Fiscal Year 2010 Budget in Brief

Medicaid

(dollars in millions)

^/1 Includes Vaccines for Children Outlays.
^/2 Represents the impact of the American Recovery and Reinvestment Act of 2009 on the level of Benefits and State Administration in the Medicaid program. For more information please see the Recovery Act Chapter.
^/3 These savings represent decreased Medicaid outlays from the Administration for Children and Families Home Visitationlegislative proposal.

Federal and State Governments jointly fund Medicaid, a mandatory spending program that provides medical assistance to certain low-income groups. The Federal Government’s share of a State’s medical assistance expenditures is called the Federal medical assistance percentage (FMAP). The FMAP has a floor rate of 50 percent. For FYs 2009, 2010, and part of 2011, FMAP rates are adjusted to reflect temporary increases enacted by the American Recovery and Reinvestment Act (Recovery Act).

In FY 2010, HHS estimates that approximately 53 million individuals in States and Territories will be covered by Medicaid. These individuals include children, the aged, blind, and/or disabled, and people who meet eligibility criteria under the former Aid to Families with Dependent Children (AFDC) program, as well as many other individuals who are eligible for benefits through waivers and amended State plans with somewhat higher income eligibility limits. In FY 2010, the Federal share of current law Medicaid outlays is expected to be $290 billion. This is a $27 billion (10.4 percent) increase over projected FY 2009 spending.

According to the first Medicaid Actuarial Report, released in 2008, total medical assistance payment spending, including State share, is projected to increase at an annual rate of 7.9 percent over the next ten years and to reach $674 billion by 2017. Total Medicaid outlays represented 14.8 percent of all United States health care spending in 2006.

HOW MEDICAID WORKS

States are required to cover individuals who meet categorical and financial eligibility levels. This includes individuals who qualified under the previous AFDC rules; most Supplemental Security Income (SSI) recipients; pregnant women and children under age 6 whose family income is at or below 133 percent of the Federal poverty level (FPL); and children ages 6 to 19 whose family income is below the FPL, all of whom are commonly referred to as “the categorically eligible.”

States may also cover medically needy individuals. These individuals meet the categorical eligibility criteria, but have too much income or too many resources to meet the financial criteria. This includes, but is not limited to, pregnant women through a 60-day post-partum period, children under age 18, newborns, and certain protected blind individuals. For 2009, the FPL for a family of four is $22,050 in the continental United States. For more information, see http://aspe.hhs.gov/poverty/09poverty.shtml.

The President’s Budget includes $1.5 billion in savings to Medicaid in FY 2010 and $22 billion over ten years. These savings will increase efficiency and accountability in Medicaid and will help contribute to the needed overhaul of our nation’s health system. The President’s proposals slow the average annual growth in Medicaid over the next five years from 4.4 percent to 4.3 percent.

FY 2010 LEGISLATIVE PROPOSALS

The President’s Budget aims to improve efficiency and accountability in the Medicaid program by reducing prescription drug payments for Federal and State governments, increasing access to family planning services for low-income women, and improving Medicaid program integrity.

Increase the Minimum Medicaid Brand-name Drug Rebate from 15.1 Percent to 22.1 Percent: Increases the savings to Medicaid from brand-name drug rebates paid by drug manufacturers by increasing the rebate amount from its current level of 15.1 percent to 22.1 percent of average manufacturer price.

Extend Drug Rebates to Medicaid Managed Care Organizations: Authorizes States to collect rebates from drug manufacturers on drugs provided through Medicaid managed care organizations (MCOs) and plans. The rebate structure would be the same as those collected for the fee-for service component of Medicaid. Currently, under an MCO arrangement, manufacturers are not required to pay the statutory rebates on drugs purchased by MCOs for Medicaid beneficiaries.

Apply Medicaid Additional Rebate to New Formulations of Existing Drugs: Addresses the current loophole that enables drug manufacturers to circumvent the additional rebate by creating new formulations of drugs and charging higher initial prices for these drugs.

Establish a Pathway for FDA Approval of Generic Biologics: This FDA legislative proposal would also create savings to the Medicaid program by reducing costs of biologics.

Mandate National Correct Coding Initiative (NCCI): Promotes correct coding by providers and prevents inappropriate billing for services that have been improperly coded.

Expand Medicaid Family Planning Services: Promotes efficiency in the Medicaid program by providing a State option to expand family planning services to non-pregnant women. This proposal will improve access to family planning services and help to avoid unplanned pregnancies, resulting in savings to States and the Federal Government.

Reallocate the Medicaid Improvement Fund: Eliminates the Medicaid Improvement Fund and reallocates these savings to support broader reform of health care.

RECENT PROGRAM DEVELOPMENTS

American Recovery and Reinvestment Act of 2009 (P.L. 111-5)

Incentives for Adoption of Health Information Technology: Provides a 100 percent Federal match for incentive payments to Medicaid providers for the adoption of health information technology and a 90 percent Federal match for State administrative expenditures. The Act also provides implementation funding for CMS.

Temporary Increase in the Federal Medical Assistance Percentage (FMAP): Provides a hold harmless for State FMAP rates and increases all FMAPs by 6.2 percentage points through December 31, 2010, with additional FMAP increases for States that experience high unemployment growth.

Temporary Increase in Disproportionate Share Hospital (DSH) Allotments: Amends Title XIX to increase State DSH allotments by 2.5 percent for fiscal years 2009 and 2010.

Extension of Congressional Moratoria on Certain Medicaid Regulations: Extends moratoria on Medicaid final regulations pertaining to optional case management services, allowable provider taxes, and school-based administration and transportation services until July 1, 2009, and establishes a new moratorium on the outpatient hospital services final regulation until July 1, 2009.

Extension of Transitional Medical Assistance (TMA) and Qualified Individuals (QI) Programs: Extends the TMA and QI programs through December 31, 2010.

Protections for Indians under Medicaid and CHIP: Provides protections for Indians under the Medicaid and CHIP programs including requirements for managed care organizations, limits on cost-sharing, and exclusion of certain property for purposes of determining eligibility.

Children’s Health Insurance Program Reauthorization Act of 2009 (P.L. 111-3) - Medicaid Provisions

Extension of Disproportionate Share Hospital (DSH) Allotment Adjustments: Amends Title XIX to extend the Medicaid DSH allotments for Tennessee and Hawaii, with specified adjustments through December 31, 2011.

Numerous provisions in the Children’s Health Insurance

Program Reauthorization Act of 2009 apply to both Medicaid and CHIP. Please refer to the CHIP chapter for detailed descriptions of these provisions.

MEDICAID PROPOSALS
(dollars in millions)

* Estimate not yet available.
^1/ The Home Visitation legislative proposal is discussed in the Administration for Children and Families section of the Budget in Brief.

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