Opportunities To Use Medicaid in Support of Access to Health Care Services

Maternal and Child Health Services
Fact Sheet

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Table of Contents

1. Purpose of this Document 2. About Medicaid and the Title V Maternal and Child Health Program: A Brief Overview 3. Opportunities to Link Medicaid and Maternal and Child Health Services 4. Attachment: A Basic Description of the Medicaid Program 5. Sources for More Information About Medicaid

1. Purpose of this Document

This document is intended to assist State and local health officials and providers involved in delivering maternal and child health (MCH) services in understanding how Medicaid works, how Medicaid can provide financing for maternal and child health services for underserved populations, and how they can work with their State and local Medicaid officials. This document explains how Medicaid can be a source of financing for State, local and community-based maternal and child health services. The appropriate use of Medicaid funding can make these services more accessible and available to more persons who need them.

Medicaid is an important partner to MCH Title V grantees and is a critical source of financing for health care services to children, including adolescents, and women. No other program, public or private, pays for more health care services for these population groups. Medicaid coverage for children is comprehensive in most States and is offered at no cost to enrolled children and pregnant women. In 1997, while Title V provided services to about one-half of the women giving birth, three-fourths of all infants and a fifth of the children in the United States, Medicaid financed health care services for about one-fourth of all children up to age 18, and about one-third of all pregnant women in America. Among those in households with incomes at or below the poverty level in the U.S., Medicaid covered 55% of all children and 35% of all women. Of the three million births in the U.S. in 1997, Medicaid paid for over one million, or 35% of all births.[1]

Medicaid programs vary greatly from State to State, but they all pay for many medically-related services that are important for women, including family planning, perinatal, prenatal and postnatal care, and services important for children and adolescents, including screening, diagnosis and treatment, immunizations, hearing, vision and dental.

Many health care providers and health officials find Medicaid rules extraordinarily complex. This complexity should not discourage the pursuit of Medicaid funding. The goal of this document is to provide information, in simplified terms, that can help all parties understand what the opportunities are. This should help as agreements are negotiated, policy decisions are made and strategic plans are formulated.

2. About Medicaid and the Title V Maternal and Child Health Program: A Brief Overview

Medicaid pays for the care of more people than any other U.S. health program while TitleV provides a significant portion of health services for the Nation’s women and children. Over 40 million persons had Medicaid coverage during 1999. About half of Medicaid enrollees are children. This document does not focus on the remainder of the Medicaid population which is generally the elderly and disabled. Medicaid covers low-income persons in specific eligibility categories, including families, children (including adolescents), children with special health care needs, pregnant women, and elderly and disabled persons.

The Maternal and Child Health Program was enacted as Title V of the Social Security Act in 1935 as a health services safety net for all women and children. Today, Title V is administered by the Health Resources and Services Administration (HRSA). In 1965, Congress enacted Medicaid, Title XIX of the Social Security Act, as a health insurance safety net. Medicaid is a State-administered program for financing medical and long-term care services for low-income Americans. At the Federal level, the Centers for Medicare and Medicaid Services (CMS) pays the Federal share of Medicaid costs by providing matching funds to States. These matching funds reimburse States for a portion of their qualifying expenditures. The specific percentage for each State is at least 50% and as much as 77%, based on a formula that relates personal income in a State to the national average. Medicaid payments are an uncapped entitlement to States. Eligible individuals are entitled to medical services covered in their State program. The coverage requirements for pregnant women and children are very broad.

States design and administer Medicaid within Federally-defined boundaries. Each State defines who is eligible for coverage, what medical services are covered, which medical providers can participate and how much providers are paid when they provide a covered service. As a result, each State Medicaid program is unique.

Between 1967 and 1989, Congress added a number of requirements to Title V to work closely with and assist Medicaid in a number of activities, including finding and enrolling both children and providers. Title V State offices are required to establish memorandums of agreement with their State Medicaid offices. In 2000, the Administrators of CMS and HRSA signed a data sharing agreement to enhance cooperation at the State level between the Medicaid and Title V programs and improve access to health care for low-income women and children.

3. Opportunities to Link Medicaid and
    Maternal and Child Health Services

Few areas of health care are more important than services for pregnant women, and children and adolescents, including those with special health care needs. And, no other program offers more opportunities to States and localities in financing these services than Medicaid.

The services Medicaid can assist with are critical because they literally affect health status and health costs over a lifetime. Among these services are prenatal, perinatal and postnatal services, primary and preventive care, immunizations and well-child check-ups, and treatment for acute and chronic medical conditions. Medicaid funding can help address important public health objectives, including reducing infant mortality and improving birth outcomes, immunization rates and child health.

Numerous opportunities exist to use Medicaid to increase access and services for children, adolescents and pregnant women. Medicaid funding can be obtained through several strategies, including those listed below. Arranging Medicaid financing for any given strategy requires discussions and agreements with the State Medicaid agency. Each approach will require specific research and may vary from State to State.

The following are key strategies to appropriately use Medicaid financing for maternal and child health services. They are organized in specific areas of opportunity as outlined below:

A. Medicaid Eligibility

• For infants
• For children and adolescents ages 1-18
• For pregnant women
• For family planning services
• Presumptive eligibility
• Twelve-month continuous eligibility

B. Medicaid Enrollment Strategies

• Outreach, marketing and promotion
• Facilitating enrollment

C. Medicaid Coverage of Medical Services

• Early and Periodic Screening, Diagnostic and Treatment Program (EPSDT)
• Enhanced prenatal services
• Family planning services
• Services for children with special health care needs
• School-based services

D. Medicaid Reimbursement for Services

• Fee-for-service reimbursement
• Managed care

E. State Children's Health Insurance Program (SCHIP)

• Eligibility
• Outreach and promotion
• Coverage of medical services

Below is a brief discussion of each of these key areas:

A. Medicaid Eligibility

Medicaid Eligibility for Infants: Federal law requires Medicaid coverage for children in "poverty-level" categories. Eligibility requirements vary with the age of the child. For infants from birth to their first birthday, all State Medicaid programs must set eligibility at or above 133% of the Federal Poverty Level (FPL). (For a family of three for the year 2000, 133% of the FPL is $18,819.) As of October 1999 all but one State had expanded eligibility for infants above the 133% level under Medicaid or the State Children's Health Insurance Program, including 42 States that set eligibility for infants at 185% of the FPL or higher.

