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July 23, 2014

Governors Press on Medicaid

By: Sara Murray | WSJ

Like nearly every other governor, Maine’s new Republican leader is trying to tame the cost of Medicaid, the state-federal program that provides health insurance to the poor.

He just doesn’t know if Washington will let him—even though Maine has among the most generous programs in the country.

Medicaid was created in 1965 to provide health coverage for the poorest Americans, particularly those with children. States pay, on average, 43% of the tab for Medicaid. Washington pays the rest and, as part of the new health-care law, the federal government restricts states’ ability to save money by narrowing eligibility for the program or charging more for coverage.

As a consequence, states like Maine that expanded Medicaid in good times find themselves locked into maintaining those expansions despite big deficits.

“It’s unbelievably unsustainable,” says Gov. Paul LePage, who took office in January. “We have to continue to be generous when we’re broke and that’s where the problem is.”

Both Republican and Democratic governors say Medicaid costs are busting their budgets, and are beseeching Washington to give them more flexibility to cut eligibility and benefits.

Medicaid covered nearly 16% of Americans in 2009, 47.8 million in all. The federal government sets minimum standards for eligibility and benefits, and states are free to cover more. MaineCare, the state’s Medicaid program, covers a lot more.

On average, states cover working parents who earn up to $11,859 a year, 64% of the national poverty level. MaineCare covers people up to 200% of poverty—or up to $37,060 for a family of three. Only Minnesota and Washington, D.C., cover families with higher income levels.

With a state budget deficit of more than $1 billion for the next two fiscal years, Mr. LePage has proposed revamping the program in several ways. First, he wants to tighten the eligibility of parents to those earning up to 133% of the poverty line, or $24,645 a year for a family of three. He likely will get federal permission to do so.

But a bigger cut the governor wanted to make, reducing eligibility for an $80 million program for childless adults, is forbidden by the health-care law. He is less clear about whether Maine can proceed with his other plans—to charge a higher insurance premium for MaineCare recipients earning income above 150% of the poverty line and to trim a program that helps elderly patients pay for prescriptions, premiums and co-payments.

Altogether, Mr. LePage’s proposals could cut coverage or increase costs for nearly 85,000 beneficiaries, according to state government estimates. He estimates his package would cut the state’s costs by nearly $39 million over the next two years.

During the recession, Washington sent states extra money to cover rising Medicaid costs. In return, states couldn’t cut Medicaid eligibility, a provision known as “maintenance of effort.” That funding, part of President Barack Obama’s stimulus program, is about to end.

The health-care law continues the maintenance-of-effort provision until 2014, when it expands Medicaid eligibility to 133% of poverty. In the meantime, Mr. LePage can’t trim childless adults, as the state only covers them up to 100% of poverty.

Washington is to pay the extra cost of Medicaid expansion from 2014, but many governors say they aren’t sure what they can cut until then. Mr. LePage is seeking guidance from Health and Human Services Secretary Kathleen Sebelius, but says the state may not wait for answers.

Critics of Mr. LePage’s approach say it would violate federal law and the penalty would be the loss of nearly $1.6 billion in federal Medicaid funds flowing to the state next year.

“I’m actually relieved we have those provisions in place,” Rep. Emily Cain, leader of Maine’s House Democrats, said. “It’s actually a safeguard for us to prevent us from moving backward.”

The Centers for Medicare and Medicaid Services, which administers the programs, is firm on the consequences of cutting eligibility. “The penalty for violation of the [maintenance of effort] is loss of all federal Medicaid funding during the period the state is in violation,” said spokeswoman Mary Kahn.

Shanna Rogers is among those who could be eliminated from MaineCare if the state lowers the income cap for eligibility. The 30-year-old mother of three works 40 to 60 hours a week, with two jobs at nonprofits and a waitressing position. She earned $34,000 last year.

Ms. Rogers a MaineCare recipient for two years, cut back on waitressing to do more nonprofit work, which she sees as a resume-builder. “I took a cut in pay,” she explains, but “I did that so that I could have a career that would lead me to a full-time position with benefits.”

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