HHS FY2015 Budget in Brief

Centers for Medicare & Medicaid Services

Centers for Medicare & Medicaid Services (CMS): Medicaid

The Centers for Medicare & Medicaid Services ensures availability of effective, up-to-date health care coverage and promotes quality care for beneficiaries.

CMS Medicaid Budget Overview

(Dollars in millions)

Current Law

2013

2014

2015

2015 */- 2014

Benefits /1

250,931

289,885

312,674

+22,789

State Administration

14,461

18,556

18,766

+210

Total Net Outlays, Current Law

265,392 

308,440 

331,440 

+23,000 



 

Proposed Law

2013

2014

2015

2015 */- 2014

Legislative Proposals /2

175

+4,521

+4,346

Extend Qualified Individual (QI) Program /3

+365

+760

+395

Adjustment for QI Transfer from Medicare /3

-365

-760

-395

Total Net Outlays, Proposed Law

265,392 

308,615 

335,961

+27,346 


 

Investment Impact

2013

2014

2015

2015 */- 2014

Impacts of Program Integrity Investments /4

+1

+1

Total Net Outlays, Proposed Policy

265,392 

308,615 

335,962

+27,347 


 

Note: Numbers may not add due to rounding

1/ Includes outlays from the Vaccines for Children Program, administered by the Centers for Disease Control and Prevention.

2/ Includes a proposal to extend Transitional Medical Assistance, currently authorized through March 31, 2014; excludes program integrity investments other than those for Medicaid Fraud Control Units.

3/ States pay the Medicare Part B premium costs for Qualified Individuals (QIs) that are in turn offset by a 100 percent reimbursement from Medicare Part B. Costs of the proposal to extend the QI program through CY 2015 are reflected in Medicare outlays. The QI program is currently authorized through March 31, 2014.

4/ Includes the net impact of the HHS and Social Security Administration program integrity investments on the Medicaid baseline. 


 

CMS Medicaid Services

Medicaid is the primary source of medical assistance for millions of low income and disabled Americans, providing health coverage to many of those who would otherwise be unable to obtain health insurance. In FY 2012, more than 1 in 5 individuals were enrolled in Medicaid for at least 1 month during the year, and in FY 2014, an estimated 65 million people on average will receive health care coverage through Medicaid.

How Medicaid Works

Medicaid EnrollmentAlthough the federal government establishes general guidelines for the program, states design, implement, and administer their own Medicaid programs. The federal government matches state expenditures on medical assistance based on the federal medical assistance percentage, which can be no lower than 50 percent. In FY 2015, the federal share of current law Medicaid outlays is expected to be approximately $331.4 billion.

States are required to cover individuals who meet certain minimum categorical and financial eligibility standards. Medicaid beneficiaries include children, pregnant women, adults in families with dependent children, the aged, blind, and/or disabled, and individuals who meet certain minimum income eligibility criteria that vary by category. States also have the flexibility to extend coverage to higher income groups, including medically needy individuals through waivers and amended state plans. Medically needy individuals are those individuals who do not meet the income standards of the categorical eligibility groups, but incur large medical expenses such that when subtracted from their income, they fall within the financial eligibility standards. Under Medicaid, states must cover certain medical services and are provided the flexibility to offer additional benefits to beneficiaries. Medicaid has a major responsibility for providing long term care services because Medicare and private health insurance often furnish only limited coverage of these benefits.

 

Percent of Medicaid Beneficiaries vs. Federal Medical Assistance Expenditures by Eligibility Group

 

 

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Recent Program Developments

Affordable Care Act (P.L. 111 148 and P.L. 111 152): The Affordable Care Act’s Medicaid expansion, which began in 2014, allows states the option to expand Medicaid eligibility to individuals under age 65 with family incomes up to 133 percent of the federal poverty level (or $31,721 for a family of four in 2014). As of January 2014, 25 states and the District of Columbia have elected to expand Medicaid in 2014.

The federal government will pay 100 percent of state expenditures related to newly eligible individuals through 2016. The federal matching rate will then drop gradually to 90 percent in 2020 where it will then remain. In addition, the Affordable Care Act also strengthens Medicaid program integrity efforts and improves services to Medicaid beneficiaries by increasing emphasis on providing long term services and supports in home and community based settings rather than institutions.

