Today, on September 1st, the state of Michigan submitted an amendment to its Section 1115 Medicaid expansion waiver to comply with a deadline established by state law (PA 107 passed in 2013). The same state statute specifies that if the changes described in the amendment are not approved by December 31, 2015 that the expansion will end for all beneficiaries on April 30th 2016.

The basic outline of the amendment requires Medicaid expansion enrollees with incomes between 100-133% of the poverty line who receive 48 months of Medicaid coverage (it is not entirely clear if this is four years in a row or four years in total but it appears to be the latter) to do one of two things:

1. Move to QHP coverage instead and pay premiums consistent with the Affordable Care Act; or
2. Stay in Medicaid managed care and be subject to increased cost-sharing of up to 7% of income and an increase in contributions up to 3.5% of income. These contributions can be reduced if the beneficiary engages in “healthy behaviors” with a hint as to what those may be but no clear guidelines.

First, to state the obvious, it is extremely irresponsible to place badly needed health coverage and economic security for 600,000 residents of Michigan at risk to try to address a purported problem that hasn’t even occurred yet — and can’t occur until April of 2018 (i.e. that folks are staying on Medicaid for more than four years). Don’t policymakers in Michigan have more pressing issues to deal with?

Second, if this were to go forward, Michigan would most certainly win an honorable mention award in the competition for red tape and bureaucratic complexity – with all of the associated administrative costs that entails (so far Indiana is still winning first place on that front). The state’s application quickly glosses over any administrative complexities and costs by saying that budget neutrality would not be affected – no estimates are provided for how many people would be affected, how the state will track the 48 months retroactively, how the cost-sharing (which is too high and many won’t be able to pay) will be collected, how the healthy behaviors will be defined and tracked, and whether the new options will be properly explained to beneficiaries and administered.

Finally, the cost-sharing limits are too high and cannot be approved by CMS for both procedural and substantive reasons. Cost-sharing changes (as regular waiver watchers know) must be requested and executed through a different waiver – a Section 1916(f), which is clearly outlined in the Medicaid statute and requires among other things a very clear research design with a control group. (This requirement is not addressed by the Michigan waiver request.) And Medicaid cost-sharing must be nominal – 7% is clearly not a nominal increase in cost burden to Medicaid beneficiaires. And, as we have said countless times, excessive cost-sharing for low-income people deters access to needed care and is counter productive. When financial barriers lead people to go without needed care they often wind up sicker and in need of more expensive care such as hospitalization.

On the plus side, the state statutory language is somewhat vague and internally contradictory which creates an opportunity for compromise to avoid loss of coverage for expansion enrollees. Option 1 described above could likely be approved in a version similar to Iowa’s approach. Option 2 will require some revamping but ultimately some kind of revised version might fly. But fundamentally this is bad public policy and should be reversed at the state level.

So more to come on this one – we will be doing comments with our colleagues at the Center on Budget and Policy Priorities when CMS opens up the comment period in the next few weeks.