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Vorys Health Care Advisors

The Hydraulics of Ohio’s Medicaid Expansion

Posted in Affordable Care Act, Medicaid

By Daphne Saneholtz and Sylvia Brown

Caution: this is a technical post – not for the faint of heart!

In our last post, we discussed Governor Kasich’s plan to seek approval from the Controlling Board to appropriate funds to enable roughly 275,000 Ohioans to gain health insurance coverage under Medicaid.  But how will this really work?

Authority to Seek An Amendment to Ohio’s Medicaid State Plan and to Implement Expansion

On September 26, 2013, the director of the Ohio Department of Medicaid submitted a State Plan Amendment (SPA) seeking to extend Medicaid coverage to additional populations.  The State Plan is Ohio’s contract with the federal government that specifies all of the eligibility groups (mandatory and optional) that the state covers, the services it offers under Medicaid, and other structural components of the state’s Medicaid program.  Changes to the State Plan must receive approval from the federal government.  The Centers for Medicare & Medicaid Services (CMS) approved the amendment on October 10, 2013.  As a result, federal funds are available to extend Medicaid coverage starting January 1, 2014, to certain individuals. 

The department’s pursuit of the SPA is authorized under Ohio law.  Section 5162.07 of the Ohio Revised Code (ORC) gives the Medicaid director express authority to seek a State Plan Amendment without requiring additional legislation.  Likewise, ORC section 5163.03 permits the state to implement expansion without requiring the department to seek additional legislative authority. This section specifies that “the Medicaid program shall cover all mandatory eligibility groups” and “may cover any of the optional eligibility groups.”  Ohio Medicaid may not cover an optional group that state statute prohibits, but no such prohibition exists for the group that would be added to under the expansion.

A Little (Recent) History About the Medicaid Expansion Group

The Affordable Care Act amended the Social Security Act (“the Act”) to add a new mandatory Medicaid eligibility group.  Specifically, the ACA added section 1902(a)(10)(A)(i)(viii) to the Act.  Section 1902(a)(10)(A)(i) is the section of the federal law that lists the Medicaid eligibility categories that states must cover.  They can, at their election, agree to cover additional, optional Medicaid eligibility categories as well.

Section 1902(a)(10)(A)(i)(viii) expands Medicaid eligibility to so-called “group eight” adults (derived from the section of the Act that governs them).  These are people who are under 65 years of age, are not pregnant, are not entitled to or enrolled in Medicare, are not otherwise eligible for Medicaid, and whose income does not exceed 138% of the poverty level.

Under the ACA’s Medicaid expansion, each state is required to expand Medicaid eligibility to “group eight” adults.  As specified in the ACA, states that choose not to expand Medicaid eligibility to this group will lose all of their federal Medicaid funding.  (The percentage of federal contribution varies by state, but averages 57%.)

The U. S. Supreme Court’s ruling on the constitutionality of the ACA itself effectively makes the expansion optional.  In short, the Supreme Court upheld the constitutionality of the Medicaid expansion and indicated that the federal government can offer enhanced federal funding to those states that want to expand Medicaid, but it cannot penalize a state that chooses not to participate in the expansion by taking away all of its federal funding for Medicaid.

Once the Court ruled on the ACA, states began to decide whether to participate in the (effectively optional) expansion.  In Ohio, the Governor expressed support early on for participating in the expansion.  In fact, the executive proposal for the state fiscal year (SFY) 2014-2015 operating budget included a provision to expand Medicaid to “group eight” adults.

During the budget process, however, the legislature removed language that authorized the Medicaid expansion.  The legislature continues to introduce various pieces of legislation that seek to reform and/or expand Medicaid.  Subsequently, a group of advocates initiated proceedings to place the expansion provision on the November 2014 ballot.

Recently, the Governor also sought to move forward on another track – working with the federal government to implement the expansion and simultaneously working through the state Controlling Board to appropriate federal funds to pay for the expansion.

What Ohio Law Seems to Say About Covering “Group Eight” Adults

As discussed above, under ORC section 5163.03, Ohio law acknowledges that the state is required to cover Medicaid eligibility groups deemed mandatory by federal law.  This section also acknowledges that the state may cover any Medicaid eligibility group deemed optional by federal law.  Thus, whether “group eight” adults are perceived to be a mandatory eligibility group (as codified in federal law) or an optional eligibility group (as specified by the U. S. Supreme Court), the Ohio Revised Code already provides the authority to cover these individuals.

What does the Controlling Board have to do with all this?

Under the ACA’s Medicaid expansion, the federal government will pay 100% of the cost of the expansion population at first and eventually reduce the funding to cover 90% of the costs of this population in later years.  Ohio Revised Code section 131.35 authorizes a state agency to spend federal funds pursuant to an appropriation of the General Assembly or authorization by the Controlling Board.  The department has determined that the state needs Controlling Board approval to authorize it to spend additional funding –the enhanced federal Medicaid reimbursement that the state will receive beginning January 1, 2014 – above levels currently set by the legislature as part of the SFY 2014-2015 operating budget.

On October 11, 2013, the Ohio Medicaid director submitted a Controlling Board request seeking authorization to spend federal-only funds to extend Medicaid coverage in Ohio beginning January 1, 2014. To receive Controlling Board approval, four of the Board’s seven members must vote in favor of authorizing the spending of the federal money.