FMAP - the most important four letters in Medicaid

[This is second in my occasional series of postings about how health reform legislation is changing the landscape for coordinated public and human services transportation.]

In the Medicaid realm, arguably the most important concept is the Federal Medical Assistance Percentage, or FMAP. This number represents the portion of eligible costs that the federal government will reimburse to states under Medicaid for the medical services they provide. Every state gets a unique FMAP, recalculated annually, that is based on each state's per capita income relative to the nation's average per capita income. In essence, the lower a state's per capita income, the higher its FMAP. Under Medicaid law, no state can have an FMAP below 50 percent, nor higher than 83 percent. However, states' FMAP rates all were boosted by approximately 6 to 9 percentage points (the amounts varied by formula and other factors) as part of the American Recovery and Reinvestment Act (ARRA). There also is an "enhanced FMAP" rate calculated for each state under an administrative formula; this rate primarily is used to determine federal payments to states for the Children's Health Insurance Program (CHIP).

The fact that every state has a different FMAP, and that every state's FMAP is subject to change every year, can be one of the challenging factors when trying to link states' Medicaid activities with public transportation or other Medicaid-related services. Under the just-enacted health reforms, different aspects of Medicaid-covered services and programs can have different FMAP rates, which could become an even greater challenge, although the generally increased federal funding should make these partnerships and programs possible.

The Assistant Secretary for Planning and Evaluation (ASPE) within the US Dept of Health and Human Services determines FMAP rates each year, which are published in the Federal Register, posted on the ASPE website, and are available in other places, as well.

For states, FMAP rates are huge concern. As the National Association of State Budget Officers, National Governors Association, and National Conference of State Legislatures report every year, Medicaid is one of the top three expense items in every state's budget (the other two are corrections and education). Of these, Medicaid is unique in that the federal government establishes the eligible population to be served and the scope of medical assistance to be provided to this population, and then leaves it up to each state to cover as much as 50 percent of costs, regardless of the state's ability to generate the needed funds.

Therefore, when the Patient Protection and Affordable Care Act (PPACA, or "health reform") became law, numerous FMAP provisions were made as an effort to soften the blow to states' budgets. Two of these instances have a direct bearing on transportation:

1. The mandatory expansion of Medicaid to all persons at or below 133 percent of poverty is financed at an FMAP of 100 percent in 2014 (when that requirement takes effect), scaling down to 90 percent federal share by 2020.
2. Elsewhere in PPACA, every state can use specified higher FMAP rates when providing certain home- and community-based long-term care services for persons with disabilities.

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On Extenders and Expirations

Public and community transit systems may have to get by with $500 million less in operating revenue next year.

The "tax extenders" bill (see the May 20 Capitol Clips posting for relevant details) continues to be a moving target for a number of tax and spending issues affecting public and community transportation. As passed by the House on the eve of its Memorial Day recess, the latest version of this bill no longer contains the continuation of increased federal Medicaid spending that was part of the American Recovery and Reinvestment Act (ARRA, or the "stimulus bill"). The bill's COBRA extension also was removed before the final vote, but most other provisions - including the TANF emergency fund extension - remained in place.

So, at this point in time - unless some action takes place otherwise - two key elements for transportation under ARRA are expiring on December 31, 2010:

1. Federal spending under Medicaid, increased to every state under ARRA, will revert to pre-ARRA Medicaid matching rates. This represents a loss of $24 billion in otherwise-anticipated Medicaid funding to states, just at a time when they are trying to ramp up for Medicaid expansion under the Patient Protection and Affordable Care Act (PPACA, or the "health reform bill")

2. The amount of income that employees can use, tax-free, for transit and vanpools is scheduled to drop from $230 a month to somewhere in the vicinity of $120 per month. Under ARRA, the tax-free transit benefit has been boosted to parity with the amount allowed as a tax-free parking benefit, but that ARRA provision expires December 31, 2010, and there has not yet been any legislation introduced that would continue this level. At the ARRA levels, $560 million a year is being pumped into public transit systems' coffers as a result of this tax-free benefit; Internal Revenue Service and Congressional estimates all indicate that transit receipts through this benefit are likely to fall by more than half next year, unless there is a change in statute.

