A Proposed Rule by the Centers for Medicare & Medicaid Services

Federal Register, January 22, 2013

Medicaid, Children’s Health Insurance Programs, and Exchanges: Essential Health Benefits in Alternative Benefit Plans, Eligibility Notices, Fair Hearing and Appeal Processes for Medicaid and Exchange Eligibility Appeals and Other Provisions Related to Eligibility and Enrollment for Exchanges, Medicaid and CHIP, and Medicaid Premiums and Cost Sharing

This proposed rule would implement provisions of the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care Act), and the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA).

IV. Medicaid Premiums and Cost Sharing

A. Background

Section 1916 of the Act describes long-standing requirements for cost sharing, which apply broadly to all individuals who are not specifically exempted. Such cost sharing is limited to “nominal” amounts. Section 1916 of the Act also establishes authority for states to impose premiums on specific groups of beneficiaries with family income above 150 percent of the federal poverty level (FPL). The Deficit Reduction Act of 2005 (DRA) established a new section 1916A of the Act, which gives states additional flexibility, allowing for alternative premiums and cost sharing, beyond what is allowed under section 1916 of the Act, for somewhat higher income beneficiaries. Such alternative cost sharing may be targeted to specific groups of beneficiaries and payment may be required as a condition of providing services. Alternative premiums and cost sharing imposed under section 1916A of the Act, cannot exceed five percent of family income.

B. Provisions of Proposed Rule

2. Update to Maximum Nominal Cost Sharing (§ 447.52)

Under the authority granted under sections 1916(a)(3) and (b)(3) of the Act for the Secretary to define nominal cost sharing, at § 447.52(b) we propose to revise the maximum amount of nominal cost sharing for outpatient services, which may be imposed on beneficiaries with incomes below 100 percent of the FPL.

To simplify the rules, we propose to remove the state payment as the basis for the cost sharing charge and replace it with a flat $4 maximum allowable charge for outpatient services.

Current rules permit cost sharing for institutional care, up to 50 percent of the cost for the first day of care, for individuals with incomes below 100 percent of the FPL. We are not proposing a change but are considering alternatives for the maximum allowable cost sharing related to an inpatient stay because this is a relatively high cost for very low income people and not a service that consumers have the ability to avoid or prevent. Options under consideration include the $4 maximum applied to outpatient services, $50, or $100, which would encompass the majority of hospital cost sharing currently in effect

3. Higher Cost Sharing Permitted for Individuals With Incomes Above 100 Percent of the FPL (§ 447.52)

Proposed § 447.52 consolidates the requirements for cost sharing established under sections 1916 and 1916A of the Act. Under the statute, states may impose cost sharing at higher than nominal levels for nonexempt individuals with incomes at or above 100 percent of the FPL. Section 1916A provides that states may establish cost sharing for nonexempt services, other than drugs and ED services, up to 10 percent of the cost paid by the state for such services, for individuals with incomes between 100 and 150 percent of the FPL.

4. Cost Sharing for Drugs (§ 447.53)

To provide additional flexibility to states, and to further encourage the use of preferred drugs, we are proposing to define nominal for this purpose so as to allow cost sharing of up to $8 for non-preferred drugs for individuals with income equal to or less than 150 percent of the FPL or who are otherwise exempt from cost sharing. States will have the flexibility to apply differential cost sharing for preferred and non-preferred drugs in whatever manner they consider most effective. For example, a state may charge $2 for preferred and $6 for non-preferred drugs or $0 for preferred and $8 for non-preferred drugs.

For individuals with family income above 150 percent of the FPL, per section 1916A(c) of the Act, cost sharing for non-preferred drugs may not exceed 20 percent of the cost the agency pays for the drug.

5. Cost Sharing for Emergency Department Services (§ 447.54)

In order to make it easier for states to utilize existing flexibilities to reduce non-emergency use of the ED, at § 447.54(a) we propose to allow cost sharing of up to $8 for non-emergency use of the ED no waiver will be required.

For individuals with family income above 150 percent of the FPL, per section 1916A(e) of the Act, there is no limit on the cost sharing that may be imposed for non-emergency use of the ED.

If an emergency condition does not exist, § 447.54(d) includes the requirements for hospital screening and referral currently codified at § 447.80(b)(2), to ensure that beneficiaries have appropriate access to other sources of care, before cost sharing is imposed. Hospitals must assess the individual clinically, identify an accessible and available alternative provider with lesser cost sharing, and establish a referral to coordinate scheduling. Examples of accessible alternative providers are those that are located within close proximity, accessible via public transportation, open extended hours, and able to serve individuals with LEP and disabilities.

5. Premiums (§ 447.55)

At proposed § 447.55, we consolidate and simplify the requirements for premiums established under sections 1916 and 1916A of the Act. Proposed § 447.56(a) describes the option to impose premiums on individuals with family income above 150 percent of the FPL, as established under section 1916A of the Act, while paragraphs (a)(1) through (a)(5) describe the options to impose premiums for specific populations as established under section 1916 of the Act. Except for the minor revisions described below, we are not seeking to change current policy related to premiums.

At § 447.55(a)(5), we propose to revise requirements related to premiums imposed on medically needy individuals whose income is under 150 percent of the FPL. We removed the current income-related scale currently at § 447.52(b) and instead would provide states with the flexibility to determine their own sliding scale for establishing premiums for the medically needy up to maximum of $20 instead of the $19 in current regulation.

VII. Regulatory Impact Analysis

C. Estimated Impact of the Medicaid Premiums and Cost Sharing Provisions

1. Overall Impact

Based on our policy analysis, we do not anticipate significant costs or savings from these proposed changes at the program level given the targeted nature of the cost sharing. We believe these proposed policies would encourage less costly care and decreased use of unnecessary services, which may reduce state and federal costs for the specified services.

2. Anticipated Effects

As states better understand their options for imposing premiums and cost sharing, more states may take advantage of existing flexibilities, such as cost sharing of up to 20 percent of the cost of the service, and the option of allowing providers to deny services for unpaid cost sharing, both of which are targeted to somewhat higher income beneficiaries. Research has shown that higher-than-nominal cost sharing on very low-income individuals can have an adverse impact on access to services by discouraging or preventing such individuals from seeking needed care. However, such impacts are not likely to result from the changes proposed here as they are largely focused on services where there are more appropriate and less costly alternatives. Increased cost sharing may have a negative impact on providers, as uncollected cost sharing reduces provider reimbursement, to the extent that the beneficiary cannot or does not pay the cost sharing and services are nonetheless provided. Under the DRA provisions and this proposed rule, however, states may minimize this impact by allowing providers to deny services for failure to pay the required cost sharing in certain circumstances.


Why do patients go on the Medicaid program? Because they’re dirt poor, that’s why. To even bring up a discussion of premiums and cost sharing on these down-and-out people represents the ultimate of bureaucratic insensitivity.

Admittedly, there was some effort to target the cost sharing to encourage more appropriate and less costly alternatives, but permitting states to require up to five percent of family income for out-of-pocket costs is truly unaffordable for most of these families.

This shows how much traction the make-them-shop-with-their-own-money crowd has gained – the moral hazard freaks who are hazardous to our health care morals. There are more effective and humane means of controlling health care costs, single payer being the most obvious. We do not need to erect financial barriers that can impair access to beneficial services, for the poor or for anyone else.

Perhaps the most disturbing statement in this Proposed Rule is the following: States may allow providers “to deny services for failure to pay the required cost sharing in certain circumstances.” Deny services for failure to pay “nominal” cost sharing?! What does that say about health care justice in America?