On January 11, 2018, the Centers for Medicare & Medicaid Services (CMS) sent a letter to State Medicaid Directors that signaled their support of section 1115 demonstration projects that include work or community engagement requirements, as previously summarized in the Health Law Pulse. CMS prompted State Medicaid Directors to respond to this letter with proposals that promote better health while also encouraging “individuals and families to rise out of poverty and attain independence.”

Since this unprecedented policy shift, Kentucky, Mississippi and Maine have proposed the following 1115 demonstration projects or reforms to their state’s Medicaid program.

Kentucky

Following CMS’ guidance letter, Kentucky sought to implement Kentucky HEALTH. Kentucky HEALTH was Kentucky’s 1115 demonstration project that would have required ACA expansion enrollees to log 80 hours a month of work or community engagement activities to remain eligible for Medicaid.

On June 29, the United States District Court for the District of Columbia vacated CMS’ approval of Kentucky HEALTH. In the court’s opinion, Judge James Boasberg explained that the Secretary of HHS did not “adequately evaluate” whether Kentucky’s work or community engagement requirements are consistent with the objectives of the Medicaid statute.

Based on this decision, Republican Governor Matt Bevin’s administration announced that it is cutting Medicaid dental and vision coverage for the 460,000 plus Kentuckian Medicaid expansion enrollees. The Bevin administration called the cuts “an unfortunate consequence” of the D.C. Circuit Court’s decision.

Further, the Kentucky Cabinet for Health and Family Services explained Bevin’s decision by stating that Kentucky HEALTH was the “solution that would make the Medicaid program financially sustainable.” Without the program, the ACA expansion enrollees’ dental and vision benefits would need to be cut to compensate for the increased costs of expanding Medicaid.

This cut prompted outcry from Democrats who say that Bevin’s decision was “rash, harsh, and potentially illegal.” According to the Kentucky Oral Health Coalition, there have also been several reports from dentists that the recent cut resulted in the denial of dental care for pregnant women and children. Kentucky Oral Health Coalition explained that this confusion is related to “the new platform and the hasty transition,” and that pregnant women and children are “supposed to be protected from these coverage changes.”

Mississippi

In November 2017, Mississippi submitted a waiver to CMS that requested permission to require “non-disabled adults” to either be working or looking for a job to be eligible for Medicaid. Along with Kansas, Maine, Utah, South Dakota, and Wisconsin, the Mississippi Division of Medicaid submitted the request even though it has not expanded its Medicaid program under the Affordable Care Act.

On May 2, CMS Administrator Seema Verma expressed doubts that work requirements are an option for non-expansion states. During a news briefing, Administrator Verma explained that she worried about a “subsidy cliff.” This would be a problem if an individual earned enough to be ineligible for Medicaid, but not enough to receive financial assistance through the exchanges. Ms. Verma did not say that she would outright deny such waivers, but rather stated that CMS is currently working with non-expansion states to ensure that affected individuals do not completely lose their coverage.

In response to the CMS Administrator’s comments, on May 29, Mississippi revised its initial work requirement proposal. The reformed application explained that Mississippi will guarantee up to 24 months of coverage for its able-bodied Medicaid beneficiaries if they comply with the proposed work requirements. The new work requirement requires non-disabled adults to work at least 20 hours per week, volunteer, contribute to the Office of Employment Security, or participate in an alcohol or other drug abuse treatment program. Medicaid beneficiaries who have a mental illness, are in school, have physician restrictions or who are a caretaker are exempt from these proposed work requirements.

The Mississippi Division of Medicaid explained that this initiative will lead to “the improvement of health outcomes, promotion of financial stability and independence from government assistance for current and future generations by promoting access to workforce training for job readiness.” Mississippi officials believe that this proposal could affect roughly 56,000 Medicaid beneficiaries, or roughly 7 percent of Medicaid beneficiaries in Mississippi.

It is unclear if the recent D.C. Circuit Court ruling that overturned Kentucky HEALTH will have any effect on Mississippi’s revised application.

Maine

Last week, Republican Governor Paul LePage publicly proposed a tax hike on hospitals to help pay for Medicaid expansion in Maine. During a radio interview, Governor LePage suggested that a tax hike on hospitals would be offset by Medicaid expansion because hospitals would stop losing money to charity care and bad debt. In 2016, charity care and bad debt cost Maine hospitals roughly $570 million. Maine lawmakers speculate that Maine’s hospital tax rate under Governor LePage’s proposal could increase from 2.23 percent to 6 percent.

This proposal is the first time that the LePage administration has suggested a way to fund Medicaid expansion since Maine voters approved ACA expansion by a ballot measure on November 7, 2017. Governor LePage seemingly accepted Medicaid expansion, but stated that he would not approve a law that included tax increases. After months of refusing to move forward with expansion until the legislature provides “appropriate” funds, Maine Superior Court Justice Michaela Murphy ordered the Governor to proceed with implementation on June 4. Governor LePage appealed this decision to the Maine Supreme Judicial Court and oral arguments are scheduled for July 18.

On July 9, the Maine House sustained Governor LePage’s recent veto of a $60 million bill that would have funded Medicaid expansion with surplus revenue and money from the state’s tobacco settlement fund. This veto marks the seventh time that Governor LePage has been able to thwart legislative efforts to expand Medicaid during his two terms as Maine’s Governor. Next week’s hearing before the Maine Supreme Judicial Court should determine whether Governor LePage will be forced to proceed with implementing Medicaid expansion.

*Many thanks to Summer Associate Hayley White in preparing a draft of this blog post.