HHS FY 2018 Budget in Brief - CMS - Medicaid

Centers for Medicare & Medicaid Services (CMS): Medicaid

Centers for Medicare & Medicaid ServicesThe 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 2016 2017 2018 2018
+/- 2017
Benefits /1 351,106 357,628 386,762 +29,134
State Administration 17,175 20,828 20,808 -20
Total Net Outlays, Current Law /2 368,281 378,455 407,570 +29,115
Proposed Law        
Legislative Proposals  — -3,857 -3,857
Total Net Outlays, Proposed Law /2 368,281 378,455 403,713 +25,258

Table Footnotes

1/  Includes outlays from the Vaccines for Children Program, administered by the Centers for Disease Control and Prevention.
2/  Totals may not add due to rounding

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 Fiscal Year (FY) 2016, more than one in five individuals were enrolled in Medicaid for at least one month during the year, and in FY 2018, over 76 million people on average will receive health care coverage through Medicaid under current law.


How Medicaid Works

Although 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 2018, the Federal share of current law Medicaid outlays is expected to be approximately $407.6 billion.  Without reforms, the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary estimates total Federal and State Medicaid spending will be nearly $1.1 trillion by FY 2027, comprising 3.5 percent of the Nation’s gross domestic product.

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 and would otherwise qualify for Medicaid.

Under Medicaid, States must cover certain medical services and are provided the flexibility to offer additional benefits to beneficiaries.  Medicaid also covers most of the costs of providing long-term care services. Medicare and private health insurance often furnish only limited coverage of these benefits.

Recent Program Developments

Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)
MACRA permanently authorized the Qualified Individual and Transitional Medical Assistance programs and extended Express Lane Eligibility authority through September 2017. The law also delayed Medicaid Disproportionate Share Hospital reductions until FY 2018 and applied an additional reduction in FY 2025.

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

21st Century Cures Act of 2016


Letter to Governors from Secretary Price and CMS Administrator Verma

On March 14, 2017, Secretary Price and CMS Administrator Verma sent a letter to all 50 State governors committing to “…usher in a new era for the federal and state Medicaid partnership” and to “…empower all States to advance the next wave of innovative solutions to Medicaid’s challenges.” The Administration also supports legislation to build on the tools provided within existing authorities to further expand State flexibility in how they spend their Medicaid dollars. The letter notes several key areas of focus for the Administration:

  1. Improving Federal and State program management;
  2. Supporting innovative approaches to increase employment and community engagement;
  3. Aligning Medicaid and private insurance policies for non-disabled adults;
  4. Providing reasonable timelines and processes for home and community-based services transformation; and
  5. Providing States with more tools to address the opioid epidemic.

The full letter to governors is available at the following URL: https://www.hhs.gov/sites/default/files/sec-price-admin-verma-ltr.pdf

This law expands access to comprehensive medical care for children receiving inpatient psychiatric hospital services, requires States to implement an electronic visit verification system for personal care and home health services, and accelerates the implementation of a limit on Federal reimbursement for durable medical equipment from January 1, 2019, to January 1, 2018.

The FY 2018 Budget puts Medicaid on a path to fiscal stability by restructuring Medicaid financing and reforming medical liability laws.  In total, the Budget includes a net savings to Medicaid of $627 billion over 10 years, not including additional savings to Medicaid as a result of the Administration’s plan to repeal and replace Obamacare with solutions that focus Medicaid on the most vulnerable Americans—the elderly, people with disabilities, children, and pregnant women—those Medicaid was intended to serve.  

Reform Medicaid Funding to States and Provide Additional Flexibility
The Budget provides additional flexibility to States and reforms the fiscal structure of Medicaid, allowing a choice between a per capita cap or a block grant beginning in FY 2020.  Rigid and outdated Federal rules and requirements prevent States from prioritizing Federal resources to their most vulnerable populations and from innovating and testing new ideas that will improve access to care and health outcomes.  This proposal will free States to advance solutions that best serve their unique populations—for example, encouraging work, promoting personal responsibility, and meeting the spectrum of diverse needs of their Medicaid populations.  States, as administrators of the program, are in the best position to assess the unique needs of their populations.  The Administration is determined to work with Congress to put in place a plan to give States the flexibility they need to achieve better health outcomes for patients while putting Medicaid on a more sustainable fiscal trajectory.  [$610 billion in Medicaid savings over 10 years]

Medical Liability Reform
The Budget includes a set of proposals to reform medical liability, which will reduce medical malpractice costs and the practice of defensive medicine, while supporting State efforts to reduce Medicaid costs. See the Budget in Brief Overview for proposal descriptions.  [$399 million in Medicaid savings over 10 years]


Medicaid Direct Primary Care Initiative

Starting in FY 2018, the Department looks forward to collaborating with States to expand Medicaid Direct Primary Care (DPC), which provides an enhanced focus on direct physician-patient relationships through enrolling Medicaid patients in DPC practices. These practices enhance physicians’ focus on patient care by simplifying health care payments for patients and physicians. DPC arrangements also often include benefits such as extended visits and electronic communication, which allows for improved patient access to primary care services. DPC arrangements have the potential to improve Medicaid in the following manner:

  • Increasing access. While approximately 70 percent of physicians are accepting new Medicaid patients nationally, there is wide variation across States and one-third of physicians still do not accept Medicaid patients. Specialists are also more likely to take Medicaid patients than primary care physicians. Moreover, many physicians refuse to treat Medicaid patients for various reasons including low reimbursement rates.
  • Supporting positive health outcomes for Medicaid patients. While limited, data available for patient outcomes for patients in DPC practices has been relatively positive. The American Journal of Managed Care evaluated a DPC group with practices in many States, and data illustrated positive patient outcomes with decreases in preventable hospital use that resulted in considerable savings.
  • Putting patients and doctors in more control of health care. DPC practices will support the vital role primary care plays in patient health, including providing preventive services, monitoring health conditions, and improving the crucial physician-patient relationship. By creating DPC practices that would encourage affordable care for patients, these patient-centered reforms would help build a more innovative and responsive health care system—one that empowers patients and ensures they and their doctor have the freedom to make health care decisions without bureaucratic interference or influence.

Working with States and primary care physicians, HHS will support the development of DPC practices, identify barriers to their entry into Medicaid, and outline flexibilities under existing authorities to facilitate these innovative approaches to strengthening the relationships between patients and physicians.

FY 2018 Medicaid Legislative Proposals

(Dollars in millions)

  2018 2018
Medicaid Fiscal Sustainability and Flexibility      
Reform Medicaid Funding to States and Provide Additional Flexibility -70,000 -610,000
Medicaid Interactions      
Medical Liability Reform (Medicaid Impact) /1 -62 -399 -399
Extend CHIP Funding through 2019 (Medicaid Impact) /2 -3,800 -16,700 -16,700
Extend Special Immigrant Visa Program (Medicaid Impact) /3 5 49 94
Total Outlays, Legislative Proposals /4 -3,857 -87,050 -627,005

Table Footnotes

1/  See the Budget in Brief Overview for proposal descriptions.
2/  See Children’s Health Insurance Program chapter for proposal description.
3/  This proposal is included in the State Department’s FY 2018 Budget Request.
4/  Totals may not add due to rounding.


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