Bipartisan Budget Act of 2013 (P.L. 113 67): This law extended the Qualifying Individual program and Transitional Medical Assistance program through March 31, 2014, repealed the Medicaid Disproportionate Share Hospitals (DSH) reductions scheduled for FY 2014, and delayed the DSH reductions scheduled for FY 2015 until FY 2016. It also made technical adjustments to the calculation of future Medicaid DSH allotments.


 Medicaid Expansion Status by State as of January 2014

 

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Medicaid Legislative Proposals

Extend the Medicaid Primary Care Payment Increase through CY 2015 and Include Mid-Level Providers (Workforce Initiative): Effective for dates of service provided on January 1, 2013 through December 31, 2014, states are required to reimburse qualified providers at the rate that would be paid for the primary care service under Medicare. The federal government covers 100 percent of the difference between the Medicaid and Medicare payment rate. This proposal would extend the enhanced rate through December 31, 2015, expand eligibility to mid-level providers, including physician assistants and nurse practitioners, and exclude emergency room codes to better target primary care. [$5.4 billion in costs over 10 years]

Rebase Future Disproportionate Share Hospital (DSH) Allotments: As the number of uninsured people decreases due to the coverage expansions in the Affordable Care Act, uncompensated care costs for hospitals will also decrease, reducing the level of DSH funding needed. Legislation has extended DSH reductions through FY 2023, but in FY 2024, allotments revert to levels that had been in effect prior to the Affordable Care Act. This proposal would determine future state DSH allotments based on states’ actual DSH allotments as reduced by the Affordable Care Act. [$3.3 billion in savings over 10 years]

Permanently Extend Express Lane Eligibility for Children: The Children’s Health Insurance Program Reauthorization Act (P.L. 111-3) authorized Express Lane Eligibility under which state Medicaid or CHIP agencies can use another public program’s eligibility findings to streamline eligibility and enrollment into Medicaid or CHIP. As of August 1, 2013, 13 states used this authority to partner with programs like the Supplemental Nutrition Assistance Program or Temporary Assistance for Needy Families (TANF) to identify, enroll, and retain uninsured children who are eligible for Medicaid or CHIP. The authority to operate expires at the end of FY 2014, and the Budget supports a permanent extension of this tool to aid states in furthering their efforts to enroll Medicaid and CHIP eligible children. [$1.1 billion including $770 million in Medicaid costs over 10 years]

Limit Medicaid Reimbursement of Durable Medical Equipment (DME) Based on Medicare Rates: Through the DME Competitive Bidding Program, Medicare is in the process of implementing innovative ways to increase efficiency for DME payments, which is expected to save Medicare more than $26.8 billion, and Medicare beneficiaries approximately $17.9 billion, over 10 years. This proposal extends some of these efficiencies to Medicaid by limiting federal reimbursement for a state’s Medicaid spending on certain DME services to what Medicare would have paid in the same state for the same services. [$3.1 billion in savings over 10 years]

Provide Home and Community-Based Waiver Services to Children and Youth Eligible for Psychiatric Residential Treatment Facilities: This proposal would provide states with additional tools to manage their children’s mental health care service delivery systems by expanding the non-institutional options available to these Medicaid beneficiaries. By adding psychiatric residential treatment facilities to the list of qualified inpatient facilities, this proposal provides access to home and community-based waiver services for children and youth in Medicaid who are currently institutionalized and/or meet the institutional level of care. Without this change to provisions in the Social Security Act, children and youth who meet this institutional level of care do not have the choice to receive home and community based waiver services and can only receive care in an institutional setting where residents are eligible for Medicaid. This proposal builds upon findings from the five year Community Alternatives to Psychiatric Residential Treatment Facilities Demonstration Grant Program authorized in the Deficit Reduction Act of 2005 that showed improved overall outcomes in mental health and social support for participants with average cost savings of $36,500–$40,000 per year per participant. [$1.9 billion in costs over 10 years]