Given historical data on Medicaid spending through public transit, these two items alone suggest that the nation's public and community transit services are being slated for a revenue loss of more than $500 million in calendar year 2011.
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"Tax Extenders" Bill has stuff for transit, human services, too

House and Senate leaders have been preparing a must-pass bill to extend various expiring tax provisions. They're hoping to get this "extenders" bill passed by both chambers of Congress and onto Pres. Obama's desk in time for the Memorial Day weekend.

As drafted, this legislation will have provisions affecting a fair number of public and community transportation providers, including:

• A six-month extension of the temporary Medicaid "FMAP" increases (i.e., the percentage of medical assistance that the federal government will reimburse to states' Medicaid programs) that were put into place in last year's American Recovery and Reinvestment Act (this is estimated to channel another $24 billion of federal funds into Medicaid);
• A one-year extension of the "emergency contingency fund" created under the American Recovery and Reinvestment Act (ARRA) as an add-on to the Temporary Assistance for Needy Families (TANF) program , which will direct an additional $2.5 billion to states' TANF activities;
• A one-year renewal of the special summer youth employment program created under ARRA, which will provide $1.0 billion to local workforce investment boards as a supplement to all their other youth employment activities this summer;
• One-year extensions of New Markets Tax Credits, Empowerment Zones, and Renewal Communities, which are tax-favored opportunities to support reinvestment and revitalization of economically distressed communities (collectively, these extensions are estimated to provide for $1.4 billion in tax-favored community revitalization);
• An additional allocation of $25 in lending authority for Recovery Zone Bonds, which were created under ARRA as a mechanism to provide quick, financially secure investments in local infrastructure projects; and
• A two-year extension (and some tweaking) of the ARRA-created Build America Bonds program for financing infrastructure projects carried out by state and local governments, which should leverage an additional $97 billion between now and 2012.

These are not the extenders bill's highest profile features, although the Medicaid FMAP increase is its second-highest expense (top of the chart is the bill's proposed extension of federal unemployment benefits eligibility).

As drafted, the extenders bill does not address the treatment of transit benefits under Internal Revenue Code Section 132(f). Under ARRA, up to $230 per month of individuals' employer-provided fringe benefits for transit passes, vanpools, etc., are tax-free. This has pumped more than $1.1 billion into public transit since the enactment of ARRA. Unless Congress changes the tax code, the allowed value of tax-free transit drops to the pre-ARRA level of $115 per month on January 1, 2011, which will cut this revenue stream for transit in half. It's possible that advocates for this transit and vanpool benefit are carrying out other strategies in advance of the year's end dropoff.
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Medicaid Expansion Under PPACA

[This is the first in an occasional series of postings about how health reform legislation is changing the landscape for coordinated public and human services transportation.]

President Obama signed the Patient Protection and Affordable Care Act (PPACA) into law on March 23, 2010. With some further amendments as a result of the Health Care and Higher Education Reconciliation Act, which Pres. Obama signed into law on March 30, 2010, this is the legislation that the country has been calling "Health Care Reform."

Many aspects of PPACA affect the provision of transportation, but here's the most significant:

Section 2001 of PPACA establishes a new category of Medicaid eligibility. All persons with income at or below 133 percent of the federal poverty line who are not otherwise eligible for Medicaid or Medicare are entitled to participation in Medicaid. This will be a major shift for those states in which Medicaid coverage currently is provided only to persons with much lower income thresholds, in some cases as low as 17 or 24 percent of poverty. States are required to serve this expanded population on January 1, 2014, although they were allowed to begin serving this population as early as April 1, 2010. In fact, Connecticut and the District of Columbia already have made these changes, having moved thousands of their residents off non-federal coverage into their Medicaid programs.