Medicaid Eligibility for Children Ages One to 18: Federal law requires that States cover children ages one to six at 133% of the FPL. For children age six and above, Federal law specifies eligibility at 100% of the FPL for children born after September 30, 1983. This provision will fully phase in eligibility at 100% of the FPL for children to their 19th birthday in the Year 2002.

States have the option to phase in older children at 100% of the poverty level more quickly, or to set eligibility at levels higher than 100%. Many States have done so. Under Section 1902(r)(2) or Section 1931 of the Social Security Act, a State can expand eligibility to the level it might choose. A few States have expanded eligibility under Medicaid to 275% or 300% of the FPL using this approach. Other States are using their State Children's Health Insurance Program as the vehicle to expand coverage for children to these levels.

Eligibility for Pregnant Women: Medicaid has special eligibility rules for women who are pregnant. The objective is to provide a source of payment that will encourage prenatal care and lead to improved pregnancy outcomes. Federal law requires Medicaid to cover women who are pregnant and for 60 days following delivery in households with income up to 133% of the FPL. States are allowed to increase eligibility levels to 185% of the FPL (and above 185% under Section 1902(r)(2).) Three-fourths of the States have gone above 133% of the FPL, including ten that have eligibility at or above 200% of the FPL.

Family Planning Waivers: A special waiver is available to States under Section 1115 that allows limited Medicaid eligibility specifically for family planning services only. These waivers are directed at the issue of unplanned pregnancies and spacing of births. Usually, these waivers allow Medicaid to continue to cover family planning services after Medicaid has covered the birth of a child since pregnancy-related Medicaid coverage ends 60 days following the delivery. Beyond this 60-day pregnancy-related eligibility, these waivers have enabled States to extend family planning eligibility for 10 months to two years.

Presumptive Eligibility: To encourage prenatal care without any delay relating to ability to pay, Medicaid coverage can be established immediately by a provider under "presumptive eligibility." A provider can then provide services and Medicaid will pay for pregnancy-related services provided that day. Application forms can be completed that day or later.

Similarly, a State can allow presumptive eligibility for children. This allows the provider to make a preliminary determination of Medicaid eligibility based on information immediately available. The provider can then provide services and these services are eligible for Medicaid payment without regard to the outcome of the formal eligibility determination process.

Twelve-month Continuous Enrollment: A State has the option to enroll children for 12-month periods of time, instead on a month-to-month basis with requirements for monthly reporting of income and resources. Adopting this policy addresses the problem of discontinuity of care caused by interruptions in Medicaid eligibility.

Without a policy for continuous eligibility, a child's enrollment is often characterized by a pattern of being on-and-off-Medicaid due to small changes in household income. With continuous enrollment, Medicaid eligibility is determined for an annual period, and coverage continues without regard to changes that occur from month to month. This policy provides more secure coverage and simplifies the process for both beneficiaries and the State agency.

B. Medicaid Enrollment Strategies

Medicaid can only pay for health care services for persons who are actually enrolled in Medicaid. Many eligible persons are not enrolled because they do not know about the program or do not know they may be eligible. Sometimes persons do not attempt to enroll because they do not want to deal with a process they perceive as a hassle or the stigma they associate with the program.

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), PL 104-193, ended the automatic eligibility link between Medicaid and welfare. Eligibility for Medicaid is now distinct from eligibility for welfare, and the eligibility determination process may also be separate. It is now quite likely that a person on Medicaid will not be on welfare. (In fact, Medicaid enrollees not on welfare outnumber those on welfare.) Another change in Medicaid involved a new definition for determining Supplemental Security Income (SSI) eligibility for children with disabilities. Implementing the new rules created confusion for a time in many States. As a result, some eligible children and adults lost Medicaid coverage even though they remained eligible. States are now adopting strategies to find and enroll these eligibles.[2]

Strategies that increase the likelihood of enrollment are those that provide easily understood information, mainstream the program and streamline the process.

Outreach, marketing and promotion to encourage enrollment of eligible adults and children: Successful strategies include outreach, marketing and promotion through the use of radio and TV public service announcements, simplified forms and procedures, and assisting persons in applying for Medicaid. These efforts are particularly important to find and enroll eligible uninsured children and pregnant women and can be carried out in conjunction with, or by, State Title V Maternal and Child Health offices.

Facilitating enrollment of eligible children and pregnant women: The key to enrollment seems to be a proactive strategy to locate persons who may be without any health coverage and possibly eligible for Medicaid or SCHIP, providing them good information and making the enrollment process as easy as possible. These approaches are important both for enrolling pregnant women and for the parents to enroll their children. As mentioned above, these activities are generally most successful when carried out in conjunction with State Title V Offices.  This joint work is supported not only by the U.S. Department of Health and Human Services, but by Congress through its mandates in the Title V law. In addition to this Medicaid and Title V collaboration, research has shown the following strategies to be effective for outreach, information dissemination, and simplifying the application and enrollment process:[3]

1. Providing information and outreach: Good information about Medicaid eligibility and coverage is often hard to find for parents and pregnant women. A well-developed comprehensive strategy can locate persons who might be eligible, can provide information and application forms to persons at a time they need and want them, and as necessary can assist throughout the application and enrollment process.

