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State Backtracking on Medicaid Would Weaken Health Reform

The health reform law requires states to maintain their current eligibility rules for Medicaid and the Children’s Health Insurance Program until 2014, when new nationwide Medicaid rules will take effect that will help reduce the number of uninsured.  Yesterday, Senator Orrin Hatch (R-UT), the Senate Finance Committee’s top Republican, asked Health and Human Services Secretary Kathleen Sebelius to grant waivers from this “maintenance of effort” (MOE) requirement to states that want to reduce their Medicaid and CHIP spending by covering fewer people.  That would be a serious step backward for health reform.

Senator Hatch claims that a new Congressional Research Service analysis says the Secretary has legal authority to allow states to lower their Medicaid income limits and tighten their enrollment procedures.  This is an overstatement:  the CRS report says that while the law could be interpreted to allow waivers of the MOE requirement, it also could be read to preclude waivers.  Whatever interpretation the Secretary adopts would receive substantial deference if challenged in court, the report added.

More importantly, both Senator Hatch and the CRS report omit a fundamental point:  under federal law, the Secretary can waive certain Medicaid rules only to facilitate “experimental, pilot or demonstration projects” that the Secretary finds are likely to “promote the objectives” of Medicaid.

So, even if the Secretary concludes that she has the legal authority to grant waivers of the MOE requirement, states would have to prove that they need one to implement a demonstration project aimed at promoting Medicaid’s objectives.  It’s hard to fathom how cutting coverage and leaving people uninsured would promote Medicaid’s objectives — namely, providing health coverage for low-income children, seniors, people with disabilities, and other adults.

We have explained that repealing the MOE requirement entirely, as some Republican governors have requested, could cause millions of children, parents, seniors, and people with disabilities to lose coverage — and also slow economic growth and job creation.  Granting large numbers of waivers to individual states could have a similar impact.  Secretary Sebelius is right to resist pressure to undermine the MOE.