Feds reject Medicaid cuts, but more could be coming

The federal government has rejected the state's controversial request to tighten Medicaid eligibility, a change that had been expected to leave more than 13,000 poor adults without health care coverage.

"The [proposal] would eliminate coverage for as many as 13,381 very low-income individuals for an approximate one year period, which is not consistent with the general statutory objective to extend coverage to low-income populations," Marilyn Tavenner, acting administrator of the federal Centers for Medicare and Medicaid Services, wrote in a letter to social services Commissioner Roderick L. Bremby.

Advocates for Medicaid recipients, who had been expecting the rejection, applauded the decision Friday. But many are now focused on trying to stop another proposal by Gov. Dannel P. Malloy that could cut even more people from the program.

"I hope that the administration has learned something from this experience, but unfortunately the governor's proposal to end Medicaid coverage for [certain low-income parents] is still being aggressively pursued," said Sheldon Toubman, an attorney with the New Haven Legal Assistance Association who had sought an injunction to stop the cut Tavenner rejected.

Toubman noted that the new cut the administration is pursuing is estimated to affect about 40,000 people, three times as many as would have lost coverage under the plan rejected Friday.

The new cut the administration is proposing would affect certain parents who get coverage through the Medicaid program known as HUSKY A. Beginning on Jan. 1, 2014, those parents will be eligible for federal subsidies to buy coverage through a new marketplace for health insurance known as the exchange. By having those parents buy subsidized coverage rather than getting free Medicaid, the administration is counting on saving close to $66 million in the upcoming two-year budget.

But advocates say the plan would make it harder for those parents to get coverage because they'd have to pay premiums and copayments for their insurance, which they might not be able to afford. Advocates also say it's a bad idea for parents and their children to be covered under separate insurance plans. Toubman said some children will likely end up uninsured if their parents lose HUSKY coverage.

That cut doesn't require federal approval, although legislators will have a say on whether to include it in the budget they ultimately adopt.

HUSKY A currently covers children and parents who earn up to 185 percent of the poverty level. The federal health reform law requires the state to expand Medicaid as of Jan. 1, 2014, to all adults earning up to 133 percent of the poverty level. Malloy's proposal would make the state's income limit for adults in Medicaid match the federal minimum requirement, eliminating coverage for the estimated 40,000 parents earning between 133 percent and 185 percent of the poverty level.

The plan the federal government rejected would have tightened eligibility in another program, known as Medicaid for Low Income Adults, or LIA. It serves poor adults who don't have minor children. Since the program began in 2010, enrollment and costs have grown beyond what officials had anticipated.

The proposal would have restricted the program to people with less than $10,000 in assets. Currently, assets aren't taken into account in determining eligibility. In addition, the administration proposed counting parental income and assets in determining eligibility for people under 26, based on the premise that some families with the means to cover their young adult children were instead relying on the free public program for their health care coverage.

Legislators last year approved a budget that counted on $50 million in savings from those eligibility changes. But they also signaled their discomfort with the idea months later when two legislative committees declined to vote on the state's application to the federal government. The two committees -- human services and appropriations -- have the ability to veto waiver applications, and although they didn't exercise that power, their decision not to approve the administration's request was seen as a statement of skepticism.

"The legislature approved the measure during the 2012 session as a way to help cool Medicaid costs but, as time went on, it was becoming increasingly apparent that CMS was not going to be receptive in the end," Department of Social Services spokesman David Dearborn said Friday. "We submitted the waiver application last summer and received the official notification today."

Even if those changes had been approved, they would have been short-lived because the state must expand Medicaid to cover all adults earning up to 133 percent of the poverty level as of Jan. 1. That's more than twice the income limit for LIA.

At that point, the federal government will pay the full cost of Medicaid coverage for the newly eligible members, including LIA recipients. After three years, the federal reimbursement level will drop gradually until it hits 90 percent. Currently, the federal government reimburses the state for 50 percent of the costs of its Medicaid program, and that level won't rise for people previously covered, like the parents in HUSKY.

Follow Arielle Levin Becker on Twitter @ariellelb.