2. Allowing enrollment by mail or phone: This significantly reduces the hassle for the applicant, because it allows an application to be completed and submitted without the need to take time off from work, to negotiate a public transportation system, or to spend time in a noisy waiting room.

3. Using "outstationed eligibility workers": These workers are stationed in hospitals and clinics to assist with the Medicaid application. Eligibility workers can be located in hospitals and Federally Qualified Health Centers (FQHCs), and the costs associated with these workers will qualify for the Medicaid administrative costs (Generally, the Federal match is 50% for administrative costs). In some States, the hospital or health center is required to cover the non-Federal share of the costs. Providers have found these eligibility workers are able to provide authoritative information, and speed the eligibility process by initiating the application and determining eligibility on-site.

4. Extending office hours: Extended hours for people to apply for enrollment supports agency efforts to encourage self-sufficiency and independence. Early morning, evening and weekend hours allow access to those who otherwise might have to take time away from a job or school.

5. Improving treatment of applicants at enrollment centers: Applicants are more encouraged to follow through on their application for Medicaid when they perceive they are treated with respect and dignity. Improving the way applicants feel about how they are treated increases the likelihood that they will follow through and successfully complete the application process.

6. Allowing enrollment at clinics or doctors' offices: A logical place for enrollment for Medicaid coverage is at the moment the uninsured child or pregnant woman seeks a service from a health care provider. When coupled with presumptive eligibility, Medicaid can cover services provided that day.

7. Allowing enrollment at schools or day care centers: In many school districts, large numbers of children are uninsured and eligible for Medicaid. Schools can provide information about Medicaid and how to apply, and can facilitate the enrollment process. Medicaid enrollment may financially benefit the school when the school is a provider of health care services that Medicaid covers.

8. Using a toll-free information and enrollment telephone line: A toll-free telephone service is an effective means of communicating information and answering questions about Medicaid and State Children's Health Insurance Program (SCHIP). All States have a 24-hour, Title V telephone hotline that is required to provide information on enrolling in Medicaid and SCHIP. Some States have found it is useful to have extended hours, including weekends. Many Medicaid and SCHIP programs, or their enrollment brokers, also have toll-free hotlines and have found it useful to have extended hours, including weekends. This allows interested persons to access information or even initiate an application over the phone or during a time that does not interfere with work or school.

9. Simplifying the enrollment form: The traditional Medicaid application form is long and complex. States have found they can simplify and shorten the application form, and still obtain the information necessary to determine eligibility.

10. Minimizing the documentation needed to apply: It is sometimes difficult and time-consuming to locate all the documents that prove identity, income and resources. A review of what is really necessary can minimize the requirements and improve the chances an eligible person will follow through and complete the application process.

11. Simplifying eligibility policies: Key policy options that simplify eligibility criteria include the following:

a) Dropping the assets test for children and pregnant women: Eligibility can be based only on household income, without regard to the value of other resources. This policy simplifies the eligibility determination process for both the State agency and for the applicant.

b) Dropping requests for social security numbers from members of the household who are not applying for coverage: Some states have a policy of requesting the social security numbers of all members of the applicant's household even though all members of the household are not applying for coverage. A State can decide to request the social security numbers of only the members in the household who are applying for coverage.

c) Adopting presumptive eligibility: Presumptive eligibility allows immediate enrollment and coverage. Presumptive eligibility allows a provider who is certified to do so to make an immediate, preliminary determination that Medicaid eligibility requirements are met. A State can decide that proof of income or resources is not required for the presumptive determination of eligibility. The child or pregnant woman can be enrolled, and the provider can provide treatment immediately with assurance that services are eligible for Medicaid payment, even if the applicant is later determined to be ineligible. The official application forms can be completed and submitted later.

d) Allowing the application to be mailed: The application can be accepted by mail without the applicant appearing in person.

e) Providing continuous 12-month enrollment: A State can decide to enroll a child for a 12-month period, without regard to any changes in household income that may occur during this time. Without this policy, a State must deal monthly with any changes in income, and even small changes may result in loss of eligibility and disenrollment from Medicaid. Continuous enrollment prevents the churning of periodic dis-enrollment and re-enrollment that often occurs when the enrollee (or the enrollee's parent) is required to report income each month. With continuous enrollment, patients are more likely to have continuity of care, and providers are more likely to accept Medicaid patients because there is greater certainty of coverage and payment.

f) Adopting common application forms and policies for both Medicaid and the State Children's Health Insurance Program (SCHIP): A State can facilitate coordination between Medicaid and SCHIP by using common forms and adopting common policies on issues, such as treatment of income and resources, use of twelve-month continuous enrollment, documentation requirements, and coverage of benefits. By Federal law, a child eligible for Medicaid cannot be enrolled in SCHIP. It is useful to make the transition from one program to the other as seamless as possible because a change in the number of persons in the household or even a small change in income can make a child eligible for one program and ineligible for the other.

g) Making the program like mainstream health insurance: As States find ways to encourage eligible persons to enroll in Medicaid and SCHIP, they have found a key part of the strategy is to model the programs after mainstream health insurance coverage. This strategy is often reflected in the name and the program, the terminology applied to program procedures, the manner in which applicants and beneficiaries are treated, and the ease with which persons are able to enroll and re-enroll.

For example, some States have renamed their Medicaid and SCHIP programs so the word Medicaid is not used. Information is available in hundreds of locations, and enrollment can be accomplished in dozens of ways. Public service announcements and paid advertising portray a mainstream image and emphasize the importance of enrolling in health coverage. The program terminology is changed so that people are "beneficiaries" instead of clients or recipients, they are "approved for coverage" instead of determined eligible; or they are "re-enrolled" or "re-newed" instead of redetermined.