People who fit this category of Medicaid eligibility (i.e., incomes up to 133 percent of poverty and not otherwise eligible for Medicaid or Medicare) are to be enrolled in “benchmark” or “benchmark equivalent” programs administered by state Medicaid agencies. “Benchmark” plans were first authorized by the Deficit Reduction Act of 2005 (DRA), and the Centers for Medicare and Medicaid Service (CMS) issued implementing regulations on April 30, 2010.

Two facts bear noting: one is that PPACA requires enrollment in benchmark plans, regardless of whether a state’s Medicaid agency was planning to provide benchmark-style coverage to any segments of its Medicaid population, and the second fact is that CMS regulations specifically require the provision of non-emergency transportation to all Medicaid enrollees, regardless of whether they are enrolled in a benchmark-style program of health coverage.

Estimates are that this expansion will add 20 million or more people to the country’s Medicaid rolls, in addition to the 40 million individuals currently enrolled in Medicaid programs. States have been concerned about the costs they would have to bear under this expansion. In response, PPACA establishes a special Federal Medical Assistance Percentage (FMAP) rate for this category of Medicaid coverage. In calendar years 2014 through 2016, the FMAP for this population is 100 percent; it scales downward in 2017 through 2019, and from January 1, 2020, onward, the FMAP for this category of Medicaid eligibility is 90 percent. In contrast, for enrollees traditionally enrolled in Medicaid, the FMAP varies by state, ranging from as low as 50 percent to no more than 83 percent (although all states had their FMAP increased temporarily under the American Recovery and Reinvestment Act).

At some point, CMS will be issuing regulations or other guidelines for this Medicaid expansion. However, since it does not become a requirement for states until 2014, they are likely to wait a bit, as there are numerous other Medicaid deadlines within PPACA that are much more urgent. For a fairly complete listing of PPACA implementation deadlines and other implementation milestones in the law, visit the Kaiser Family Foundation website.

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Transit Money for Indian Country

Every so often, I tell friends or family that one of the things we do is provide technical assistance that promotes better transit for people on Indian reservations and in tribal communities across the country. This fascinates them, and then they realize that yes, indeed, there are a lot of critical mobility needs among our country's first inhabitants.

Under the current SAFETEA-LU legislation, there is a small program of competitive grants to help tribes (by which the federal government also includes Alaska Native villages, and other groups, governments and communities officially recognized by the Bureau of Indian Affairs [BIA]) plan, capitalize and operate public transit programs to serve their residents. It's one of the most competitive programs within the Federal Transit Administration's (FTA) budget.

Having said that, this is the announcement that tribal grant application writers had better fire up their computers right now, because FTA published an announcement on May 13 that this year's funding is now available for application.

The program is the Section 5311(c) Tribal Transit Program. Only BIA-recognized entities are eligible applicants. The federal share is 100 percent of project costs. There is a total of $15.1 million available for grants. Applications are due June 28, 2010. Because Section 5311(c) is a subset of the FTA program of transit grants for rural areas, BIA-recognized entities within urbanized areas (e.g., some tribal communities within certain portions of Arizona, New Mexico, California and Washington) are not eligible to apply for these particular grants.

The Section 5311(c) program is not the only avenue for funding transit projects in Indian Country. Tribes and tribal entities are eligible subrecipients under all of FTA's formula grant programs, including Section 5311 rural transit grants and Section 5307 urban transit grants, although these grants require tribes to participate in state- or metropolitan transit programs in ways that don't always mesh with the U.S. Government's stated policy of "government-to-government" relations with tribal nations. In addition, funds allocated to tribes through the Indian Reservation Roads program are allowed to be spent on planning, capital purchases and even operations of tribal transit programs, if those are identified as priorities in tribal transportation planning documents.

More information, including a history of past funding awards for the Section 5311(c) program, can be found on the FTA web site.
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Making the Year Complete

It may seem pro forma, but it's necessary. On May 13, the Federal Transit Administration (FTA) published a notice apportioning the entirety of its FY 2010 funds. Because of the previous short-term extensions of SAFETEA-LU, FTA grantees had only partial access to these funds until now.

