LegiStorm

Summary:

Medicaid is a federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports, to a diverse low-income population, including children, pregnant women, adults, individuals with disabilities, and people aged 65 and older. Medicaid is financed jointly by the federal government and the states. Federal Medicaid spending is an entitlement, with total expenditures dependent on state policy decisions and use of services by enrollees. State participation in Medicaid is voluntary, although all states, the District of Columbia, and the territories choose to participate. States are responsible for administering their Medicaid programs. States must follow broad federal rules to receive federal matching funds, but they have flexibility to design their own versions of Medicaid within the federal statute's basic framework. This flexibility results in variability across state Medicaid programs. Most Medicaid beneficiaries receive services in the form of what is sometimes called traditional Medicaid. However, states also may furnish Medicaid in the form of alternative benefit plans (ABPs). ABPs were first introduced in the Deficit Reduction Act of 2005 (DRA 2005; P.L. 109-171 P.L. 109-171) and are referred to in the Social Security Act (SSA) as benchmark or benchmark-equivalent coverage. In general, under traditional Medicaid benefit coverage, state Medicaid programs must cover specific required services listed in statute (e.g., inpatient and outpatient hospital services, physician's services, or laboratory and x-ray services) and may elect to cover certain optional services (e.g., prescription drugs, case management, or physical therapy services). Under ABPs, by contrast, states may furnish a benefit that is defined by reference to an overall coverage benchmark that is based on one of three commercial insurance products (e.g., the commercial health maintenance organization (HMO) with the largest insured commercial, non-Medicaid enrollment in the state) or a fourth, "Secretary-approved" coverage option rather than a list of discrete items and services. The 33 states and District of Columbia that have implemented the state option to expand Medicaid to low-income adults under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) are required to cover the ACA Medicaid expansion population using ABPs, and states also may elect to require other Medicaid populations to receive care through ABPs. States cannot require certain vulnerable populations to obtain benefits through ABPs. ABPs must qualify as either benchmark, where the benefits are at least equal to one the statutorily specified benchmark plans, or benchmark-equivalent benefits, which means the benefits include certain specified services and the overall benefits are at least actuarially equivalent to one of the statutorily specified benchmark coverage packages. In addition, ABPs must include a variety of specific services, including services under Medicaid's early and periodic screening, diagnostic, and testing (EPSDT) benefit and family planning services and supplies. Unlike traditional Medicaid benefit coverage, coverage under an ABP must include at least the essential health benefits (EHB) that most plans in the private health insurance market are required to furnish. States choose whether to furnish ABPs through managed care or a fee-for-service delivery system. The Medicaid limitations on beneficiary premiums and cost sharing apply to services furnished through ABPs. To date, states have chiefly used ABPs as the benefit package for the ACA Medicaid expansion population. However, several states have elected to use ABPs to serve other Medicaid populations (e.g., working individuals with disabilities or children and adults who do not have special health care needs). States can have more than one ABP coverage option to serve different target populations operating concurrently with traditional Medicaid benefit coverage. States have largely used the ABP design flexibility to align their benefit coverage with the traditional Medicaid benefit coverage.