C. Medicaid Coverage of Medical Services

In general, Medicaid coverage is comprehensive. Certain services available under Medicaid are of particular importance for children and pregnant women. State Medicaid offices can work with Title V offices to help assure that health care providers are available in areas where there is a shortage of providers who are willing to accept Medicaid patients and reimbursement.

Early and Periodic Screening, Diagnostic and Treatment Program (EPSDT): EPSDT is a specific program under Medicaid that provides well-child and comprehensive pediatric care for children and adolescents up to age 20. EPSDT requires comprehensive coverage of physical and mental health, growth and developmental assessments, including lab and other diagnostic tests, immunizations, health education and anticipatory guidance. Screening exams are covered on a clinically-sound periodicity schedule specific for each age group or as needed at any age. EPSDT also requires coverage of any medically necessary service reimbursable under Medicaid for the treatment of a condition identified under a periodic or an "as needed" health exam, even if the service is not otherwise a covered benefit in that State.

Under EPSDT, States specifically must cover hearing, vision and dental services for children and adolescents, even if Medicaid does not cover those services for adults. Also covered are transportation and scheduling assistance related to EPSDT screening, diagnosis or treatment.

Immunizations: All childhood vaccinations are covered under EPSDT and Medicaid. Providers obtain the vaccines under the Vaccines for Children (VFC) program.

Lead Screening: Under EPSDT, specific testing for lead is a covered service, as are certain remedial services necessary to remedy a problem with lead in a child's home.[4]

Dental: EPSDT requires coverage for children and adolescents of any necessary dental service reimbursable under Medicaid for the treatment of a condition identified under a periodic or "as needed" exam, even if the service is not otherwise a covered benefit in that State.

Services for children with special health care needs: Medicaid can play an important role in paying for portions of the required medical coverage for children with special health care needs; many of whom are enrolled in the Title V Program. Cooperation between State Medicaid and Title V Programs can enhance the coordination and case management of sources, result in better care, and provide a financial resource for specialty and primary care.

It is important to ensure that children served by Title V programs are enrolled in Medicaid when they are eligible to do so. Medicaid is a key source of funding for most medically necessary services for children with special health care needs for conditions identified through an EPSDT screening. Medicaid is especially important for the coverage of services, such as durable medical equipment, medical supplies and prescription drugs. Also important are home- and community-based services that Medicaid programs can pay for in States with specific "waiver" programs for the developmentally disabled.

School-based health services: Providing health services in schools can be an effective way to ensure that children receive needed preventive and primary care services. Medicaid is able to pay for covered services furnished to children enrolled in Medicaid. Medicaid policy may need to address the relationship of school-based services to managed care when the children with Medicaid coverage are enrolled in a health plan.

Health services related to special education as provided under the Individuals with Disabilities Education Act (IDEA) are reimbursable if they are a covered service under Medicaid. Early intervention programs and school districts may enroll as Medicaid providers, and receive payment for covered services for eligible children. Services usually covered include therapies, case management, transportation, screening and evaluation, health education and other services that may fall under EPSDT.

Medicaid funding is also available for administrative expenditures that support the administration of Medicaid. Reimbursable activities might include: Medicaid outreach; information and referral; coordination and monitoring of health services; or eligibility intake.[5]

Note: The Office of the Inspector General and CMS found in recent audits that some States claimed Federal funds for services in schools that were not covered or for children not enrolled in Medicaid. These claims related both to medical services and administrative activities. Extra care is needed to be sure Medicaid funding is claimed only for services that are covered, and for children who are eligible and enrolled. For more information on appropriate reimbursement for school-based health services under Medicaid, CMS provided guidance in the May 21, 1999 State Medicaid Directors letter.[6]

Enhanced prenatal services: Medicaid is able to cover services that identify high-risk pregnancies and improve the likelihood of good pregnancy outcomes. These services may not be medical services. Typical services covered include: a) risk assessment; b) case management; c) health education; d) nutritional counseling; e) psychosocial counseling; f) home visits; and g) transportation. A key issue is how these services are covered under Medicaid managed care programs. (See managed care section below.) These services may be part of the managed care contract, or they may be carved out of managed care and paid separately by Medicaid.

Family planning services: All Medicaid programs are required to cover family planning services and supplies. Because family planning services qualify for a 90% federal matching rate, Medicaid programs require specific procedure codes to ensure that these services are properly identified for the special Federal matching rate.

D. Medicaid Reimbursement for Services

Fee-for-service reimbursement for medical providers: A provider's participation in Medicaid is voluntary. Providers who do decide to participate in Medicaid must agree to accept Medicaid payment as payment in full. As a result, payment rates are a key factor in the number of medical providers who are willing to accept Medicaid patients. In many States, low payment rates discourage provider participation in Medicaid. Each Medicaid program is able to set its rates at the level it chooses, within the amount of money appropriated by the legislature. Services for children, adolescents and pregnant women are of high priority, and often merit special attention in Medicaid rate setting.

Services provided by public providers, including local health departments and community mental health clinics can qualify for reimbursement from Medicaid that is related to the actual cost of providing each service. Federal law requires States to pay Federally Qualified Health Centers (FQHCs) at least 95% of reasonable costs in Fiscal Years (FY) 2001 and 2002, 90% in FY 2003 and 85% in FY 2004, but allows Federal Medicaid matching funds on payments up to 100% of costs.

Disproportionate Share Hospital (DSH) payments: Federal law allows States to make special payments to hospitals that serve a disproportionate share of patients who are uninsured or on Medicaid. These payments have become a significant source of funding for children's hospitals, and other public and teaching hospitals that often are the major provider of care for children and women who are pregnant. The State has the ability to define the criteria for qualifying for these funds, and to define the total amount. DSH payments are now about ten percent of the total of all Medicaid payments.

