When the Patient Protection and Affordable Healthcare Act became law, it was assumed that the states would expand Medicaid services. The inducement to expand Medicaid services was a federal subsidy to the states to assist in the payment for the increased expense incurred by the states by virtue of the expansion. However, 14 states — including Texas — did not expand Medicaid. The reasons were both political and economic. One concern was that the law only obligated the federal government to subsidize the increased costs for a limited period of time, and it was felt by 14 states that they could be burdened with a large increase in Medicaid costs if the federal government did not extend the subsidy. Medicaid is a joint federal-state program.

Last week the Centers for Medicare and Medicaid Services known as “CMS” introduced a new plan to change the way states and the federal government would fund Medicaid. If the proposal is adopted, the new funding plan will not take place until 2021.

The new program would increase flexibility for the states to administer and design Medicaid programs. The proposal is called in “Healthy Adult Opportunity.” The thinking behind the program is to encourage the 14 states to consider expanding their Medicaid programs so as to allow more persons receive Medicaid services (as was anticipated by the original healthcare law).

The CMS believes that the use of “block grants” or “per capita grants” would allow states to receive special waivers so to change provider payments levels, eligibility requirements, and benefits designed to generate savings relative to capped payments. The program would allow states to implement narrower “drug formularies” which would limit the availability of certain high cost drugs to Medicaid recipients.

The plan will be debated by the various interest groups involved in the healthcare industry. The outcome is unknown.

Banker Phares is a practicing attorney and founding member of the Estate Planning and Probate Law certification by the Texas Board of Legal Specialization. He is the John and Karen Mast Professor at SFA and teaches in the Department of Economics and Finance.

Banker Phares is a practicing attorney and founding member of the Estate Planning and Probate Law certification by the Texas Board of Legal Specialization. He is the John and Karen Mast Professor at SFA and teaches in the Department of Economics and Finance.

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