New Rule Lets States Charge Premiums, Raise Medicaid Copays

A new federal rule allows states to charge Medicaid beneficiaries premiums and higher copayments for physicians' services, hospital care and prescriptions drugs, the New York Times reports. The rule, which was published on Tuesday in the Federal Register, implements a law (S 1932) that President Bush signed in 2006.

The rule allows states to implement a sliding scale for premiums and copays, the total of which cannot exceed 5% of a family's income. Under the new rule, states in certain cases can deny care or coverage to Medicaid beneficiaries who do not pay their premiums or their portion of the costs for particular items or services.

For Medicaid beneficiaries with incomes at or below the federal poverty level, states can require copays of up to $3.40 for a physician visit or other services. That $3.40 maximum will be updated each year in accordance with medical inflation.

For Medicaid beneficiaries with incomes between 100% and 150% of the poverty level, states can require beneficiaries to contribute up to 10% of what the state pays for a service.

States can require beneficiaries with incomes above those levels to contribute up to 20% of what states pay for a service.

The new rule allows states to use copays to encourage the use of preferred brand-name drugs and to discourage the use of emergency departments for primary care.

Implications

The Bush administration estimated that over five years Medicaid beneficiaries will pay more than $1.3 billion in copays.

Estimated five-year savings will total $1.4 billion for the federal government and $1.1 billion for states as a result of the copays and reduced services.

According to the Congressional Budget Office, about 13 million low-income U.S. residents, or about 20% of Medicaid beneficiaries, will encounter new or higher copays.

The administration noted that "some individuals may choose to delay or forgo care rather than pay their cost-sharing obligations."

Help for States

The Times reports, "Higher copayments may be an attractive option for states struggling to rein in Medicaid costs in the current fiscal crisis" because "[r]ather than restricting eligibility, states can charge more."

In a preamble to the final rule, the administration said, "This flexibility will help protect the program from cutbacks in a time of tight state budgets."

CMS spokesperson Jeff Nelligan last week said, "States are in the best position to determine the appropriate levels of cost sharing. This rule gives states more tools to help slow spending growth, while maintaining needed coverage, which was the intent of Congress."

Reaction

Sara Rosenbaum, a professor of health law and policy at George Washington University, said, "It's a tremendous break with the past in terms of what low-income people are expected to pay for their health care."

Public health experts said that people delaying or forgoing care could result in more serious and costly health problems in the future, according to the Times.

The rule has been opposed by groups including the American Academy of Pediatrics, the National Association for Home Care and AARP, arguing that higher copays will make it increasingly difficult for low-income children, homebound people and older U.S. residents to receive necessary care (Pear, New York Times, 11/27).