Managed care: Medicaid managed care may be provided through health plans or through a primary care case management (PCCM) system. Health plans are paid a capitated amount per person per month, and are responsible to pay providers for all services included in the capitated payment. This is another area in which State Medicaid and Title V cooperation can enhance the health care received by perinatal women and children. A provider (such as a health department) will need to be enrolled with a health plan to be eligible to receive payment for services to Medicaid beneficiaries in the health plan. It is the health plan that decides whether to contract with any provider, including a health department, and the amount of payment it will make to providers in its network. However, a Medicaid agency has discretion to require in its contract with participating health plans that certain providers must be included in the network and how they are to be paid.

A Medicaid program has the option to decide which services are included in the capitation payment; and therefore, must be billed to the plan instead of to Medicaid. If certain services are "carved out" of the capitation payment, they may be billed directly to Medicaid, without seeking authorization from the health plan. Services sometimes carved out include EPSDT screenings for children, services provided by schools or prenatal care for pregnant women.

Under a PCCM program, a Medicaid beneficiary selects or is assigned a primary care provider, who is responsible for primary care and referrals to specialists. Medicaid authorization may be required from the primary care provider in order for services to be paid by Medicaid. However, a Medicaid program can decide whether prior authorization is needed for selected services.

E. State Children's Health Insurance Program (SCHIP)

Since enactment of Title XXI in 1997, States have focused on implementing their SCHIP programs and enrolling eligible children and adolescents. In the year from December 1998 to December 1999, enrollment in SCHIP programs more than doubled, from about 0.8 million to 1.8 million. An estimated 2.6 million children and adolescents are eligible for SCHIP nationally.[7]  Many States have found that SCHIP outreach and enrollment has a Medicaid case-finding effect, with one or more children enrolled in Medicaid for every child enrolled in SCHIP. Children who are eligible for Medicaid (whether they are enrolled or not) are by law not eligible to enroll in SCHIP.

A State can implement SCHIP as a Medicaid expansion, or as a separate program based in the private health insurance market, or it can implement both. In its design and public appearance, a Medicaid expansion SCHIP program is often indistinguishable from Medicaid (although the SCHIP program qualifies for a higher rate of Federal matching funds than Medicaid). A separate SCHIP program may be based on private health insurance coverage, and unlike Medicaid, have a nominal premium, copayments for services for children and adolescents, and limits on benefits.

SCHIP Eligibility: SCHIP has provided an excellent opportunity to expand access to needed health care for children. Enrolling children and adolescents in SCHIP provides significant coverage that can bridge the gap between Medicaid and private employer-sponsored health insurance.

States can also choose to cover the adults associated with SCHIP-covered children. A number of States now provide "family coverage" by covering adults under Medicaid, as an extension of their coverage for children enrolled in SCHIP or Medicaid. CMS has announced on July 31, 2000 that it will now consider waivers to include coverage of parents of children or adolescents enrolled in SCHIP.

SCHIP Outreach and Promotion: Expenditures to market SCHIP, and to find and enroll children are eligible for Federal SCHIP matching funds. States have often found that their marketing efforts for SCHIP have served to encourage eligible children to apply for health coverage. Many children are found to be eligible for Medicaid, as well as SCHIP.

Conclusion

This document provides an overview of the potential for State and local health programs to use Medicaid as a source of financing, with a focus on maternal and child health services. Medicaid has become a significant source of funding for almost every health-related service in the U.S. for low-income persons. However, Medicaid has an especially important role in financing medical care for women, children and adolescents. Medicaid funding of these services has increased significantly over the past decade. New opportunities for Medicaid to support such services will continue to emerge. A periodic review is useful to identify new ways for a State to take advantage of Medicaid as a source of funding to help finance these services.

Other Opportunities to Use Medicaid

In addition to maternal and child health services, Medicaid is also a potential source of financing for a number of other State or local health programs. Specific areas where Medicaid can be a source of funding include oral health services, rural health services, services for persons living with HIV/AIDS, and mental health and substance abuse services.

Contact for More Information

If you have questions or wish to obtain additional information on implementation strategies, contact HRSA at:

Alexander Ross
U.S. Department of Health and Human Services
Health Resources and Services Administration
Center for Health Services Financing and Managed Care
5600 Fishers Lane, Room 10-29
Rockville, Maryland 20857

Phone: 301-443-1512
Fax: 301-443-5641
E-mail: aross@hrsa.gov

For copies of this document, contact:

HRSA Information Center 
P.O. Box 2910
Merrifield, VA 22116
Phone: 1-888-Ask-HRSA
Fax: 703-821-2098
TTY: 877-4TY-HRSA
Se Habla Espanol

OR

Visit the HRSA web site at: www.hrsa.gov/medicaidprimer

For more information about maximizing partnerships with Medicaid, visit the Website of the Association of Maternal and Child Health Programs at www.amchp.org

This document was prepared by Health Management Associates under a contract with HRSA.

4. Attachment: A Basic Description of the Medicaid Program

Federal law provides that a State may qualify for Federal Medicaid matching funds only if it designs its program within specific Federal requirements. These include eligibility for specific population groups, coverage for certain medical services and medical providers, and adherence to specific rules relating to payment methodologies, payment amounts, and cost-sharing for Medicaid beneficiaries.

To qualify for Federal Medicaid matching funds, a State must obtain the U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS) approval of its Medicaid State Plan. The State Plan is the contract between the Federal government and the State, which spells out the terms and conditions under which the State will receive Federal Medicaid matching funds. Every change in eligibility for beneficiaries, change in coverage of services or change in methodology of reimbursement in a State's Medicaid program requires a State Plan Amendment that must be approved by CMS.

Waivers of Federal Requirements
Federal law requires that Medicaid beneficiaries have freedom of choice of providers, that the program is statewide, and that services are available in an amount, duration and scope sufficient to achieve their purpose.

