Medicaid and CHIP Provisions in Biden Administration’s Fiscal Year 2024 Budget

On March 9, the Biden Administration issued its budget plan for fiscal year 2024.  Based on budget documents from the Office of Management and Budget (OMB) and the Department of Health and Human Services (HHS), here’s a brief summary of the provisions related to Medicaid and the Children’s Health Insurance Program (CHIP), along with the expected budgetary impact as estimated by OMB.  My Georgetown CCF colleagues will be writing more detailed analyses of some of these provisions in the coming days.

  • Close Coverage Gap in Remaining Non-Expansion States. There are currently 11 states that have still not adopted the Affordable Care Act’s Medicaid expansion, although it is highly likely that North Carolina will enact the expansion this spring.  The budget would provide “Medicaid-like coverage” to individuals in non-expansion states.  There would also be “financial incentives” to ensure that current expansion states “maintain their existing expansions” but the budget provides no additional detail.  The proposal would increase federal spending by $200 billion over 10 years.
  • Require 12-Month Postpartum Coverage in Medicaid and CHIP. The Consolidated Appropriations Act, 2023 made permanent the American Rescue Plan Act’s state plan option to provide 12 months of postpartum coverage in both Medicaid and CHIP.  The budget would make 12-month postpartum coverage mandatory for all states, which would increase federal spending by $2.4 billion over 10 years.
  • Improve Medicaid Home- and Community-Based Services (HCBS). Medicaid is the largest payer of long-term services and supports (LTSS ) in the United States, providing LTSS coverage for millions of individuals including children with special health care needs.  However, due to a longstanding structural bias towards institutional care settings in Medicaid, many states have limits on access to HCBS.  Without any details, the budget proposes to increase Medicaid HCBS spending by $150 billion over 10 years in order to enable more seniors and people with disabilities to remain in their communities, promote better quality jobs for home care workers and enhance supports for family caregivers.
  • Make Certified Community Behavioral Health Clinics Demonstration into Permanent State Option. The Medicaid Certified Community Behavioral Health Clinic (CCBHC) is a demonstration project under which a limited number of states receive an enhanced federal matching rate for services furnished to Medicaid beneficiaries at certified behavioral health clinics.  The budget plan would convert this demonstration project to a permanent state option, which is expected to increase federal Medicaid spending by $20.1 billion over 10 years.
  • Improve Oversight of Medicaid and CHIP Managed Care Plans. The budget would enhance federal enforcement of Medicaid managed care requirements by allowing the Centers for Medicare and Medicaid Services (CMS) to condition federal matching funds related to a managed care contract’s capitation amounts on a service-by-service basis when a plan is out-of-compliance, rather than only be able to withhold all federal Medicaid matching funds for an entire contract.  This would produce federal Medicaid savings of $1.5 billion over 10 years.  The budget would also set a minimum Medicaid and CHIP Medical Loss Ratio (MLR) — the percentage of premium dollars spent on medical care — of 85 percent and require states to collect “remittances” from plans if they fail to meet the minimum MLR.  This would produce federal savings of $21.7 billion over 10 years.
  • Lower Medicaid and CHIP Prescription Drug Costs and Expand Access to Drugs that Prevent HIV/AIDS. The budget includes several provisions related to prescription drugs.   It would extend the highly effective Medicaid Drug Rebate Program (MDRP) to separate state CHIP programs, which would lower federal CHIP spending by $2.3 billion over 10 years.  This would also have the benefit of extending the MDRP’s open formulary protection to children and pregnant women enrolled in separate state CHIP programs.  It would also authorize the HHS Secretary, on a voluntary basis, to negotiate supplemental rebates from drug manufacturers on behalf of states, on top of the rebates required under federal law.  This is expected to reduce federal Medicaid spending by $5.3 billion over 10 years.  It would allow Puerto Rico and the other territories to opt out of the MDRP without a waiver.  This means, however, that as they do today, the territories would continue to obtain considerably lower discounts than they would if they participated in the MDRP and beneficiaries would not receive the MDRP’s open formulary protection.  This is not expected to have a budgetary impact.  Finally, the budget would also require all states to cover Pre-Exposure Prophylaxis (PrEP) drugs and related laboratory services with no cost-sharing and add guardrails to the use of utilization management tools related to such drugs.  By reducing the incidence of HIV/AIDS and therefore lowering Medicaid-covered treatment costs, this provision would reduce federal Medicaid spending by $10.2 billion over 10 years.
  • Extend Vaccines for Children Program to Children in Separate State CHIP Programs. The budget would extend the Vaccines for Children (VFC) program, which already applies to children in Medicaid and CHIP-funded Medicaid, to children in separate state CHIP programs.  This would eliminate any cost-sharing for vaccines in separate state CHIP programs while reducing federal vaccine costs and simplifying vaccine administration.  This would reduce federal CHIP spending by $2.9 billion over 10 years (but the OMB estimates indicate that overall, the proposal would increase federal spending by $310 million over 10 years).
  • Improve Quality Reporting in Medicaid. The budget would provide mandatory funding for quality measures for adults in Medicaid and make annual reporting mandatory.  It would also develop a quality measure core set for HCBS and make reporting of such core set mandatory.  It would increase federal spending by $278 million over 10 years.
  • Increase Participation in the Medicare Savings Programs. The Medicare Savings Programs (MSPs) provide financial assistance to certain low-income Medicare beneficiaries also enrolled in Medicaid by picking up Medicare premiums and for those with incomes below 100 percent of the federal poverty line, Medicare deductibles and other cost-sharing.  However, MSP participation among eligible seniors and people with disabilities remains low.  The budget would align eligibility methodologies for the MSPs and the Medicare Part D Low Income Subsidy to reduce administrative barriers to enrollment.  This would increase federal spending by $5.8 billion over 10 years.  The budget would also establish a 12-month renewal period for MSPs to align with the renewal period for other Medicaid eligibility groups, whose eligibility is determined under the Modified Adjusted Gross Income (MAGI) methodology.  This provision is not expected to have a budgetary impact.
Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.