Lower Medicaid Drug Costs for States and the Federal Government: The Budget includes targeted policies to lower drug costs in Medicaid. First, the Budget strengthens the Medicaid Drug Rebate Program by clarifying the definition of brand drugs, collecting an additional rebate for generic drugs whose prices grow faster than inflation, and clarifying the inclusion of certain prenatal vitamins and fluorides in the rebate program. The Budget also corrects a technical error to the Affordable Care Act alternative rebate for new drug formulations, limits to twelve quarters the timeframe for which manufacturers can dispute drug rebate amounts, and excludes authorized generic drugs from average manufacturer price calculations for determining manufacturer rebate obligations for brand drugs. Finally, the Budget improves Medicaid drug pricing by calculating Medicaid Federal Upper Limits based only on generic drug prices. [$8.6 billion in savings over 10 years]

Improvements to Program Integrity for Medicaid Drug Coverage: The Budget includes four related proposals to enhance program integrity for the Medicaid prescription drug program. The first proposal would require manufacturers to make the drug rebate equal to the entire amount that the state has paid for the drugs in cases where the state improperly reported non-drug products to CMS as covered outpatient drugs or reported drugs that the Food and Drug Administration (FDA) has found to be less than effective under the Drug Efficacy Study Implementation as if they were not found to be less than effective. By requiring full reimbursement, this proposal eliminates the incentive for manufacturers to improperly report information about drugs in these situations. [$10 million in savings over 10 years]

The second proposal would enhance existing enforcement of manufacturer compliance with drug rebate requirements. Under current law, CMS has authority to survey drug manufacturers, and OIG has authority to audit drug manufacturers. This proposal would allow more regular audits and surveys of drug manufacturers to ensure compliance with requirements of Medicaid drug rebate agreements to the extent they are cost effective. [No budget impact]

The third proposal would require drugs to be electronically listed with FDA in order for them to be included in Medicaid coverage. Current law requires manufacturers to list their prescription drugs with the FDA, but not all drugs on the market are properly listed. This proposal would require electronic listing of drugs with the FDA in order to receive Medicaid coverage and thereby align Medicaid drug coverage requirements with Medicare drug coverage requirements. [No budget impact]

Finally, the President’s Budget proposes to increase penalties for fraudulent noncompliance on rebate agreements. Under Medicaid drug rebate agreements, drug manufacturers are required to report accurate information. This proposal would increase penalties collected from drug manufacturers that knowingly report false information under their drug rebate agreements for the calculation of Medicaid rebates. [No budget impact]

Increase Access to and Transparency of Medicaid Drug Pricing Data: The Deficit Reduction Act of 2005 (P.L. 109-171) provided funding for this survey which expired in FY 2010. This proposal fully funds a nationwide retail pharmacy survey incorporating prices paid by cash-paying, third-party insured, and Medicaid insured consumers. The funding also permits collection of the actual invoice prices from retail community pharmacies to enable states to set reasonable payment rates to pharmacies. Finally, these proposals provide CMS the authority to collect wholesale acquisition costs for all Medicaid covered drugs. [$30 million in costs over 10 years]

Expand State Flexibility to Provide Benchmark Benefit Packages: States currently have the option to provide certain populations with alternative benefit packages called benchmark or benchmark-equivalent plans in place of the benefits covered under a traditional Medicaid state plan. This proposal provides states the flexibility to allow benchmark equivalent benefit coverage for non elderly, non disabled adults with income that exceeds 133 percent of the federal poverty level. [No budget impact]

Extend Transitional Medical Assistance (TMA) through CY 2015: The TMA program extends Medicaid coverage for at least 6 months and up to 12 months for low income families who lose cash assistance due to an increase in earned income or hours of employment. This proposal extends authorization and funding of the TMA program through December 31, 2015. States that adopt the Medicaid expansion will be able to opt out of TMA, consistent with a related Medicaid and CHIP Payment and Access Commission recommendation. Current law extends this program through March 31, 2014. [$1.6 billion in costs over 10 years]

Extend the Qualified Individual Program through CY 2015: The Qualified Individual program provides states 100 percent federal funding to pay the Medicare Part B premiums of low income Medicare beneficiaries with incomes between 120 and 135 percent of the Federal Poverty Level. This proposal extends authorization and funding of the program through December 31, 2015. Current law extends this program through March 31, 2014. [$960 million in costs over 10 years]

Medicaid Program Integrity Proposals: The Budget includes a number of Medicaid program integrity proposals that strengthen the Department’s and states’ ability to fight fraud, waste, and abuse in the Medicaid program. See the Program Integrity chapter for proposal descriptions. [$620 million in savings over 10 years]

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Legislative Proposals for Medicare-Medicaid Enrollees

The Budget includes three proposals to improve the quality and efficiency of care for Medicare Medicaid beneficiaries.

