HHS proposes changes to expand Medicaid

January 1, 2001

Pharmaceutical Representative

The U.S. Department of Health and Human Services announced that it is proposing new rules to enable more low-income Americans to gain Medicaid coverage.

The U.S. Department of Health and Human Services announced that it is proposing new rules to enable more low-income Americans to gain Medicaid coverage.

The change, which would allow states greater flexibility in determining Medicaid eligibility, could potentially benefit tens of thousands of Americans; in particular, it could help the elderly, people with disabilities and families with disabled children obtain Medicaid coverage while living at home, instead of having to live in nursing care facilities.

The proposal is aimed at assisting those whose income is slightly above traditional Medicaid income limits, but who are strapped with overwhelming medical bills.

Under current "medically needy" rules, a state can offer Medicaid coverage to such persons once they have spent so much of their income on medical bills that what is left over meets the state's medically needy income standard. In more than 40% of the states, however, that standard is significantly below the poverty level. Under the proposed rule, a state could disregard portions of a person's income, such as the income necessary to pay for food, clothing or housing.

The proposed rule is of special significance for the elderly and people with disabilities. Under current rules, people in institutions can qualify for Medicaid coverage at much higher income levels than if they lived in the community. This "institutional bias" acts as a barrier to living in the community for many persons with disabilities. The proposed change would allow states the flexibility to change their own rules so that the elderly or people with disabilities would not have to lose their health coverage if they move into a community setting.

"This proposal has important potential to open doors to community living for thousands of Americans who are able to live at home and do not want to be confined in nursing homes," said HHS Secretary Donna E. Shalala. "It can enable people to obtain the services they need to live in their own home despite a chronic illness or disability, and lead fuller lives of their own choosing."

Work force participation

The proposed change could also be used by states to help low-income people who have a disability to participate in the work force by allowing states to disregard certain earnings or other sources of income and still retain vital health coverage under Medicaid. For example, a state might disregard income from a savings account used by a worker to save funds for the purchase of a home, an automobile or similar items that promote independence.

The proposed regulation could also allow states to provide health coverage to additional families and children who cannot be covered under existing rules.

For example, states would have the flexibility to offer health insurance coverage under Medicaid to young adults aged 19 and 20 who are still in school or just beginning employment.

"This change could permit the elderly and others to retain enough income to meet life's basic living expenses and still get help with their catastrophic medical bills," said Mike Hash, acting administrator of HHS's Health Care Financing Administration, which administers the Medicare and Medicaid programs. "We propose this as an important and meaningful change for states that already provide critical health coverage under Medicaid to millions of Americans."

New federal spending under the proposed regulation is estimated at $960 million over five years. States would also spend a similar additional amount over that period. PR

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