What Could Reconciliation Mean for Medicaid: Reviewing HR 3762

By Cindy Mann, Partner, Manatt Health

President-elect Trump and leaders in Congress have proposed a major restructuring of the Medicaid program, but very significant changes to Medicaid coverage and financing could be adopted even before that debate begins as part of a reconciliation bill aimed at repealing various provisions of the Affordable Care Act (ACA). An ACA “repeal” bill is expected to take center stage as soon as the new Congress convenes in early January 2017. The current Congress has passed ACA repeal bills before, most recently a reconciliation bill (HR 3762) passed in late 2015 and vetoed by President Obama.1 HR 3762 is likely to be the starting point for the legislation Congress will take up in January. Of note, the provisions repealed in HR 3762 would not have taken effect until January 2018, purportedly allowing time for Congress to develop and enact a replacement for the ACA. A major question for Congress and President-elect Trump is whether they will proceed with a repeal bill without a “replacement” bill in hand. Without such a bill, the future of coverage for some 20 million people, the insurance reforms that have affected countless others, and the impact of the changes ahead on states, healthcare providers and health plans will be highly uncertain.2

While most of the provisions in HR 3762 pertain to the Marketplaces and the ACA individual and small group market reforms, in considering the implications of a repeal vote for Medicaid and myriad stakeholders in the program, it is instructive to review the Medicaid-related provisions in the 2015 ACA repeal bill—that is the subject of this Manatt on Medicaid.

Repealing the Medicaid Expansion for Adults

The central Medicaid feature in HR 3762 is the repeal of the Medicaid expansion for low-income adults (those with incomes below 133% of the federal poverty level (FPL)). The bill would have repealed the enhanced federal funding for the expansion taken up by 31 states and eliminated the legal authority for states to cover these low-income adults, even at the regular Medicaid matching rate. Under the ACA, the federal match rate for the expansion was set at 100% (meaning the federal government paid the full cost of the expansion) for the first three years of ACA coverage (2014-2016) and then drops gradually to 90% effective 2020 and thereafter. To date, about 10 million adults have enrolled in coverage through the ACA Medicaid expansion.3

In addition to the impact on coverage, a repeal of the Medicaid expansion would have a significant negative impact on state budgets, healthcare providers and health plans.4 It could also have consequences for any later effort to cap federal Medicaid funding by removing the expansion-related dollars that 31 states are now relying on from the base amounts that could determine the level of the federal caps.

Rolling Back Coverage for Children

In addition to the repeal of the adult expansion, HR 3762 would have lowered the eligibility level for children, aged six and older, from 133% to 100% of the FPL, the minimum eligibility level for children in that age range prior to the ACA. The ACA raised the eligibility level for children to align with the minimum eligibility level for younger children and with the new expansion for adults, many of whom are parents, so that family members would qualify for the same program. In some states, the children made eligible for Medicaid had been covered through the Children’s Health Insurance Program (CHIP); effective 2014, over half a million children were transferred from CHIP to Medicaid.5 The repeal provision would require states to either move children in this income and age range back to CHIP, if CHIP is reauthorized (CHIP is set to expire October 1, 2017), or cover them under Medicaid coverage at state option.

The other key change for children in last year’s reconciliation bill was with respect to the ACA provision that required states to maintain their eligibility levels for children (in Medicaid and CHIP) until September 30, 2019. HR 3762 would have moved up the date for the end of the “maintenance of effort” (MOE) provision to September 30, 2017, the same date when the authorization of CHIP expires. Ending the MOE provision would allow, but not require, states to reduce their coverage for children to federal minimum standards. Currently, the median state covers children (in Medicaid or CHIP) with incomes up to 255% of the FPL.6 The federal Medicaid minimums for children under HR 3762 would be 100% of the FPL, and without the MOE provision, there would be no federal minimum eligibility level for CHIP.

Eliminating Medicaid Application and Enrollment Simplifications

Prior to the ACA, states had broad authority to design their Medicaid application and enrollment processes. State processes varied widely: some states had extensive paperwork requirements while others had streamlined their applications and relied on electronic sources of information to verify eligibility. The ACA required all states to simplify and modernize the application and renewal process and to align that process with the Marketplace to promote streamlined, coordinated enrollment of eligible individuals. HR 3762 would have repealed these requirements as well as a process known as “presumptive eligibility,” where hospitals and other health providers or community-based organizations help families receive temporary coverage through Medicaid while their full application is reviewed by the state. (HR 3762 would not have affected presumptive eligibility for children and pregnant women.)

Ending the State Option to Provide Long-Term Services and Supports in the Community

Medicaid is the largest source of funding for long-term care services and related supports. Consistent with the requirements under the Americans with Disabilities Act and family preferences, states have been reforming their long-term care systems so that people can receive these services in their homes and communities if appropriate given their needs. Prior to the ACA, a state could provide these services outside of a nursing home only by applying for a Medicaid waiver; the ACA established authority for states to offer these services as a Medicaid option under their state plans—no waiver is required. HR 3762 would have repealed this new flexibility for states.

Eliminating Federal Funding for Planned Parenthood

For one year beginning on the date of enactment, HR 3762 would have effectively eliminated federal Medicaid funding—including funding for reproductive health, maternal health and other services—for Planned Parenthood.

Reducing Federal Support for the Territories

HR 3762 would have rolled back the federal matching rate for the Territories from 55% to 50%.

Ending the Cuts to Disproportionate Share Hospital (DSH) Payments

In light of the expectation that the ACA would reduce uncompensated care, and to help offset the cost of the ACA, the law reduced federal DSH payments for hospitals. The DSH cuts have been twice delayed by Congress and are currently slated to take effect October 1, 2017. HR 3762 would have repealed the DSH cuts.

Overall Coverage Impact of the 2015 Repeal Bill

According to the Congressional Budget Office, the ACA repeals included in HR 3762 would increase the number of uninsured Americans by 22 million, with some 14 million losing Medicaid or CHIP, 18 million losing coverage in the individual and small group market (both inside and outside of the Exchanges), and 10 million added to employer-sponsored coverage.7

1HR 3762.

2Centers for Medicare & Medicaid Services, March 31, 2016 Effectuated Enrollment Snapshot, June 2016.

3Centers for Medicare & Medicaid Services, October – December 2015 Medicaid MBES Enrollment Report. More recently, CMS reported that as of August 2016, nearly 16 million individuals have gained coverage through Medicaid/CHIP since October 2013; this number includes previously eligible but unenrolled individuals.

4“States Expanding Medicaid See Significant Budget Savings and Revenue Gains,” State Health Reform Assistance Network, March 2016.

5“Aligning Eligibility for Children: Moving the Stairstep Kids to Medicaid,” Kaiser Family Foundation, August 2013.

6“Income Eligibility Limits for Children’s Health Coverage as a Percent of the Federal Poverty Level as of January 2016,” Kaiser Family Foundation.

7Congressional Budget Office Cost Estimate of HR 3762.