Letter to Governors from HHS Secretary Sebelius Outlining State Flexibility and Federal Support Available for Medicaid

February 3, 2011

Website Link  http://www.hhs.gov/news/press/2011pres/01/20110203a.html

News Release

Thursday, February 3, 2011

Contact: HHS Press Office
(202) 690-6343
Sebelius outlines state flexibility and federal support available for Medicaid


HHS to increase efforts to create savings for states; ensure sustainability and quality in Medicaid program

WASHINGTON - Today, HHS Secretary Kathleen Sebelius sent a letter to governors outlining the flexibility and support available to states that are examining how to make Medicaid programs more efficient while meeting pressing health care challenges in the face of difficult budget circumstances.

"In light of difficult budget circumstances, we are stepping up our efforts to help you identify cost drivers in the Medicaid program and provide you with new tools and resources to achieve both short-term savings and longer-term sustainability while providing high-quality care to the citizens of your states," Sebelius wrote in the letter. "We are committed to responsiveness and flexibility, and will expedite review of state ideas."

Over the past two years, the administration has worked to provide additional support for states to manage their Medicaid program by working with Congress to increase federal support for the states through an enhanced federal match for Medicaid (known as the Federal Medical Assistance Percentage or FMAP), and, at the request of many governors, extending the enhanced FMAP policy through June 2011. In 2009 alone, due to the enhanced FMAP, state Medicaid spending fell by ten percent even though enrollment in Medicaid climbed by seven percent due to the recession.

In addition to this financial support, the administration has taken administrative steps to open up lines of communication with states, lower the paperwork burden states face in administering the program, and accelerate the review process for state plan amendments.

The letter also outlines the substantial flexibility that states have to design benefits, service delivery systems, and payment strategies, without a waiver. In 2008, roughly 40 percent of Medicaid benefits spending, $100 billion, was spent on optional benefits for all enrollees, with nearly 60 percent of this spending for long-term care services. In addition, the letter describes new initiatives that HHS will pursue with states, and offers state-specific technical support.

Some of the key areas of potential cost savings include:

* Changing Benefits. States can generally change optional benefits or limit their amount, duration or scope through an amendment to their state plan. In addition, states may add or increase cost sharing for services within limits.
* Managing Care for High-Cost Enrollees More Effectively. Just 5 percent of Medicaid beneficiaries account for more than half of all of Medicaid's costs. These individuals often have fragmented care that contributes to higher costs. A new option to provide "health homes" to people with chronic illnesses, and initiatives to reduce unnecessary hospital readmissions, are just some of the strategies that can help improve care and lower costs.
* Purchasing Drugs More Efficiently. States have broad flexibility to set their pharmacy pricing. HHS will create a first-ever national database of actual acquisition costs that states can use to determine state-specific rates. HHS will also share proven approaches that states have used to drive down costs.
* Assuring Program Integrity. States will be able to use federal audit contractors to save funds and consolidate auditing efforts and will benefit from new, cutting-edge analytics, like predictive modeling, being developed to prevent fraud in the Medicare program. HHS' Medicaid Integrity Institute is preparing a series of webinars for states to share best practices for assuring program integrity.

The full letter can be found at this link, http://www.hhs.gov/news/press/2011pres/01/20110203c.html.