DSS considers restricting “financially unsustainable” Medicaid program, drawing rebuke from advocates

Warning that a portion of the state’s Medicaid program has become “financially unsustainable,” state officials have outlined ways to limit enrollment and scale back benefits in a “concept paper” sent to federal officials.

The move has drawn criticism from advocates for patients and low-income residents, who say it would put some of the lowest-income adults in the state into a “second-tier health care program,” violating the principles of Medicaid and federal health reform and increasing the number of uninsured.

At issue is the Medicaid Low-Income Adult program, or LIA, which was created shortly after federal health reform passed in 2010. It covers adults without minor children who have incomes up to 56 percent of the poverty level. Before the program was created, Connecticut covered low-income adults through a state-funded program. Officials anticipated that moving them into Medicaid, which the federal government partially funds, would save the state money.

But instead, the program has become a major financial problem for the state Department of Social Services, with far more enrollees than anticipated. LIA grew from 46,156 participants in June 2010 to 73,915 in August 2011, a 60.1 percent increase. Last fiscal year, the program had a $139 million shortfall, and DSS is projecting it will produce a $90 million shortfall this fiscal year.

“[G]iven current budgetary conditions, Connecticut estimates that caseload growth in the Medicaid LIA program has created an expansion program that has become financially unsustainable through the end of 2013,” state officials wrote in the concept paper sent to the federal Center for Medicare and Medicaid Services, which must approve any significant changes to the program.

The financial strain of the program is expected to be temporary. Beginning in 2014, the federal government will fully fund the cost of Medicaid coverage for people made newly eligible after the health reform law passed — including those in LIA. The federal reimbursement levels will fall beginning in 2017, but won’t dip below 90 percent — far higher than the 50 percent reimbursement the state now gets for the program.

But in the interim, DSS is contemplating ways to change LIA, including limiting the benefits provided and tightening the eligibility requirements. The changes would take effect Feb. 1.

The state-run coverage program that LIA replaced was only open to adults with less than $1,000 in assets, but LIA has no asset limit.

In the concept paper, DSS proposed adding back an asset limit, although it did not specify a level. The department is also seeking to count family income in determining eligibility. DSS said some parents are using LIA to cover children in college.

DSS also asked for flexibility to limit additional enrollment if funding does not allow it, although the department noted that it expects that available funding would cover those who would be eligible under the proposed new rules.

Under the plan outlined in the concept paper, DSS would also provide a different benefits package to people in LIA. Changes under consideration include limiting the number of outpatient hospital visits, non-emergency emergency room visits, home health visits and occupational, physical and speech therapy services. Nursing home coverage could also be limited to 90 days per admission, and the authorization necessary to get some pharmaceuticals could be increased.

In a letter accompanying the concept paper, DSS Commissioner Roderick L. Bremby wrote that state officials explored several ways to control growth in the program, including adding an asset test, counting family income for 19- and 20-year-olds, limiting the length of nursing home admissions and establishing an alternative benefit package. But he noted that only the last appears to be allowed under current law, and would not likely result in significant savings.

To make the changes, DSS would have to get a waiver to run a demonstration project, which allows states flexibility in running Medicaid programs.

“If approved, we believe that this proposal would enable Connecticut to preserve its commitment to providing quality health care coverage to the State’s most vulnerable single adults in a manner that is financially sustainable,” Bremby wrote.

On Wednesday, advocates wrote to federal officials asking them to advise the state that it could not get a waiver for the proposed changes.

“Limiting benefits and threatening the end of the entitlement for working-age adults, particularly during a period of high unemployment, would take Connecticut in exactly the wrong direction,” the letter said.

It was signed by representatives from the Legal Assistance Resource Center of Connecticut, New Haven Legal Assistance Association, Advocacy for Patients with Chronic Illness, Connecticut Legal Rights Project, Mental Health Association of Connecticut, Connecticut Legal Services, Connecticut Health Policy Project, Connecticut Association for Human Services, National Alliance on Mental Illness, Greater Hartford Legal Aid, Connecticut Voices for Children and Connecticut AIDS Resource Coalition.

Separately, state Healthcare Advocate Victoria Veltri wrote to Bremby that the design outlined in the concept paper is extreme. If allowed, she wrote, the plan “would shred the safety net for over seventy thousand people currently enrolled in the program.”

And while the state is moving to implement health reform to reduce the number of uninsured residents, the LIA proposal would increase the number of people without health insurance, Veltri wrote.

In their letter, the advocacy group representatives wrote that high enrollment in LIA demonstrates its importance, and that DSS’ proposal would weaken a program that meets a real need while paving the way for health reform to be fully implemented. They also wrote that recent enrollment figures indicate that enrollment has fallen in the past three months.

“Medicaid LIA coverage offers a critical safety net and has limited the number of uninsured in the state,” they wrote.

Allowing DSS to limit enrollment, they added, “would undermine the bedrock Medicaid principle of an entitlement for all those who meet the strict eligibility requirements of the program.”

DSS spokesman David Dearborn said, “We are aware that going in this direction would have an impact on the people we serve. However, as the legislature acknowledged in giving DSS authority to consider an alternative benefits package, the cost of Medicaid for Low-Income Adults has grown at an unsustainable level. We’re doing our best to avoid going down this road, but we are staring financial reality in the face.”