By Katherine Jett Hayes

Background

A previous Implementation Brief reviewed the Medicaid maintenance of effort (MOE) provisions of the Affordable Care Act (ACA). In brief, the MOE provisions in the ACA were an extension of the MOE provisions of the American Recovery and Reinvestment Act (ARRA), and limited states’ ability to reduce eligibility for Medicaid and the Children’s Health Insurance Program (CHIP). The ARRA MOE provisions conditioned states’ eligibility for enhanced Medicaid funding to adherence to existing eligibility standards. The ACA’s MOE provisions were designed to assure that families and children with incomes slightly over the federal poverty level do not lose eligibility for Medicaid and CHIP during the transition period between the ACA’s date of enactment and January 1, 2014, when low-income individuals with incomes that nonetheless exceed Medicaid eligibility levels will have access to subsidized coverage through state health insurance Exchanges. Under the ACA MOE provisions, states that reduce eligibility during the transition period risk loss of federal Medicaid funding. With the end of the period of enhanced federal Medicaid funding under ARRA, numerous states have sought a relaxation of the ACA MOE standards to permit states to reduce eligibility for Medicaid beneficiaries whose incomes exceed 133% of the federal poverty level.^[1]

Legislation to Repeal MOE

House and Senate Republicans introduced legislation to permit states, effective on the date of enactment, to repeal both the ARRA MOE provisions and the Medicaid and CHIP MOE provisions^[2]
included in the ACA.^[3] The State Flexibility Act (H.R. 1683) was introduced in the House of Representatives by Rep. Phil Gingrey (R-GA). The Senate companion legislation (S. 868) was introduced by Senator Orrin Hatch (R-UT), ranking member of the Senate Finance Committee. Supporters of the State Flexibility Act argue that the MOE limits the ability of states to lower Medicaid spending and balance state budgets.

According to preliminary estimates made available by the Senate Finance Committee, the Congressional Budget Office (CBO) and the Joint Committee on Taxation have indicated that, if enacted, the proposed legislation would save $2.8 billion in federal spending between 2012 and 2016 and an additional $2.1 billion between 2012 and 2021.^[4] The legislation would achieve savings by permitting states to reduce eligibility by an estimated 1.5 million children and adults between 2012 and 2018. By 2019, the CBO estimates that those who were protected under the MOE will be limited to less than 50,000 per year, since they will qualify for tax credits under the ACA. In a recent letter to HHS Secretary Sebelius, a hospital coalition noted that elimination of Medicaid eligibility is likely to increase the current $40 billion uncompensated care burden on providers.^[5]

Prospects for Congressional Action

The proposed legislation likely will be advanced by House and Senate Republicans as part of ongoing negotiations between Congress and the Obama Administration to reach a budget agreement for fiscal year (FY) 2012 and to increase the federal debt ceiling. While funding for FY 2011 expires on September 30, 2011, Treasury Secretary Timothy Geithner has indicated that the debt limit will be reached by May 16, 2011, and that absent agreement, the Treasury will begin implementing policies that will allow the government to continue borrowing authority through August 2, 2011.^[6]