The notice, and other information concerning FTA's apportionments and allocations, can be found on the FTA web site.
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New Federal Rule Addresses Medicaid Transportation

The federal-state Medicaid program continues to be the largest single purchaser of public transportation services in the country. When provisions of the health reform legislation begin to kick in, Medicaid is slated to become an even larger purchaser of public transit services. Meanwhile, you may recall that there has been some controversy in the past few years, as the Centers for Medicare and Medicaid Services (CMS), the federal agency that oversees Medicaid, made efforts to implement some significant provisions under the Deficit Reduction Act of 2005 (DRA).

So, it's important to take note of a notice published in the April 30, 2010, Federal Register, in which CMS announces its final rules concerning "State Flexibility for Medicaid Benefits Packages." This rule implements a language in the DRA that gives states the option to establish Medicaid services that are "benchmarked" to other forms of insurance, such as the Federal Employees Health Benefits Program, state employees' health coverage, etc.

State Medicaid agencies will be reading this rule in detail from beginning to end. For transportation providers, the most important thing is the new regulation at 42 CFR Section 440.390, which reads "If a benchmark or benchmark-equivalent plan does not include transportation to and from medically necessary covered Medicaid services, the State must nevertheless assure that emergency and non-emergency transportation is covered for beneficiaries enrolled in the benchmark or benchmark-equivalent plan, as required under Section 431.53 of this chapter."

In other words, states continue to be responsible, by CMS regulation, for assuring non-emergency medical transportation for all their Medicaid beneficiaries, regardless of whether those people are in a benchmark plan or are served by "traditional" Medicaid.

This rule concerning "benchmark" plans in Medicaid takes effect July 1, 2010. States' requirement to assure non-emergency medical transportation is nothing new; that has been in place for many years, first as a result of federal court cases, and then as a matter of CMS regulation.

Now that medical transportation providers may be feeling some level of justified comfort that their services are not going to be ended (that was a very real fear in response to CMS' initial proposals on this rule), there are some points of this latest rulemaking that bear careful consideration.

1. "Benchmark" plans are an option that is available to states. There is no requirement that states adopt this optional approach to elements of their Medicaid programs. However, CMS estimates that 90 percent of states will have some form of benchmark programs in place within a year or two. Given the nature and scope of the newest federal health legislation, that number is probably too low, and it's much more likely that nearly every state will have some form of benchmark-like coverage in their Medicaid programs in the near future. Therefore, anyone who's trying to set up systems for the future implementation of Medicaid should read more of today's rule, and see how CMS is beginning to instruct states in their relations with insurance companies, managed care organizations, and other intermediaries.

2. The rule on benchmark plans has some reminders that CMS has an option by which states can provide Medicaid transportation through a brokered program (defined by regulation at 42 CFR Section 440.170(a)(4), in which case these transportation expenses can be covered as "medical services" (and thus reimbursed by CMS at the state's Federal Medical Assistance Percentage rate, instead of the fixed 50 percent reimbursement for Medicaid program administrative costs) even if certain requirements for medical services (such as patient freedom of choice) are not part of the "brokerage." As with the benchmark program, it is very important to remember that such Medicaid transportation brokerages are an option available to states; they are not required.

3. For the first time that I've ever noticed, the benchmark rule has a requirement for public participation in Medicaid planning. It's a narrow window, and simply requires states to solicit public comment if they are preparing a state Medicaid plan amendment in pursuit of creating a benchmark program. Maybe there's always been a requirement for public input; if so, it may be something to be more aggressively publicized.

4. In case people hadn't been following this trend, in both the previous and current presidential administrations, CMS is having options and features of Medicaid being addressed by states through Medicaid plan amendments, and not through waiver requests. Although Medicaid planning is nothing at all like transportation planning, the fact that more process-driven approaches are being dictated by the federal government may give more opportunities for meaningful involvement by stakeholders as states pursue their Medicaid strategies.

5. And for those people who follow federal interagency coordination policies, there is this verbiage, as it appears in the CMS rulemaking notice: "We do not believe that Executive Order 13330, which relates to the coordination of transportation among Federal agencies, is relevant to this rule."
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