined by a complicated, three-tiered analysis. Importantly, this formula is tied to the unemployment rates in the states. States with the highest unemployment rates should see the most significant boosts in FMAP during the recession adjustment period.
Basically, the first step is a ?hold harmless? provision that maintains the base FMAP rates at levels no lower than the state?s 2008 rates. For fiscal year 2009 and each subsequent fiscal year through December 2010, the base FMAP rate can be no lower than previous years? FMAP rate. ARRA, § 5001(a). Thus, if the state?s FMAP was scheduled to decrease in fiscal year 2009, that state will receive its 2008 rate. If the state?s FMAP for fiscal year 2010 would be less than the FMAP as determined for FY 2008 or 2009, they will receive the highest FMAP determined for the three-year period.
In the second step, each state receives a general 6.2 percent FMAP increase on top of the base rate calculated during step one. Id. at § 5001(b)(1). Thus, if after application of the first step, the state?s FMAP is 60 percent, that state will receive a 63.72 percent FMAP rate (60% x .062=63.72%). Territories, whose FMAP is normally set at 50 percent, may chose to take this increase plus an additional 15 percent or a flat 30 percent increase with certain conditions. Territories are not eligible for the third tier of FMAP increases. Id. at §§ 5001(b)(2),(c)(2)(d).
In the third step, states experiencing severe economic downturns are eligible for additional FMAP?5.5 percent, 8.5 percent or 11.5 percent, depending on the extent to which the unemployment rate increases during a quarter. If a state?s unemployment rate increases at a lower rate than in a previous quarter, the state nevertheless remains eligible for the higher FMAP increase rate through June 2010. Id. at § 5001(c). And while the FMAP increases are cumulative, together they cannot exceed 100 percent. Id. at § 5001(b)(1), (c)(1), (f)(5).
The increased FMAP does not apply to Medicaid payments attributable to:
- Disproportionate share hospital (DSH) payments;
- TANF payments, except to Title IV-E foster care and adoption assistance payments;
- Enhanced FMAP payments for CHIP;
- Services for beneficiaries eligible for Medicaid under the breast and cervical cancer treatment option, See 42 U.S.C. §§ 1397ee(b), 1396d(b);
- Expenditures for individuals made eligible through income eligibility expansions after July 1, 2008, including such expenditures when made under a state plan, any waiver
- under Title XIX, or under Section 1115 of the Social Security Act. This includes higher eligibility standards under a state law that was enacted but not effective as of July 1, 2008 or a state plan amendment or Title XIX waiver request pending approval on July 1, 2008.
ARRA, § 5001(e)
States will not receive the enhanced FMAP ifthey do not pay providers promptly as current Medicaid law requires. Under Medicaid, states must ensure that 90 percent of completed claims are paid within 30 days of receipt; 99 percent, within 90 days of receipt. See 42 U.S.C. § 1396a(a)(37)(A). To be eligible for the increased FMAP, a state must be in compliance with this law for claims made for most covered services after February 17, 2009. However, for purposes of the increased FMAP, states have until June 1, 2009 to have prompt payments in place for nursing facility and hospital claims. See ARRA, § 5001(f)(2). This requirement is the only prerequisite to obtaining the increased FMAP, which the Secretary may waive, and then only in exigent circumstances.
States may not shift the cost of Medicaid expenditures onto cities and counties and still claim the increased FMAP. If a state requires cities or counties to contribute toward the nonfederal portion of Medicaid expenditures, the state is not entitled to the increased FMAP if it has increased the cities? or counties? share after September 30, 2008. ARRA, § 5001(g)(2).
ARRA?s clear intent is to assist states with maintaining their Medicaid programs as those programs were in effect on July 1, 2008. This is further emphasized by a provision that denies increased FMAP if any amounts attributable, directly or indirectly, to the increased FMAP are deposited or credited into any reserve or rainy day fund of the state. ARRA, § 5001(f)(3). Please contact NHeLP if you learn of any abuses of this provision or of instances where your state is using the enhanced FMAP for non-Medicaid purposes, such as highway, prison or other infrastructure projects.
State Maintenance of Effort Requirements
The enhanced FMAP period runs from October 1, 2008 through December 31, 2010. However, to qualify for any enhanced FMAP, states and territories must maintain the ?eligibility standards, methodologies, and procedures? in effect on July 1, 2008. ARRA, § 5001(f)(1)(A). The Secretary of DHHS cannot waive this provision. Id. at § 5001(f)(4).
ARRA provides a grace period for states that have recently enacted restrictive provisions. If a state hasimplemented more restrictive eligibility standards, methodologies or procedures after July 1, 2008 but before February 17, 2009 (the date of ARRA?s enactment), it has until July 1, 2009 to return to the July 1, 2008 standards. If it makes this change, the state can obtain the full increased FMAP for expenditures back to October 1, 2008. Id. at § 5001(f)(1)(C). If a state otherwise reinstates eligibility standards as they were on July 1, 2008, the state becomes eligible for the full increased FMAP beginning in the quarter in which the state has reinstated eligibility.Id. at § 5001(f)(1)(B).
States have an incentive to reinstate coverage as soon as possible in order to obtain the increased FMAP payments at the earliest possible date. Indeed, four states initially cited by DHHS as not qualifying for the enhanced FMAP due to post July 2008 restrictions (NC, SC, MS, VA) have already taken the steps needed to reinstate coverage. Department of Health & Human Services, American Recovery and Reinvestment Act (PL 111-5) Sec. 5001 Grant Award Summary, at http://hhs.gov/recovery/statefunds.html (accessed March 8, 2009).
Application to Medicaid. The maintenance of effort requirement appliesto Medicaid standards, methodologies and procedures, including under any waiver under Title XIX or under Section 1115 of the Social Security Act. Id. Thus, the requirement applies to managed care and home and community-based services waivers approved under Section 1915 of the Social Security Act (42 U.S.C. §§ 1396n) and to all demonstration projects operating pursuant to any authority under Section 1115 of the Social Security Act (42 U.S.C. § 1315).
The ?in effect? requirement. The requirement applies to eligibility standards, methodologies, or procedures ?in effect? on July 1, 2008. Thus, ARRA is worded to include
requirements contained in state statute; Medicaid agency regulation, written policy or practice; and binding court orders or consent/settlement agreements.
Eligibility standards, methodologies and procedures. Finally, the requirement applies to ?eligibility standards, methodologies, and procedures? in effect on July 1, 2008. The outer parameters of this phrase await clarification from DHHS. Meanwhile, the provision must be read in conjunction with the purpose of ARRA. That purpose is to ?protect and maintain State Medicaid programs during a period of economic downturn, including by helping to avert cuts to provider payment rates and benefits or services, and to prevent constrictions of income eligibility requirements for such programs, but not to promote increases in such requirements.? ARRA, § 5000 (emphasis added). When assessing state cutbacks against the maintenance of effort provision, the following are examples eligibility standards, methodologies, and procedures:
- Categorically and/or medically needy options selected by the state, for example noninstitutionalized disabled children (Katie Beckett), women with breast and cervical cancer, medically needy;
- Income eligibility cut offs, such as the percentages of the federal poverty level at which the state covers children, pregnant women, and/or the aged, blind and disabled;
- Medically needy income levels;
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