Integrate the Appeals Process for Medicare Medicaid Enrollees: Medicare and Medicaid have different appeals processes governed by different provisions of the Social Security Act, resulting in different requirements related to timeframes and limits, amounts in controversy, and levels of appeals. At times, these requirements may conflict and can result in confusion for beneficiaries and inefficiencies and administrative burdens for states and providers. This proposal provides authority for the Secretary to implement a streamlined appeals process to more efficiently integrate Medicare and Medicaid program rules and requirements. [No budget impact]

Ensure Retroactive Part D Coverage of Newly Eligible Low-Income Beneficiaries: This proposal would allow CMS to contract with a single plan to provide Part D coverage to low income beneficiaries while their eligibility is processed. This plan would serve as the single point of contact for beneficiaries seeking reimbursement for retroactive claims. These beneficiaries are assigned at random under current law to a qualifying Part D plan, which is reimbursed based on the standard Part D prospective payment, regardless of their utilization of Part D services during this period. Under this proposal, the plan would be paid using an alternative methodology whereby payments are closer to actual costs incurred by beneficiaries during this period. A current demonstration, set to expire in December 2014, has shown the proposed approach to be more efficient and less disruptive to beneficiaries. [No budget impact]

Pilot the Program of All-Inclusive Care for the Elderly to Individuals between Ages 21 and 55: This program provides comprehensive long term services and supports to Medicaid and Medicare beneficiaries through an interdisciplinary team of health professionals who provide coordinated care to beneficiaries in the community. For most participants, the comprehensive service package includes medical and social services and enables them to receive care in the community rather than to receive care in a nursing home or other facility. Under current law, the program is limited to individuals who are 55 years old or older and who meet, among other requirements, the state’s nursing facility level of care. This proposal would create a pilot demonstration in selected states to expand eligibility to qualifying individuals between 21 years and 55 years. This pilot demonstration would test whether the Program for All-Inclusive Care for the Elderly can effectively serve a younger population without increasing costs. [No budget impact]

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HEALTH REFORM -- The Affordable Care Act Medicaid Eligibility Expansion
The Affordable Care Act provides states 100 percent federal funding for newly Medicaid-eligible individuals up to 133 percent of the Federal Poverty Level for 3 years and no less than 90 percent Federal Medical Assistance Percentages (FMAP) thereafter. Millions of new individuals are expected to gain Medicaid coverage in the coming years due to the expanded eligibility, streamlined applications, and standardized MAGI based eligibility determinations provided by the Act.

Multi-Agency Proposals

Establish Hold Harmless for Federal Poverty Guidelines: To protect access to programs, including Medicaid, for low income families and individuals, this proposal would treat the Consumer Price Index for All Urban Consumers (CPI U) adjustment for the poverty guidelines consistent with the treatment of the annual cost of living adjustments for Social Security Benefits. The poverty guidelines would only be adjusted when there is an increase in the CPI U, not a decrease. [No budget impact]

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FY 2015 Medicaid Legislative Proposals

Dollars in millions

(negative numbers reflect savings and positive numbers reflect costs)
 


 

Medicaid Proposals


 

2015

2015 -2019

2015 -2024

Extend the Medicaid Primary Care Payment Increase through CY 2015 and Include Mid-Level Providers (Workforce Initiative)

4,060

5,440

5,440

Rebase Future Disproportionate Share Hospital Allotments

-3,260

Permanently Extend Express Lane Eligibility for Children (Medicaid Impact) /1

20

245

770

Limit Medicaid Reimbursement of Durable Medical Equipment Based on Medicare Rates

-195

-1,300

-3,135

Provide Home and Community-Based Waiver Services to Children and Youth Eligible for Psychiatric Residential Treatment Facilities

75

770

1,908

Lower Medicaid Drug Costs for States and the Federal Government

-336

-3,390

-8,550

Clarify the Medicaid Definition of Brand Drugs (non-add)

-16

-100

-205

Apply Inflation-Associated Penalty to Medicaid Rebates for Generic Drugs (non-add)