The Federal law provides flexibility to States to cover optional services and eligibility groups. Some options are specifically described in the Federal law. Other options may be available through "waivers." CMS has authority to "waive" certain statutory requirements so a State can, for example, cover certain benefits or eligibility groups that could not otherwise be covered under Medicaid.

CMS may grant "program waivers" or "research and demonstration waivers". The most common program waiver is under Section 1915(b), which waives the freedom of choice requirement so a State can implement a managed care program. Recently, the Balanced Budget Act of 1997 provided that a State has a choice of a managed care waiver or a State Plan Amendment. Either approach will be approved with a set of specific terms and conditions. Section 1915(c) waivers provide for Home and Community Based Services waivers. Research and demonstration waivers are granted under Section 1115 for more comprehensive programs of health reform. Section 1115 waivers may involve restructuring the State's Medicaid program, as well as the terms and conditions of Federal funding.

The Impact of Medicaid Managed Care
Increasingly, Medicaid programs have moved toward the use of managed care arrangements as delivery systems for Medicaid beneficiaries. Medicaid managed care may involve enrollment with health maintenance organizations (HMOs) and managed care organizations (MCOs) which are paid on a capitated basis, or a Primary Care Case Management (PCCM) system, which is a fee-for-service program that the state develops and manages itself. Some states have found that a PCCM works well in rural areas that may be served by few or no HMOs.

An HMO, a MCO or a PCCM system will require the Medicaid beneficiary to enroll with a specific primary care provider, who by contract with the Medicaid agency accepts certain responsibilities for providing and authorizing needed medical care. Providers not in the HMO network, or not referred by the primary care provider in a PCCM system, may not be able to be reimbursed for services provided to Medicaid beneficiaries.

The use of managed care can raise significant issues for Medicaid reimbursement of services delivered by public health agencies, mental health agencies, health centers or other publicly assisted agencies. This is particularly true for care provided through capitated HMOs and MCOs. Public providers may need to negotiate participation and reimbursement arrangements with an HMO instead of with the Medicaid agency. Public providers would be well served to monitor the development of State Medicaid policy to be sure their interests are taken into account as managed care policy is developed. It is sometimes possible and advantageous to the State agency and the State budget to arrange for certain services to be "carved out" of capitated managed care contracts and directly reimbursed by Medicaid. Services often considered for a carve-out include: family planning; prenatal care and other pregnancy services; selected Early and Periodic Screening, Diagnostic and Treatment (EPSDT) services; immunizations; or mental health services.

Qualifying for Federal Medicaid Matching Funds
Medicaid is a program that provides open-ended Federal contributions according to a statutory formula to participating States with approved plans. CMS reimburses the State Medicaid Agency for a portion of actual expenditures made under the provisions of the State Plan. Federal reimbursements (Federal financial participation, or "FFP") are based on qualifying expenditures for either "medical assistance" (i.e., medical services) or for program administration.

The amount of Federal payments to a State for medical services depends on two factors. The first is the actual amount spent that qualifies as matchable under Medicaid. In general, this means that:

• The expenditure is for a covered service;
• Provided by a qualified provider enrolled with the Medicaid program; and
• To a person eligible for and enrolled in Medicaid at the time of service.

The second factor is the Federal Medical Assistance Percentage (FMAP) for each State. The FMAP percentage is computed from a formula that takes into account the average per capita income for each State relative to the national average. By law, the FMAP cannot be less than 50%. States with per capita personal incomes below the national average have a FMAP rate as high as 77% in fiscal year 2000. This means, for example, for every $1 in qualifying Medicaid expenditures made by a State, the State is able to claim and receive at least $0.50 and as much as $0.77, depending on the State FMAP.

Expenditures for Medicaid-related administrative activities also qualify for Federal matching funds. For administrative expenditures to qualify, the activities must be related to the administration of the State Medicaid program. Unlike the FMAP for medical services, which is different for each State, the administrative matching rates are the same for all States. Expenditures necessary for the administration of the program generally are reimbursed at 50%. Certain administrative expenditures qualify for higher Federal matching rates. For example, certain activities requiring skilled medical professionals qualify for 75% Federal matching. Some expenditures relating to the development of new information technology systems may qualify for Federal matching rates of 75% or 90%.

Medicaid allows State and local agencies that provide or arrange for covered services to Medicaid enrollees to receive Federal payments toward the cost of such services. For these expenditures to qualify for Federal Medicaid payments, service delivery and administrative activities must be carried out under the terms of an inter-agency agreement with the Medicaid agency. The agreement is a contract that spells out the medical and administrative services that will be treated by the Medicaid agency as Medicaid expenditures; and thus, will qualify for Federal funds. The Medicaid agency will include those qualifying expenditures identified in the agreement in its claim for Federal funds. The agreement usually holds the service delivery agency responsible for any potential future recoveries if an audit should find the claim for Federal matching funds included non-qualifying expenditures.

Opportunities to Use Medicaid
Federal Medicaid matching funds have proven to be a rich source of financing for many State and local health programs. Federal Medicaid funds may help finance a new program or coverage, or the expansion of an existing program. In some cases, where an existing health program was previously financed entirely from State or local funds, the availability of Federal Medicaid matching funds may reduce the cost of general fund dollars borne by State or local government.

The opportunity to use Medicaid as a source of financing for State or local health programs depends on the ability of policymakers to design programs (or redefine on-going programs) that meet the Medicaid requirements.

