HHS Gives Arizona Go Ahead on Plan To Cut Medicaid Eligibility

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In a letter to Arizona Gov. Jan Brewer (R) on Tuesday, HHS Secretary Kathleen Sebelius wrote that the state does not need a formal federal waiver to proceed with a plan to drop 250,000 childless adults from its Medicaid program, the New York Times reports.

Sebelius was responding to Brewer's request in January for a formal federal waiver to drop certain Medicaid beneficiaries from the program as part of a broader state plan to narrow the state's budget deficit (Sack, New York Times, 2/16).

Last month, Brewer signed legislation authorizing her to request a waiver from a Medicaid provision in the federal health reform law that prohibits states from restricting coverage eligibility before 2014, when all states must begin extending coverage to low-income adults.

Under Brewer's waiver request, all 250,000 Medicaid beneficiaries in the state who do not have children would no longer be eligible for coverage. Another 30,000 parents whose annual incomes are higher than $10,830 also would lose coverage. Brewer's staff said the plan would reduce state expenditures by about $541 million in fiscal year 2012, followed by another $900 million in FY 2013 (California Healthline, 1/24).

In her letter, Sebelius noted that Arizona in 2000 had enacted a Medicaid expansion with a special time-limited waiver, which expires on Sept. 30, 2011 (New York Times, 2/16). The so-called "demonstration waiver" allowed Arizona's Medicaid program to provide childless adults with coverage just like a managed care system or an HMO plan would, according to the Washington Post (Aizenman, Washington Post, 2/16).

When the waiver expires in September, Arizona is not required to renew it, and the state has the choice to decline a new demonstration waiver or pursue a different waiver, Sebelius wrote (New York Times, 2/16).

State Officials Praise Decision, Potential Roadblocks Ahead

State Medicaid officials praised Sebelius' action. "The secretary's letter is extremely well written, and it addresses the state's concerns," Monica Coury, an official in Arizona's Medicaid program, said, adding, "Now it's a question of reviewing it and determining what policy direction will work best for the state."

However, the plan to drop the 250,000 beneficiaries still could face another roadblock. According to the Post, even if the state's Republican-controlled Legislature approved the plan, state Democratic lawmakers could counter with a lawsuit alleging that because state residents voted to expand Medicaid to childless adults via a referendum, the Legislature lacks the authority to rescind such coverage.

Sebelius' Letter Might 'Embolden' Other States To Push for Waivers

HHS' decision to allow Arizona to move forward with its plan to drop the group of Medicaid beneficiaries "could further embolden" a number of other Republican governors who have criticized the overhaul's provision restricting their ability to decrease program eligibility, the Post reports (Washington Post, 2/16).

In early January, Brewer and 32 governors and governors-elect urged the Obama administration and Congress to eliminate the provision, which stipulates that states risk losing federal matching funds if they revise their Medicaid enrollment criteria (California Healthline, 1/24).

According to the Times, five other states currently provide coverage for childless adults through demonstration waivers, which are scheduled to expire on a rolling basis over the next three years. In addition, several Republican governors already have submitted requests for waivers from the overhaul provision (New York Times, 2/16).


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