-150

-1,225

Require the Coverage of Prescribed Prenatal Vitamins and Fluorides under the Medicaid Drug Rebate Program (non-add)

Correct the ACA Medicaid Rebate Formula for New Drug Formulations (non-add)

-270

-2,610

-5,880

Limit Dispute Resolution Timeframe in the Medicaid Drug Rebate Program to Twelve Quarters (non-add)

Exclude Authorized Generics from Medicaid Brand-Name Rebate Calculations (non-add)

-20

-100

-200

Exclude Brand and Authorized Generic Drug Prices from the Medicaid Federal Upper Limits (non-add)

-30

-430

-1,040

Promote Integrity of Medicaid Drug Rebate Program

-1

-5

-10

Require Manufacturers that Improperly Report Items for Medicaid Drug Coverage to Fully Repay States (non-add)

-1

-5

-10

Enforce Manufacturer Compliance with Drug Rebate Requirements (non-add)

Require Drugs be Electronically Listed with FDA to Receive Medicaid Coverage (non-add)

Increase Penalties for Fraudulent Noncompliance on Rebate Agreements (non-add)

Increase Access to and Transparency of Medicaid Drug Pricing Data

6

30

30

Provide Continued Funding for Survey of Retail Pharmacy Prices (non-add)

6

30

30

Require Drug Wholesalers to Report Wholesale Acquisition Costs to CMS (non-add)

Expand State Flexibility to Provide Benchmark Benefit Packages

Extend the Transitional Medical Assistance Program through CY 2015 /2

920

1,550

1,550

Extend the Qualified Individual Program through CY 2015 /3

760

960

960

Adjustment for Qualified Individual Program Transfer from Medicare /3

-760

-960

-960

Medicaid Program Integrity Proposals /4

-19

-275

-620

Total Outlays, Medicaid Proposals

4,530

3,065

-5,877


 


 

Medicare-Medicaid Enrollee Proposals


 

2015

2015 -2019

2015 -2024

Establish an Integrated Appeals Process for Medicare-Medicaid Enrollees

Ensure Retroactive Part D Coverage of Newly Eligible Low-Income Beneficiaries

Pilot the Program of All-Inclusive Care for the Elderly to Individuals Between Ages 21 and 55

Total Outlays, Medicare-Medicaid Enrollee Beneficiary Proposals


 


 

Medicaid Interactions


 

2015

2015 -2019

2015 -2024

Demonstration to Address Over-Prescription of Psychotropic Medications for Children in Foster Care (non-add) /5

130

675

665

Establish Hold-Harmless for Federal Poverty Guidelines

Extend Special Immigrant Visa Program /6

0

17

36

Extend Supplemental Security Income Time Limits for Qualified Refugees /7

11

23

23

Eliminate Medicaid Recoupment of Birthing Costs from Child Support /8

Modify Length of Exclusivity to Facilitate Faster Development of Generic Biologics /9

-50

-190

Prohibit Brand and Generic Drug Manufacturers from Delaying the Availability of New Generic Drugs and Biologics /9

-150

-860

-1,960

Total Outlays, Medicaid Interactions

-9

-195

-1,426

Total Outlays, Medicaid Legislative Proposals

4,521

2,870

-7,303


 

1/ The score reflects the impact on Medicaid only. See CHIP Chapter for CHIP Impact.

2/ Currently authorized through March 31, 2014.

3/ States pay the Medicare Part B premium costs for Qualified Individuals (QIs) that are in turn offset by a reimbursement from Medicare Part B. Costs of the proposal to extend the QI program are reflected in Medicare outlays. The QI program is currently authorized through March 31, 2014. 

4/ See Program Integrity chapter for proposal descriptions. Excludes savings not subject to PAYGO.

5/ This is a joint proposal with the Administration for Children and Families (ACF). The score reflects the non-PAYGO impact on the Medicaid baseline. Please see the ACF and State Grants and Demonstration chapters for more information on this proposal.

6/ This proposal is included in the State Department's FY 2015 Budget Request.

7/ This proposal is included in the Social Security Administration's FY 2015 Budget Request.

8/ This proposal is included in the ACF FY 2015 Budget Request.

9/ This proposal is a multi-agency proposal with savings to Medicaid. See Medicare chapter for proposal descriptions.
 

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