Feds Propose Increase in Medicaid Premiums, Deductibles, to Entice States to Expand Coverage

The federal government has proposed to increase deductibles and other “nominal” costs charged to Medicaid patients, presumably with the goal of enticing states to expand Medicaid coverage.

In a proposed rule published Tuesday in the Federal Register, the Centers for Medicare and Medicaid Services “propose to update the maximum allowable cost sharing levels, in particular expanding upon the flexibilities related to drugs and emergency department (ED) usage. We propose new options for states to establish higher cost sharing for non-preferred drugs, and to impose higher cost sharing for non-emergency use of the ED.”

While the new rules appear to hold the line on fees charged to those below 100 percent of federal poverty level, the increased premiums and deductibles would be imposed on those with incomes above that level.

As the New York Times  recently pointed out, the new rules will make it more palatable to expand Medicaid per the Patient Protection and Affordable Care Act. Last summer the U.S. Supreme Court ruled that expansion of Medicaid is at the option of the states, and many have elected not to do so, citing impact on government coffers.

From a healthcare provider revenue cycle perspective, the new rules present three possible outcomes each with far different impacts to the bottom line:

1. The state and federal governments expand Medicaid, at the same time expanding their respective budgets for Medicaid. As a result, a larger percentage of the low-income population is covered, and the aggregate larger budget means increased revenues for providers.
2. The state and federal governments use the new deductible rates to expand Medicaid but hold the line on budgets simply by paying less per patient and transferring additional costs onto those patients. This will result in increased administration costs for providers, who will be required to collect larger co-pays and deductibles from a low-income patient population.
3. The state takes advantage of the new rules to reduce Medicaid expenses, transferring costs to the patient, which in turn will increase the burden on providers who must collect those increased fees from a population least able to pay.

Comments on the new proposed rule will be accepted until Feb. 13. To submit comments, conult the proposed rule published in the Federal Register. For more information about the proposed changes to Medicaid premiums and deductibles, contact Melissa Harris at CMS, (410)786-3397.