How to Increase Medicaid Funding for State and Local Health Services
Policy changes that will permit a State program to qualify its expenditures for Medicaid matching funds can be classified as follows:

Increase the Number of Persons Who Qualify for Medicaid Coverage: Expenditures cannot qualify for Federal Medicaid matching funds when services are provided to persons who are not enrolled in Medicaid. Thus, one avenue for increasing Medicaid support for a program is for eligibility to be expanded so a greater number of persons served by a program may qualify. Many persons who are eligible for Medicaid do not apply because they do not know they are eligible, or they regard the application process as difficult.

State residency requirements are not allowed under Medicaid. This means, for example, that migrant workers and their children are able to qualify on the same terms as any other person in a specific State.

Medicaid eligibility is determined in general by two key factors. First, persons must be in a qualifying category. Second, persons must meet State-defined income and asset criteria. (Other requirements also apply, such as being a legal U.S. resident.) Each Medicaid program must cover certain groups of persons, but has the opportunity to offer coverage to other optional eligibility categories.

Medicaid eligibility rules are complex. The following is a general description of Medicaid eligibility categories and rules:

Mandatory Eligibility Groups: Federal law specifies that States must cover certain eligibility categories, including:

• Low-income families with children who would have qualified for Aid to Families with Dependent Children (AFDC) cash assistance in July 1996. These persons may or may not be receiving Temporary Assistance to Needy Families (TANF) cash assistance now.
• Children under age 6 in families with incomes below 133% of the federal poverty level (FPL).
• Children ages 6 to 17 in families with incomes below 100% of the FPL (to age 18 in 2001).
• Pregnant women with family income below 133% of the FPL.
• Elderly, blind or disabled adults and children receiving Supplemental Security Income (SSI) payments.
• Children receiving foster care or adoption assistance under Title IV of the Social Security Act.
• Persons who lose eligibility for AFDC/TANF due to earnings (i.e., leave welfare for work) may continue on Medicaid for up to a year; those who leave due to increases in child support payments, may continue on Medicaid up to four months.
• Certain Medicare beneficiaries, with benefits depending upon income up to 175% of FPL are also eligible for Medicaid. "Dual Eligibles" are a group enrolled in both Medicaid and Medicare. Depending on the individual's income, these persons qualify for various levels of Medicaid coverage and support. Persons who qualify under SSI income standards qualify for full Medicaid coverage. Persons above this level may not receive full Medicaid benefits. Medicaid pays for all or a portion of Medicare premiums, deductibles, and coinsurance, depending on the income level of the beneficiary. (An asset test also applies such that countable assets cannot exceed $4,000 for an individual, or $6,000 for a couple.)

• Qualified Medicare Beneficiaries (QMBs): Income up to 100% of the FPL. Medicaid pays Medicare part A and B premiums, deductibles and cost sharing related to Medicare covered benefits.
• Specified Low-Income Medicare Beneficiaries (SLIMBs): Income between 100% and 120% of the FPL. Medicaid pays only for the Medicare Part B premium.
• Qualified Individuals (QIs): Medicaid pays all or part of the Medicare Part B premium for persons who would be eligible to be a QMB except their income is between 120% and 135%, or at state option up to 175% of the FPL.
• Qualified Disabled and Working Individuals (QDWIs): Persons who are disabled, but who lost their Medicare Part A benefit due to increased earnings, and whose income is between 100% and 200% of the FPL. Medicaid pays the only the Part A premium.

Optional Eligibility Groups: Federal law specifies that States may, at the option of the State, cover low-income persons in a number of specified eligibility groups. These include (but are not limited to) the following:

• Pregnant women, infants, children and parents of any Medicaid-eligible child, including parents in two-parent families with income and assets at or below state-defined levels.
• Disabled children who would be eligible under criteria in effect in July 1996.
• Persons in institutions with incomes less than 300% of the SSI Federal benefit level.
• Recipients of SSI payments, and disabled or elderly persons with incomes below100% of the FPL.
• Certain working disabled persons who would qualify for SSI if they were not working, up to 250% of the FPL.
• Children under a "Medicaid Expansion" State Child Health Insurance Program.
• Persons who are "Medically Needy".

The "Medically Needy" category provides for a different method of determining eligibility, based on actual medical expenses incurred by an individual. Medically needy persons are individuals who fall within one of the mandatory or optional eligibility groups, but have income and resources that would make them ineligible, except when the cost of their medical care is taken into account. When they incur medical expenses they "spend down" their income, and become eligible for the balance of the eligibility period from the point in time they spend down their income to the eligibility level. The process begins again at the beginning of the next state-defined eligibility period.

Income Eligibility Levels: States have considerable flexibility in setting permissible income levels. Income eligibility levels can be set separately for specific groups, such as children, families, pregnant women, the disabled and the elderly.

States can increase effective eligibility levels for pregnant women, children, families with children, elderly and disabled persons by "disregarding" a certain amount of income. In this way, eligibility for children could be extended above 185% of the FPL (technically the upper limit for pregnant women and infants), by setting the disregarded amount to a level that would bring countable income down to 185% of the FPL. To extend the eligibility level to 285% of the FPL, for example, a State would set the disregarded amount at 100% of the FPL.

The income disregard provisions can also be used to effectively increase the income limits for Qualified Medicare Beneficiaries (who receive Medicaid assistance with their Medicare premiums, deductibles, and coinsurance), and some aged, blind and disabled Medicaid groups. This flexibility over countable income is found in Section 1902 (r)(2) and Section 1931 of the Social Security Act.

State Children's Health Insurance Program (SCHIP): A State can implement its SCHIP program as a Medicaid expansion, or as a separate health insurance program. Another option is for a State to have both a Medicaid expansion and a separate program operating at the same time with each one targeted at health coverage for different groups of children. SCHIP has an enhanced Federal matching rate, ranging from 65 percent to about 85 percent. Because the matching rate is higher, a State can extend coverage to children at a lower State cost through SCHIP than through regular Medicaid.

