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What's ahead for Medicaid

April 1, 2006
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The Deficit Reduction Act could have broad consequences for mental health consumers and providers

Governors, state legislators, members of Congress, providers, and healthcare advocates have used Medicaid to meet a variety of healthcare needs. Indeed, Medicaid fulfills many roles. It is a health insurance program for 25 million children and 14 million adults, most of them low-income working parents. Medicaid is the largest purchaser of long-term care and personal care services for older Americans and the primary payer for community-based mental health services. Medicaid has proven to be a dependable and nimble healthcare program.

Yet not everyone is happy with Medicaid. There are conflicting calls for Medicaid to be more flexible in the services it offers, but more stable in its costs. Congressional budget reconciliation legislation, known as the Deficit Reduction Act (DRA) of 2005, has set the stage for a potentially massive upheaval of Medicaid, affecting both mental health consumers and providers.

The DRA is far-reaching legislation that touches many areas of federal spending and policy, including farm subsidies, student loan policy, Medicare, Medicaid, SCHIP, and others. The legislation passed the Senate only after Vice-President Cheney cast the tie-breaking vote. Because of a procedural move, the DRA had to pass the House twice—the second time it passed by only two votes. President Bush signed it into law on February 8, 2006.

The DRA includes a number of changes to Medicaid. Mandatory provisions include new proof of U.S. citizenship requirements and changes to case management. The legislation also creates a number of options for states regarding cost sharing, premiums, and benefit package design. Each of these changes could disrupt the services offered by community behavioral health agencies to persons with mental illness who qualify for Medicaid.

Proof of Citizenship

Effective July 1, 2006, all persons applying for Medicaid for the first time, as well as persons being recertified for Medicaid, must provide proof of U.S. citizenship. The statute indicates that the primary documents necessary to prove citizenship are U.S. passports or birth certificates. For naturalized citizens, naturalization papers would be accepted. The statute allows some flexibility for other documents and gives the secretary of the Department of Health and Human Services (HHS) some discretion in determining allowable documents. However, the statute indicates that allowable documents must be of a type that requires proof of citizenship when issued, effectively meaning birth certificates or passports.

Under current practice, most state Medicaid programs ask applicants to indicate if they are U.S. citizens and allow self-attestation as proof of citizenship. A state has the ability to investigate if it believes a person is not a U.S. citizen. Legal immigrants must produce written proof of their immigration status, but a recent report by the HHS Office of Inspector General (OIG) found no substantial evidence that illegal immigrants were claiming to be U.S. citizens and successfully enrolling in Medicaid. In fact, the OIG recommended against requiring applicants to produce U.S. citizenship documentation; the OIG suggests that since this is not a prevalent problem, it is not worth the time and money to require proof of citizenship.

For all practical purposes, all 51 million Medicaid beneficiaries will have to produce proof of U.S. citizenship sometime between July 1, 2006, and July 1, 2007, and at every recertification date in the future. There are no exceptions to this requirement. Therefore, persons displaced by natural disasters, persons in nursing homes, the homeless, and persons with serious mental illness all must produce proof of U.S. citizenship. This requirement presents a daunting challenge for Medicaid beneficiaries, as well as for case management staff within community mental health centers, for state Medicaid agencies, and for city and county offices charged with record maintenance.

It is unclear how the Centers for Medicare and Medicaid Services (CMS) will pursue implementation of this requirement. The statute directs the HHS secretary to implement an outreach campaign. It also would be customary for HHS to issue regulation or some other guidance to the states. As of this writing, HHS had not given such direction.

Case Management

Case management is a foundation service within community mental health centers, providing staff and consumers the opportunity to gain access to needed medical, social, educational, and other services. A state can target case management to a particular client population or to particular areas within the state. The DRA offers a new definition of case management services that clarifies their purpose and intent.

The DRA goes on, however, to indicate that case management and targeted case management are only eligible for federal financial participation (i.e., reimbursement) if “there are no other third parties liable to pay for such services, including reimbursement under a medical, social, educational, or other program.” The Congressional Budget Office (CBO) scored the savings for this provision as $760 million over five years. The effective date for this provision is January 1, 2006, and the statute offers an expedited regulatory process for this provision.

There is much concern that the statute's language will be interpreted to mean that if any other medical, social, or educational program can pay for case management services, then Medicaid will not. As of this writing, CMS had not issued guidance.