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Early plan redesigns raise concerns

August 1, 2006
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Benefit changes in 2 states signal what is likely to come in the other 48

In February, the President signed the Deficit Reduction Act (DRA), which includes many substantial changes to Medicaid. At the request of the National Governors Association, federal lawmakers provided states with some flexibility in customizing Medicaid benefits through the State Plan Amendment process. Governors declared that they needed this flexibility to modernize Medicaid and to control Medicaid spending.

The Centers for Medicare and Medicaid Services (CMS) issued guidance to states on March 31, and West Virginia and Kentucky received approval for State Plan Amendments by May 3—within two weeks of their submissions to CMS.

The DRA allows states a number of options to redesign Medicaid benefit packages. These options, known as “benchmark plans,” include a general category called “Secretary Approved Coverage.” The DRA exempts certain populations from benchmark plans, including seniors, pregnant women, and adults who qualify for Medicaid because of disabilities. However, mental illness and addiction disorders do not restrict themselves to these populations. For example, a low-income parent who qualifies for Medicaid because of TANF benefits could have either a mental illness or an addiction disorder requiring intensive treatment.

Early examples of tiered benefit packages indicate that access to mental health and addiction treatment services likely will be complicated for individuals in benchmark plans. Let's examine the concerns arising from the first two out-of-the-box plans CMS approved under the benchmark plans' Secretary Approved Coverage category.

West Virginia

West Virginia received CMS approval to implement tiered benefit packages for parents and children enrolled in the state's Medicaid program. These beneficiaries will have access to either a basic or an enhanced benefit package. Access to the enhanced package is subject to the beneficiary or his/her guardian voluntarily signing a Medicaid Member Agreement, which asks beneficiaries to show up for doctor appointments, use emergency rooms only for emergencies, and adopt healthier lifestyles. In return, the state will continue to provide them with the full package of Medicaid benefits. Providers are responsible for monitoring beneficiary compliance with the Medicaid Member Agreement. “Noncompliance” results in expulsion from the “enhanced” benefits package for one year.

If Medicaid beneficiaries do not sign the agreement or are found to have violated it, they will be shifted out of the enhanced plan and placed in the basic package, which has restrictions on medications and services. Most alarming is the fact that the basic benefit package does not cover mental health or addiction treatment services. Other services not available in the basic benefit package include nutrition education and diabetes care, as well as limitations on dental, hearing, and vision services and on the number of prescriptions that can be filled in a month.

West Virginia's approach to Medicaid reform raises serious concerns for adults and children with mental illnesses and for providers. Given that effective medical care depends on an open relationship with one's provider, reliance on provider monitoring of client compliance with the Medicaid Member Agreement raises ethical, legal, and medical concerns. How open will beneficiaries be with providers? How are providers to hold children responsible for their parents' actions?

Furthermore, the future of Medicaid's Early and Periodic Screening, Diagnostic, and Treatment mandate is uncertain. Under EPSDT, states must ensure that all children enrolled in Medicaid receive regular screening for vision, hearing, dental, and mental illnesses. EPSDT also requires that states provide all necessary follow-up diagnostic and treatment services. West Virginia's basic benefit package seems to violate the requirements of EPSDT.

It is surprising that CMS would approve a plan that flies in the face of EPSDT, especially for one of the first programs out of the box. It raises the question as to what standard CMS is using to assess State Plan Amendments. It seems that increased state flexibility also implies impunity from existing law.


Kentucky is in the midst of a total redesign of its Medicaid program, which has been renamed KyHealth Choices. Through State Plan Amendments and waivers, KyHealth Choices will consist of four tailored benefit packages, incentivized wellness benefits, and increased cost-sharing requirements. The program will involve the redesign of behavioral health and long-term care services and create “Get Healthy Benefits.”

Kentucky describes Get Healthy Benefits as those that allow individual members, who have specifically targeted diseases, to access additional benefits by participating in certain healthy practices as identified by the commonwealth. These benefits can be used toward accessing additional dental and vision services or obtaining nutritional or smoking-cessation counseling.

Using additional benefits to drive healthy behavior and compliance sounds good on paper, but it is unfair given the complications associated with poverty, such as lack of transportation, and the potential for untreated mental illness and addiction disorders as a result of limited benefit packages. One wonders whether this approach really will save the state money.

More Changes Ahead

We clearly are in the midst of Medicaid upheaval. If the first two plans have raised so many concerns, what are the implications for the rest of the states? Other plans are likely to follow suit and further scale back benefits under Medicaid. Providers, advocates, consumers, and families must work harder and work together to ensure that the Medicaid of tomorrow will continue to meet the needs for mental health treatment.