The End-of-Year COVID Relief Package: Medicaid and CHIP Highlights

After more than the usual end-of-session drama, the Consolidated Appropriations Act, 2021 (CAA) became law on December 27, 2020 (P.L. 116-260). The sprawling, 2,124-page opus includes not just badly needed COVID relief for millions of unemployed Americans but also funding for the entire federal government and protections against surprise medical bills for consumers with private health insurance coverage. Medicaid and CHIP are a very minor focus of the more than $1.6 trillion (with a “t”) in outlays that CBO projects, but the legislative package does have some important implications for program beneficiaries.

The Federal government is funded through September 30, 2021. This gives the Biden Administration generally, and the Department of Health and Human Services (HHS) in particular, breathing room to focus on controlling the pandemic, unwinding the policy damage done by its predecessor, and preparing its FY 2022 budget without having to worry about a government shutdown.

The increases in the federal Medicaid and CHIP matching rates during the pandemic public health emergency remain intact. Last March, Congress raised federal matching rates (FMAPs) for Medicaid (6.2 percentage points) and CHIP (4.34 percentage points) to help states pay for increases in enrollment and declines in revenues during the economic downturn caused by the pandemic. The FMAP increases last as long as the Secretary of HHS declares that a public health emergency is in effect (the current declaration expires on January 20 and is certain to be renewed). The CAA does not increase the 6.2 percentage point “FMAP bump” as economists (among others) have urged, but it also does not reduce it. (CBO estimates that the FMAP bump will result in an additional $172 billion in federal funds for states through 2023). Maintaining the elevated FMAP is particularly important because the Act does not include fiscal relief  for states and localities.

The Medicaid maintenance of effort (MOE) requirements tied to the matching rate increase remain intact. In order to receive the FMAP bump, states must comply with MOE requirements, most notably a prohibition against terminating Medicaid coverage for any individual enrolled on or after March 18, 2020 so long as the Secretary’s declaration of a public health emergency is in effect. This prohibition has eliminated red tape-driven enrollment churn during the pandemic, protecting coverage for hundreds of thousands of Americans. The CAA did not change the MOE requirements, but the current CMS is attempting to do so by rulemaking. My colleague Edwin Park has some choice words for that.

Certain expiring Medicaid provisions are extended through FY 2023. While almost all provisions of federal Medicaid law are permanent, some are not. Known in the Congressional trade as “extenders” because the authority for federal matching funds expires, they include payments to disproportionate share (DSH) hospitals; funding to assist individuals in transitioning from institutional settings to the community (Money Follows the Person); and protection against impoverishment for spouses of beneficiaries receiving home- and community-based services. There are policy disagreements over whether to make these provisions permanent; the CAA kicks those differences down the road, extending the provisions through September 30, 2023. As a practical matter, this means that the provisions won’t have to be revisited before the mid-term elections in November 2022, enabling both Congress and the new Administration to focus on responding to the pandemic.

Medicaid eligibility is restored to immigrants from the Marshall Islands. Under the Compact of Free Association (COFA) approved by Congress in 1986, citizens of the Marshall Islands, Micronesia, and Palau may lawfully reside in the U.S. and are entitled to Medicaid if they meet categorical eligibility requirements. The 1996 welfare “reform” law stripped these immigrants of Medicaid coverage; the CAA restores it, effective on enactment (December 27, 2020). This will be of particular benefit to the Marshallese communities in Arkansas, Hawaii, and Iowa, which have been hammered by the coronavirus, and to the providers that treat them.

Non-emergency medical transportation (NEMT), including the use of ride-sharing services, is “ensured.”  The CAA requires state Medicaid agencies, to “ensure”—not just “assure”—”necessary transportation for beneficiaries … to and from providers.” This requirement is effective on enactment. The CAA also specifies minimum qualifications that drivers for ride-sharing firms like Lyft and Uber must meet in order to be reimbursed for transporting Medicaid beneficiaries on a non-emergency basis. These new qualifications are effective one year from enactment.

States will be required to cover the costs of routine services for Medicaid beneficiaries participating in clinical trials. The CAA requires that, effective January 1, 2022, all states cover “routine patient costs” of Medicaid beneficiaries participating in a clinical trial, including those approved, conducted, or supported by NIH, CDC, or CMS, as well as those operating under an investigation new drug application (IND) approved by the FDA. A state’s regular federal matching rate (50 to 78 percent, 90 percent for expansion adults) will apply to these costs.

New documentation requirements for insurers concerning parity for behavioral health services provide a safe harbor for Medicaid managed care organizations (MCOs). The CAA requires private insurers and group health plans that impose non-quantitative treatment limits (NQTLs) on mental health or substance use disorder benefits to document compliance with parity requirements. Medicaid and CHIP MCOs that are in compliance with parity requirements under current federal regulations are treated as being in compliance with this new documentation requirement. The availability of this safe harbor may be an incentive for compliance with current requirements.

Bottom Line:

In the 116th Congress, which is now behind us, the first test of any Medicaid and CHIP legislation was “Do No Harm.” The CAA passes with flying colors. While it does not do as much good as it could have—the absence of 12-month post-partum coverage for pregnant women is indefensible—the legislation avoids the lapsing of beneficiary protections and makes some modest but important improvements in coverage and benefits. That, in and of itself, qualifies the CAA as a Minor Medicaid Miracle.

[Editor’s Note: On January 7, 2021, the Secretary of Health and Human Services extended the PHE  for another 90 days. The extension is effective January 21, 2021 and will last until April 20, 2021.]

Andy Schneider is a Research Professor at the Georgetown University McCourt School of Public Policy.