DHHS Supplemental Budget Proposals and the Maintenance of Effort (MOE) Provisions of the Affordable Care Act

Much of what is proposed with respect to elimination of eligibility under this budget violates the maintenance of effort requirements (MOE) of the Affordable Care Act (ACA) and is illegal. The ACA requires that, as a condition of receiving Federal Medicaid funding (approximately $1.5 billion in federal funding per state fiscal year in Maine), states must maintain Medicaid “eligibility standards, methodologies and procedures” that are no more restrictive than those in effect on March 23, 2010. The following budget proposals violate MOE requirements of the ACA:

1. Reducing eligibility for the Medicare Savings Program (MSP, or the Medicare
Buy-In Program) MOE is violated when a state puts into “effect eligibility standards, methodologies, or procedures . . . that are more restrictive than the eligibility standards, methodologies, or procedures . . .” than those that were in effect on March 23, 2010.1 Maine’s Medicare Savings Program (the MSP program for QMBs, SLMBs and QIs) is a Medicaid eligibility group. CMS approved Maine’s use of an eligibility standard and methodology to achieve its current eligibility levels. Making that eligibility standard and methodology more restrictive than what Maine had in place on March 23, 2010 violates MOE. This proposal was also made in the biennial budget. On May 24, 2011, CMS notified the Commissioner that it violated the MOE provisions of the ACA.

2. Eliminating eligibility for parents under 133% of the federal poverty level
MOE requirements apply to non-disabled, non-pregnant adults whose income is below 133% of FPL. Even when a State certifies to the Secretary of HHS that it has or projects a budget deficit, as our State has done, this requirement remains in force protecting adults with incomes at or below 133% of the federal poverty level.

3. Eliminating eligibility for 19 and 20 year olds under 150% of the federal
poverty level The budget deficit exemption to the MOE requirements allows states with documented budget deficits to reduce eligibility to 133% of the poverty level for non-disabled “adults.” However, this exemption does not apply to children. Under the ACA, 19 and 20 year olds are considered to be “children.” The Act strictly requires that eligibility for these children must 1 The law exempts from the MOE requirements non-disabled, non-pregnant adults whose income is over 133% of FPL.

continue without change until October 1st 2019. The State may not eliminate coverage for 19 and 20 year olds.

DHHS has acknowledged that these three proposals would violate the ACA and “require waivers” from the Affordable Care Act. However, a waiver could not be lawfully granted under these circumstances. The waiver authority generally available to states under Section 1115 of the Social Security Act2 permits only experimental, pilot or demonstration projects which, in the judgment of the Secretary, are likely to assist in promoting the objectives of the Act. In a recent 9th Circuit decision in the case of Newton-Nations v. Betlach,3 the Court of Appeals provided some guidance on this issue. Although analyzing a different kind of state waiver request, the Court held that a Section 1115 waiver can only be granted when the Secretary of HHS makes “some judgment that the project has research or demonstration value. A simple benefits cut, which might save money, but has no research or experimental goal, would not satisfy this requirement.”4 The proposals listed above do not seek to test a hypothesis; they have only been proposed to save money. Nor do these proposals assist in promoting the objectives of the Act. The MOE provisions in the ACA were designed to keep Medicaid and CHIP coverage stable and to protect people until Medicaid coverage expands under health reform. For these reasons, a waiver of the MOE requirements cannot be granted under federal law. To date, no state has received a waiver of the MOE requirements under these circumstances. Although a few states have sought waivers to circumvent this MOE requirement, no such waiver has been granted. Arizona is the only state that has actually implemented enrollment freezes or cuts in its Medicaid or CHIP program since the MOE requirement went into effect. These cuts were exempted from the MOE requirements because they only applied to populations that were covered under the state’s Section 1115 waiver, which expired on September 30, 2011. Notably, several other waivers that Arizona sought from CMS were denied. For example, Arizona requested permission to freeze enrollment for parents between 75% and 100% of the FPL and to expand mandatory copayments and these proposals were expressly denied by CMS. The populations discussed above that would lose MaineCare coverage are not covered by a Section 1115 waiver that is set to expire. These proposals also fail to meet the budget deficit exemption as they would impermissibly restrict eligibility in the Medicare Saving 2 42 U.S.C. Section 1315.

3 2011 WL 5084839 at 9 (9th Cir. Oct. 27, 2011).

4 Id. at 1069.

Program, cut eligibility for “children” ages 19 and 20, and cut eligibility for parents under 133% of the FPL.

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