Back in March, Tom gave you, our readers, an overview of the Administration’s and Congress’ initial response to the COVID-19 pandemic, including the inclusion in the second Congressional package (the Families First Coronavirus Response Act) of a substantial “bump” to each state Medicaid program's federal medical assistance percentage (FMAP) during the period of the current national emergency to the extent they abide by certain minimum standards. This enhanced 6.2% FMAP has provided states with roughly $35 billion in extra, critical funding during a period where state budgets are constrained and Medicaid enrollment is surging. Following passage of FCRA, I noted for you new guidance on the enhanced FMAP, including a lengthy discussion of the maintenance of effort requirement tied to the extra funding (in other words, the requirement that states maintain eligibility standards, methodologies, etc. that are no more restrictive than what the state had in place as of January 1, 2020). The guidance/FAQ has been periodically updated since March. This maintenance of effort requirement, as well as the requirement that states not cut individuals from their Medicaid rolls during the current public health emergency, has been a critical feature of the enhanced FMAP, encouraging states to keep their Medicaid programs robust even during challenging economic times and as demands on their Medicaid programs grow.

Until now, CMS has taken a rather strict view toward this carrot-stick model. In particular, CMS has held firm to very strict eligibility requirements for state qualification for the 6.2% FMAP increase, meaning states have generally been unable to disenroll individuals from their programs, and unable to make program cuts even as state budgets are increasingly strained. In response to feedback from states that the “stick” may be too severe, in the fourth COVID-19 interim final rulemaking (IFR) package released on October 28, 2020 CMS proposes a significant re-interpretation of these maintenance of effort requirements, granting states significant new flexibilities to make changes to coverage and enrollment and still retain the enhanced FMAP. CMS’ fact sheet/updated FAQ on this new policy can be access here.

In CMS’ own words, this truly is a reversal. In the October 28th IFR, CMS notes, in part:

“our existing interpretation[of the statutory language in the FFCRA] is not the only possible interpretation that could be made. As the PHE for COVID-19 continued, and states requested increased flexibility for managing their programs, we revisited our existing interpretation. Seeking to balance the beneficiary protections in our existing interpretation with the state flexibility that could be afforded through an alternative interpretation, this IFC establishes a blended approach as discussed below.”

Under previous policy, in order to retain the 6.2% FMAP, states must have generally kept beneficiaries enrolled in Medicaid if they were enrolled on or before March 18, 2020, and do so with the same amount, duration, and scope of benefits. Under this policy, for example, if a state receives information that may call into question a beneficiary’s eligibility for Medicaid, or for a certain level of Medicaid services, they would be prohibited from disenrolling the individual or transitioning them to a new coverage category. As another example, if a Medicaid beneficiary is enrolled in a home and community-based services (HCBS) program and is later determined to no longer require that level of service, a state must still maintain their enrollment in the HCBS program during the COVID-19 PHE.

The IFR makes several significant changes to the current MOE standards for the enhanced FMAP:

1. Maintaining enrollment only for “validly enrolled beneficiaries.” As noted above, CMS’ previous guidance on the enhanced FMAP has largely prohibited states from removing anyone already enrolled in Medicaid from their Medicaid rolls. CMS is now granting states new flexibility to remove individuals from coverage if: (a) the determination of eligibility for coverage was incorrect at the time it was made due to agency error; or (b) eligibility was incorrectly granted due to beneficiary fraud. States may similarly remove individuals from coverage if they request termination, if they die, or if they move out of state.
2. Ability to modify coverage within “tiers of coverage.” The IFR amends the existing regulations to specify three tiers of coverage (defined below) for purposes of satisfying the MOE requirement. While states were previously prohibited from transitioning individuals from one eligibility group to another, they will now be permitted to do so as long as an individual remains in the save coverage tier.

As discussed in the IFR, the three tiers of coverage are:

1.  Minimum Essential Coverage (MEC): Medicaid coverage that meets the definition of MEC at 26 C.F.R. 1.5000A-2, including coverage in Medicare with coverage under a Medicaid Medicare Savings Program eligibility group (this includes the eligibility groups for Qualified Medicare Beneficiaries, Specified Low-Income Medicare Beneficiaries, Qualifying Individuals and Qualified Working Disabled Individuals).  This tier provides the most robust coverage.
2. Non-MEC with coverage of COVID-19 testing and treatment: Medicaid coverage that does not meet the definition of MEC, but does include coverage for testing services and treatments for COVID-19 including vaccines, specialized equipment, and therapies. Some states provide tier 2 coverage under a section 1115 demonstration project, and in some states, coverage provided to pregnant or postpartum women under 42 C.F.R. 435.116 is not MEC and would also be included in tier 2.
3. Non-MEC with limited benefits: Medicaid coverage that does not meet the requirements of tier 1 or tier 2 because it is not MEC and does not include testing and treatment for COVID- 19; examples of such limited benefit coverage include coverage available through the eligibility groups limited to family planning or tuberculosis-related services. This tier provides the least robust coverage.

As you can see, these new flexibilities are expansive and could mean coverage changes and/or cuts for Medicaid beneficiaries who have so far been spared such changes during the COVID-19 PHE. We will certainly be monitoring changes at the state level to see how this new regulation impacts beneficiaries downstream.