White House to Restore Medicaid Program Cuts

The Obama administration has moved to cancel Medicaid regulation changes that would have severely tightened access to several programs, including care coordination for people with mental illness—a program for which APA has advocated.

The Medicaid regulatory revisions—most of which have yet to go into effect—were among seven packages of administrative changes that the Bush administration had sought to implement for several years to reduce costs and eliminate Medicaid activities not explicitly authorized to receive federal funding.

Mental health advocates, including APA, argued that the changes would have negatively impacted many Medicaid beneficiaries who have come to rely on the services. Reductions in targeted case management (TCM), which coordinates services and treatment for many beneficiaries with serious mental illness transitioning from inpatient settings to the community, were especially opposed by APA.

“People with serious and persistent mental illness need to have their services coordinated, including making sure they are receiving the treatment they need, where they live,” as well as receiving other assistance, said Lizbet Boroughs, associate director of APA's Department of Government Relations.

The TCM changes had progressed through the regulatory process and become finalized, so federal regulators have asked for public comment on a new rule to reverse those regulations.

“In discussions with states about the implementation of case-management requirements, we have become concerned that certain provisions of the [proposed Medicaid regulations] may unduly restrict beneficiary access to needed, covered case-management services and limit state flexibility in determining efficient and effective delivery systems for case management services,” regulators wrote in a May 6 notice of regulations to reverse the TCM restrictions.

Other Bush administration Medicaid changes to be reversed by the Obama administration would have restricted coverage of rehabilitation services for Medicaid-eligible people with disabilities, barred schools from providing“ administrative services” for Medicaid-covered children, restricted what states can cover as hospital outpatient Medicaid services, eliminated Medicaid support for graduate medical education, restricted the ways in which states could raise funds to support their share of Medicaid, and limited Medicaid payments to public hospitals and other “safety net” providers and facilities.

When Bush was still in office, officials at the Centers for Medicare and Medicaid Services (CMS) said that the regulatory changes were needed to eliminate services that Congress never intended to fund and to control the program's growth. The changes would have saved an estimated $17 billion of the program's expected five-year spending total of $1.2 trillion, according to CMS.

The changes drew widespread opposition in Congress after the Congressional Budget Office estimated that the TCM changes alone would cut Medicaid payments to states by almost twice as much as the $760 million over five years that was intended by the Bush administration. (Medicaid is jointly funded by the federal government and the states.)

Boroughs said the Bush administration changes would have resulted in many additional costs that would have considerably reduced the estimated savings. For example, Medicaid beneficiaries who were unable to adhere to prescribed treatment regimens once TCM was restricted could become so ill that they would require costly hospitalization.

The concerns about the impact of the changes led Congress to repeatedly delay their implementation beyond the original implementation date of May 25, 2007 (Psychiatric News, August 1, 2008). Opponents of the changes—including governors and state legislators—said the congressional delays were needed to allow whomever replaced President Bush to review the regulations and, they hoped, reverse them.

Among those condemning the Medicaid changes was New York Gov. David Paterson (D), who wrote in a statement issued in May that they “would have limited New York's and other states' flexibility and could have impeded states from providing the most effective health care possible in the right setting at the right price.”

The Obama administration's Medicaid regulatory reversal followed approval of an $87 billion boost in the federal share of Medicaid provided through the stimulus law (the American Recovery and Reinvestment Act; PL 111-5). The temporary increase in the share of Medicaid that the federal government would pay through the end of calendar year 2010 was approved as 46 states announced they were facing budget deficits.

The Department of Health and Human Services' announcement of the rescission of the Medicaid rules and related actions is posted in the May 6Federal Registerat<http://edocket.access.gpo.gov/2009/pdf/E9-10460.pdf>.▪