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State Medicaid Directors Receive Guidelines on New Premium and Costs Sharing Options

On June 16, 2006 the Centers for Medicare and Medicaid Services of the Department of Health and Human Services sent a letter to all state Medicaid directors providing them with specific guidelines on new options states may implement regarding Medicaid premiums and cost sharing. This is one of many communications the Medicaid directors will receive clarifying the numerous changes states are now permitted to make to their Medicaid programs based on the provisions of the Deficit Reduction Act (DRA).

The most recent communication specifies how and for which populations states may charge premiums and impose cost sharing. Premiums are fees that are paid to access the program. Cost sharing is a system in which a certain percentage of a covered product or service is paid for; the remainder, sometimes called the co-payment, is the responsibility of the consumer.

Under the new guidelines, states may choose to impose cost sharing for Medicaid recipients whose family income is more than 100% above the Federal Poverty Level (FPL). They may also impose premiums for those whose income is more than 150% above the FPL. Some groups are exempt from the extra charges, including covered individuals under the age of 18. States may also, at their discretion, exempt additional groups or individuals. In addition, cost sharing cannot exceed 20% of the cost of products or services (10% for the lower income group), and neither can it exceed 5% of a family's income.

States have the option of imposing a higher co-payment for drugs that they have listed as "non-preferred," although another provision allows physicians to override this differential if they believe a patient will do better on a particular nonpreferred drug. Although many states already have a preferred drug list (PDL) for Medicaid, until now none of them has applied it to clotting factor. Last year, Pennsylvania came close to becoming the first state to restrict access to some factor products through a PDL. It backed down following a vociferous grassroots effort by the National Hemophilia Foundation (NHF), our chapters in Pennsylvania, and other community and industry groups.

The goal of the Medicaid provisions of the DRA are to reduce healthcare spending for both the federal government and the states, and ultimately to pass more of the costs to consumers. Across the country, state governments are now considering which cost-saving provisions they will try to implement. A few states, including Kentucky, Idaho and West Virginia, have already received approval on their initial plans. In addition, several others, including Florida and Vermont, have received approval for Medicaid changes under an earlier provision known as a Section 1115 waiver. Planned changes in these states include setting an annual cap for the amount each individual may receive for their healthcare. In Florida, where the state plans to initially implement the changes in two counties, the annual capitation rate has been set at $550,000.

DRA-based changes to Medicaid are not limited to the aforementioned cost-cutting strategies, and neither are they all optional. For example, states must now require those applying for Medicaid to prove their citizenship. They may deny enrollment to applicants who lack such proof. Guidelines on this provision were also issued recently; states are expected to begin enforcement in July.

NHF is extremely concerned that some of these changes to Medicaid may limit access to quality care for some consumers. We are working closely with our chapters, legislators and others in the community to closely monitor all proposed changes and challenge those that are most likely to harm consumers. We will also continue to keep the community informed as more information becomes available.

For more information on what is happening in your state and what you can do about it, please contact your local NHF chapter, or  Glenn Mones, NHF Vice President for Public Policy, at

Read a detailed issue brief on changes to Medicaid from the Kaiser Commission on Medicaid and the Uninsured >>


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