Medicaid Expansion:

States' Implementation of the Patient Protection and Affordable Care Act

GAO-12-821: Published: Aug 1, 2012. Publicly Released: Aug 1, 2012.

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Stanley J. Czerwinski
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Carolyn L. Yocom
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What GAO Found

  • Under PPACA, states are responsible for making a number of changes to their Medicaid programs by January 1, 2014, including expanding eligibility levels and streamlining their enrollment processes. Specifically, states must expand Medicaid eligibility to non-elderly individuals with incomes at or below 133 percent of FPL. Under the newly eligible category, states will provide Medicaid coverage to eligible low-income parents and childless adults. States must also begin determining income eligibility for Medicaid beneficiaries, including newly eligible adults, using a uniform methodology—MAGI, which is a tax-based definition of income. To implement these requirements, eligibility categories have been consolidated into four groups—adults, children, parents, and pregnant women. States may choose to expand Medicaid coverage to the newly eligible prior to January 1, 2014 (referred to as the early expansion option), but must cover lower income individuals before higher income individuals. These more uniform eligibility requirements will replace the current system where Medicaid eligibility and income rules may vary from state to state. Further, states must adopt a methodology for identifying the newly eligible in order to obtain the increased federal match. States will receive the enhanced federal match for newly eligible adults starting in 2014. States must also provide a simplified and streamlined eligibility process whereby individuals, through a website, may apply for and, if eligible, be enrolled in Medicaid. In addition, state eligibility determination systems will interface with a Federal Data Services Hub—an electronic service states will use to verify certain information with other federal agencies, such as an applicant’s citizenship, immigration status, and income data.

  • The six selected states included in our study (Colorado, Georgia, Iowa, Minnesota, New York, and Virginia) are taking some steps to prepare for the Medicaid expansion, including assessing changes that need to be made to their existing eligibility levels and eligibility determination policies. In an effort to streamline their eligibility and enrollment processes, the six states also are taking steps to upgrade or replace their Medicaid information technology systems and have submitted applications to CMS for enhanced federal funding for this purpose. In our interviews with selected states, officials noted that the enhanced funding provides the states with an opportunity to update outdated eligibility and enrollment systems. At the same time, state officials reported challenges to implementing PPACA’s Medicaid expansion requirements, including the need for additional federal regulations and guidance in a number of areas. For example, state officials indicated that they need additional guidance on using MAGI to determine an applicant’s eligibility under different scenarios involving household income levels, sources of income, and household composition. CMS has issued a final Medicaid rule and hosted webinars on this and other issues, and said that additional guidance is forthcoming. States also reported operational challenges that could affect their ability to meet Medicaid expansion and system development deadlines, such as lengthy state procurement processes, the complexities of developing new systems, coordination of multiple programs and systems, and resource limitations.

  • In terms of states’ views on the fiscal implications of the Medicaid expansion on states’ budget planning, our survey found that across fiscal years 2012 to 2020, the majority of state budget directors believe that three aspects of Medicaid expansion will contribute to costs: (1) the administration for managing Medicaid enrollment, (2) the acquisition or modification of information technology systems to support Medicaid, and (3) enrolling previously eligible but not enrolled individuals in Medicaid. At the same time, state budget directors expressed uncertainty about how other aspects of expansion will affect their budgets, such as the impact of shifting existing Medicaid enrollees into health benefit exchanges. Further, most state budget directors reported that their fiscal capacity and the state’s share of Medicaid expenditures create challenges for implementing the Medicaid expansion. A few state budget directors reported that CMS guidance was useful, while most commented that more guidance was needed to develop budget estimates in the following areas: Medicaid benefits packages (including essential and benchmark benefits), Medicaid eligibility determination, and the FMAP match for newly eligible adults. CMS officials indicated that the agency is planning to issue additional guidance or regulations at a later date in a number of areas, including clarification on eligibility groups, MAGI, and the FMAP methodology for the newly eligible population.

Why GAO Did This Study

The Patient Protection and Affordable Care Act (PPACA), signed into law on March 23, 2010, made significant changes to the way eligibility for the Medicaid program will be determined and who the program will cover.1 Under PPACA, eligibility for Medicaid—a joint federal-state program that finances health care for certain categories of low-income individuals—must be expanded to non-elderly individuals with incomes at or below 133 percent of the federal poverty level (FPL) beginning on January 1, 2014. Through this expansion, states will provide Medicaid coverage to eligible low-income parents and childless adults. PPACA also requires the establishment of American Health Benefit Exchanges (referred to as exchanges)—marketplaces where eligible individuals can purchase private health insurance in each state. The Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary has estimated that, as a result of the expansion, the number of Medicaid enrollees will increase by 14.9 million in 2014 and by 25.9 million in 2020.

State governments will play a key role in implementing many aspects of this reform, which must be in place by the beginning of 2014. Specifically, states will need to make major changes to the way they conduct Medicaid eligibility determinations for individuals and families. States also will need to develop streamlined eligibility and enrollment systems that allow for the coordination of enrollment across Medicaid, the Children’s Health Insurance Program (CHIP), and exchanges. At the same time, states will need to address the financial implications of implementing this Medicaid expansion and accompanying enrollment systems. The federal government will initially provide states with full funding to cover the cost of adults who are newly eligible for Medicaid due to the expansion.

Congress asked us to report on the actions states are taking to implement the Medicaid expansion. This report addresses the following questions:

1. What are states’ responsibilities for implementing the Medicaid expansion provisions under PPACA?

2. What actions have selected states taken to prepare for the Medicaid expansion provisions of PPACA and what challenges have they encountered?

3. What are states’ views on the fiscal implications of the Medicaid expansion on state budget planning?

For more information, please contact Stanley J. Czerwinski at (202) 512-6806 or czerwinskis@gao.gov or Carolyn L. Yocom at (202) 512-7114 or yocomc@gao.gov.

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