A key feature of SCHIP is its focus on finding children who are eligible, but not yet enrolled in either Medicaid or a separate SCHIP program. Matching funds are available specifically for the purpose of marketing, outreach and determining eligibility.

Increase Services Covered by Medicaid: Each State determines what medical services will be covered under Medicaid. By defining services appropriately, a State can be sure services provided by other State agencies qualify for Medicaid reimbursement. Typically, medical services provided through public health, mental health, disability, substance abuse treatment, aging, or education agencies can qualify for Federal Medicaid matching funds. Federal Medicaid matching funds can help finance capacity expansion in these programs or reduce the net cost to the State for these services, if they are specifically covered in the State Plan.

Mandatory coverage includes the following services:

• Hospital services, inpatient and outpatient
• Physician services
• Lab and X-ray
• Immunizations and other well-child services listed under the Early and Periodic Screening, Diagnostic and Treatment requirements, including any medically necessary diagnostic and treatment services, plus vision, dental and hearing services for children.
• Family planning services
• Nurse midwife, pediatric and family nurse practitioner serves
• Federally-qualified health center (FQHC) and rural health clinic (RHC) services
• Home health care services
• Nursing home services
• Transportation for medical services

Optional coverages include 34 specific services, including the following:

• Prescription drugs
• Clinic series
• Rehabilitation and physical therapy services
• Prosthetic and orthotic devices
• Optometrist services and eyeglasses
• Hearing services
• Dental Services
• Home and community based care for persons with certain impairments

Set Medicaid Reimbursement Rates at Appropriate Levels: State Medicaid programs are required by Federal law to set their payment rates at a levels sufficient to achieve access to needed care. Medicaid may want to set rates to achieve specific public policy objectives, such as access to primary care, well-child care, prenatal care or deliveries.

Rates for safety net providers, including FQHCs and RHCs, can be set to assure their financial viability. Federal law specifies cost-related reimbursement methods for FQHCs, but meeting the minimum legal requirement may not assure full reimbursement of costs for Medicaid patients. Medicaid has the option under the law to provide full-cost reimbursement for these providers.

The maximum amount that the State Medicaid Programs are allowed to pay is defined by the Upper Payment Limit, which is generally the amount Medicare would have paid for the same services and patients. If a Medicaid program were to pay an amount greater than the upper payment limit, the amount above the limit would not qualify for Federal Medicaid matching funds.

Special "Disproportionate Share Hospital" (DSH) payments can be made to hospitals that qualify on the basis of their service to Medicaid and the uninsured. Each State is able to define the specific criteria these hospitals must meet to qualify. Funds are distributed based on a state-defined formula. DSH payments are limited to inpatient and outpatient hospital providers.

Find and Enroll Potential Eligibles: Medicaid, Title V Maternal and Child Health Program or Temporary Assistance to Needy Families (TANF) funding can support administrative activities that are directed at case-finding, education and outreach initiatives that help locate and enroll persons who are eligible for Medicaid. Medicaid funding also is available to create the systems needed to determine eligibility and to enroll individuals into Medicaid. Federal Medicaid funds can be used to support outstationed enrollment services of FQHCs, DSH payment hospitals, health departments and other community sites.

Medicaid can also reimburse for case management as an administrative activity. Case management may apply in situations where enrolled persons have complex medical conditions; and it is beneficial to set up a process to systematically manage their medical care.

5. Sources for More Information About Medicaid

Excellent information on Medicaid is available from several sources. These sources may provide more detailed information on specific areas of interest. Medicaid is constantly changing and responding to new issues. The following sources may be useful in obtaining up to date information.

Centers for Medicare and Medicaid Services (CMS)
Web site: www.cms.gov -- on the CMS web, see:

• Medicaid, Medicare, and State Child Health Insurance Program (SCHIP) descriptions and data sections
• State Medicaid Director Letters
   (specific direction to Medicaid agencies on a range of issues)
• Federal Medical Assistance Percentages (FMAP) for each state

Bureau of Primary Health Care
Health Resources and Services Administration
Web site: www.bphc.hrsa.gov

Provider Reimbursement
Health Systems and Financing Group
Health Resources and Services Administration
Web site: www.hrsa.gov/reimbursement

Kaiser Commission on Medicaid and the Uninsured
Web site: www.kff.org

National Academy for State Health Policy
Web site: www.nashp.org

National Health Law Program
Web site: www.healthlaw.org

Center on Budget and Policy Priorities
Web site: www.cbpp.org

Urban Institute New Federalism Project
Web site: newfederalism.urban.org

Rural Policy Research Institute
Web site: www.rupri.org

Footnotes:

[1] Data reported in: "MCH Update: Income Eligibility for Pregnant Women and Children," National Governors Association, January 20, 2000.

[2] CMS issued a directive to State Medicaid Directors dated April 7, 2000 to ensure that Medicaid eligibility is determined for those who leave welfare. See CMS Website at www.cms.gov

[3] Medicaid Survey on Barriers to Medicaid Enrollment, Kaiser Commission on Medicaid and the Uninsured, 1999.

[4] CMS guidance to State Medicaid Directors on August 22, 1999 indicated "any follow-up services, including diagnostic or treatment services determined to be medically necessary that are within the scope of the Federal Medicaid statute, should also be provided. This would include both case management services and the one-time investigation to determine the source of lead for children diagnosed with elevated blood levels."

[5] Detailed requirements are found in CMS, "Medicaid and School Health: A Technical Assistance Guide." August 1997.

[6] CMS issued a letter to State Medicaid Directors dated May 21, 1999, which provided guidance on reimbursement for school-based health services under Medicaid. See CMS Website at www.cms.gov/medicaid

[7] "CHIP Program Enrollment: December 1998 to December 1999," Kaiser Commission on Medicaid and the Uninsured. July 2000. Publication 2195.