Note: for a fairly up-to-date analysis of where states stand on the Medicaid expansion, check out this nice break down by the Advisory Board.

As we previously discussed, the agreement between Indiana and CMS last week to expand Medicaid in that state has big implications for the Medicaid program.  First, Indiana’s agreement with CMS has seemed to trigger a handful of other Red States that now appear ready to rethink agreements with CMS.  While a Tennessee plan narrowly failed to pass in that state’s House on the last night of session, Wyoming, Utah, Alaska, Idaho and Montana are all still considering Medicaid expansions.  Second, in accepting Indiana’s plan, the Obama Administration demonstrated its determination to increase the number of expansion states, even if it means waiving traditional Medicaid rules (using the administration’s flexibility under section 1115 of the Social Security Act). We will write soon on the underlying legal authorities that allow CMS to waive otherwise-applicable Medicaid laws.  The Indiana deal included a number of concessions that veer from the traditional Medicaid program, including a number that had never been seen before.  Notable elements of the Indiana plan include:

• Required beneficiary premium payments;
• Mandatory six month “lock outs” for beneficiaries with income above 100% FPL who fail to pay the premium following a 60 day grace period; and
• Graduated co-payments for non-urgent use of the emergency room.

Waiving Medicaid requirements is not new.  For years now, Section 1115 waiver have been used in the Medicaid program to provide states an avenue to test and implement coverage approaches that do not meet federal rules.  However, the lengths the administration now appears to be going to get states to sign on the expansion is unprecedented and certainly signals a potential shift in the Medicaid marketplace.  Non-traditional models vary and include:

• Incentives for job-training and work-related activities in Pennsylvania (note that CMS has consistently rejected attempts to make work a condition of Medicaid eligibility);
• Premium assistance models in Arkansas and Iowa  wherein states use Medicaid funds to purchase coverage for some or all newly eligible beneficiaries in qualified health plans;
• Waivers that allow premiums or monthly contributions (Michigan, Iowa, Pennsylvania, and now Indiana);
• Healthy behavior initiatives which condition lower premiums and cost-sharing on participation in specified healthy behaviors (Iowa, Michigan, and Pennsylvania);
• Waivers permitting states not to cover non-emergency medical transportation (Iowa, Indiana).

What does all of this mean? It certainly shows some degree of movement or adaptation from the perspective of the Administration on what kind of program the Medicaid program should become.  To some, the introduction of premium payments, enhanced cost-sharing requirements, and mandatory lock-out periods is simply antithetical to the purpose of the Medicaid program (to act as a social protection program) as these requirements may ultimately deny Medicaid to those who may need it the most.   Indeed, in the past CMS has rejected some of the very “concessions” it has now agreed to.  However, over the past two decades we have already seen a tremendous transformation in the way the Medicaid program works and operates – from limits on benefits to the rise of managed care to the Medicaid expansion.  It is likely that over the next several months we will see agreements with several more states, some of which may push the buck even more on what is and is not acceptable in the Medicaid program.