Header graphic for print
Focus on Regulation

HHS Announces No Enhanced Federal Matching Funds for Partial Medicaid Expansion, But Still Finds Ways to Ease Administrative Burden and Costs for States

The Patient Protection and Affordable Care Act (ACA) made 100% federal matching funds available through Medicaid for states to provide health benefits to all non-pregnant, childless adults with incomes up to 133 % of the federal poverty level (FPL) starting in 2014 (“the ACA Medicaid expansion”).  Since the Supreme Court decision in National Federation of Independent Business v. Sebelius effectively made it optional for states to expand their Medicaid programs, there has been widespread buzz among state officials and other stakeholders about whether states that elect to implement a partial Medicaid expansion, such as only to individuals with income levels of up to 100% of the FPL, would be eligible to receive the enhanced federal matching funds available for the ACA Medicaid expansion population.  On December 10, 2012, the Secretary of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) answered that question with a definitive “No.” 

In response to questions received from Governors and other state officials, the Secretary released a document entitled “Frequently Asked Questions on Exchanges, Market Reforms, and Medicaid” to summarize and supplement HHS’ guidance to states regarding the exchanges, the Medicaid expansion, and several other topics related to state insurance marketplaces. The questions and answers included the following:

26. Can a state expand to less than 133% of FPL and still received 100% federal matching funds?

A.    No.  Congress directed that the enhanced matching rate be used to expand coverage to 133% of FPL.  The law does not provide for a phased-in or partial expansion.  As such, we will not consider partial expansion for populations eligible for the 100 percent matching rate in 2014 through 2016.

The Secretary’s answer to the question further explained that instead, states could propose demonstration projects involving a partial Medicaid expansion through the Medicaid Section 1115 waiver process (which would be eligible for federal funds at the state’s regular federal matching rate) or, starting in 2017, through the ACA’s new State Innovation Waivers coupled with a Medicaid Section 1115 waiver.  However, the federal matching rate for the expansion population in 2017 would be at the then-effective rate (95%), not at 100% federal funds.

But the Secretary’s responses to several other FAQs also revealed alternative ways to ease the administrative burden—and the costs to the states—of the Medicaid provisions of the ACA.  Most notably, the Secretary explained that states have the option to have the Exchange determine individuals’ eligibility for Medicaid or assess individuals’ eligibility for Medicaid—regardless of whether the state elects to expand  Medicaid —and that no charge will be imposed on states for Medicaid determinations or assessments conducted by the Exchanges.  This means that for states that have opted for a Federally-Facilitated Exchange (“FFE”), which will be funded and operated by HHS, and that also have opted to have that FFE perform the Medicaid eligibility determination or assessment, the substantial costs associated with performing that determination or assessment will be shifted to the FFE, proposed to be financed with a premium tax..  This opportunity appears to exist even if those states elect not to implement the ACA Medicaid expansion, but simply continue their current state Medicaid eligibility rules.

The Secretary also confirmed that the enhanced federal funding (90% federal matching funds, 10% state funds) that HHS has made available to states for the design and development of new or improved Medicaid eligibility systems to facilitate state implementation of the new federal income eligibility standard for Medicaid, the Modified Gross Adjusted Income (MAGI), remains available through December 31, 2015.  In addition, the Secretary assured states that the enhanced federal matching rate (75% federal matching funds, 25% state funds) will be available indefinitely for the maintenance and operation of such systems.  The Secretary reiterated that these two types of enhanced funds will be available regardless of whether or not the state chooses to implement the ACA Medicaid expansion.  Finally, the Secretary confirmed that consistent with previous guidance, there will be no charge to states to use the federally-managed data services “hub” to assess enrollees’ eligibility for Medicaid, the Children’s Health Insurance Program, or the advance premium tax credits available to individuals with incomes between 100% and 400% of FPL to help them purchase qualified health plans through the Exchanges.