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Medicaid Programs: State Flexibility for Medicaid Benefit Packages

Posted May 11 2010 12:00am

By Ryan S. McCrosson

Japanese leveling datum point (benchmark), Suijyuntenkatori City, Japan. Photo by katorisi

Japanese leveling datum point (benchmark), Suijyuntenkatori City, Japan. Photo by katorisi

This post seeks to further an understanding of 42 CFR 440 (“The Rule”), State Flexibility for Medicaid Benefit Packages.  Specifically, it will provide (1) an overview of what rulemaking is about, (2) the best argument in support of 42 CFR 440, (3) the best argument against 42 CFR 440, (4) and the blogger’s position on the rule.

The Rule implements provisions of § 6044 of the Deficit Reduction Act of 2005 (“DRA”), which amends the Social Security Act (“SSA”) by adding § 1937 to the definition of coverage of medical assistance under approved State plans.  Generally, The Rule provides states with increased flexibility under an approved Medicaid plan to define the scope of covered medical assistance.  Medicaid is a federally and state financed program by which medical assistance is furnished to families with dependent children and individuals who are aged, blind or disabled.  State eligibility and federal funding is contingent upon federal approval of the state’s plan.  Prior to the passage of the DRA, states were required to offer the standard minimum benefits packaged as it is defined by § 1902(a)(10)(A) of the SSA.

However, § 6044 of the DRA provides states flexibility with regard to the standard minimum benefits package.  § 6044 of the DRA adds § 1937 to the SSA.  § 1937 provides states with the option of amending their Medicaid plans to provide “Benchmark Benefit” packages or “Benchmark-Equivalent” packages instead of the standard minimum benefits package.  The following link provides the Center for Medicare and Medicaid Services’ description of, and requirements for, Benchmark and Benchmark Equivalent Benefits packages:

E 134, a U.S. Coast & Geodetic Survey (now NGS) benchmark located on North Avenue in Chicago, IL. The crossed lines at the center of the disk mark an altitude of 598.95 feet above mean sea level. The disk is stamped with its designation (E 134) and the year in which it was set (1947). A complete datasheet for this benchmark can be found at the NGS website.  Photograph taken 17 April 2004 by Jeremy A

E 134, a U.S. Coast & Geodetic Survey (now NGS) benchmark located on North Avenue in Chicago, IL. The crossed lines at the center of the disk mark an altitude of 598.95 feet above mean sea level. The disk is stamped with its designation (E 134) and the year in which it was set (1947). A complete datasheet for this benchmark can be found at the NGS website. Photograph taken 17 April 2004 by Jeremy A

A Benchmark Package is defined by § 440.330 of The Rule and generally must be equivalent to either of a Federal Employees Health Benefit Plan Equivalent Coverage, a State Employee Coverage, a Health Maintenance Organization plan or other coverage approved by the Secretary of Health and Human Services.  Specifically, § 440.330 provides:

“Benchmark coverage is health benefits coverage that is equal to the coverage under one or more of the following benefit plans:

(a) Federal Employees Health Benefit Plan Equivalent Coverage (FEHBP – Equivalent Health Insurance Coverage).  A benefit plan equivalent to the standard Blue Cross/Blue Shield preferred provider option service benefit plan that is described in and offered to Federal employees under 5 U.S.C. 8903(1).

(b) State employee coverage.  Health benefit coverage that is offered and generally available to state employees in the State.

(c) Health maintenance organization (HMO) plan.  A health insurance plan that is offered through an HMO, (as defined in section 2791(b)(3) of the Public Health Service Act) that has the largest insured commercial, non-Medicaid enrollment in the state.

(d) Secretary-approved coverage.  Any other health benefits coverage that the Secretary determines, upon application by a State, provides appropriate coverage to meet the needs of the population provided [in] that coverage….”

Triangulation Pillar Benchmark, Plynlimon, near to Plynlimon/Pumlumon Fawr [hill or Mountain], Ceredigion, Great Britain. Photo from from the Geograph project collection.
Triangulation Pillar Benchmark, Plynlimon, near to Plynlimon/Pumlumon Fawr (hill or Mountain) , Ceredigion, Great Britain. Photo from from the Geograph project collection.

A Benchmark-Equivalent Package is defined by § 440.335 and generally requires benefits within each of the following categories of basic services: inpatient and outpatient hospital service, physicians’ surgical and medical services, laboratory and x-ray services, “well-baby” and “well-child” care including age-appropriate immunizations and other appropriate preventive services, as defined by the Secretary.  The coverage must have a value that is at least equivalent to coverage under a Benchmark Package as outlined in § 440.330.  Specifically, § 440.335 provides:

“(a) Aggregate actuarial value.  Benchmark-equivalent coverage is health benefits coverage that has an aggregate actuarial value, as determined under § 44.340, that is at least actuarially equivalent to the coverage under one of the benchmark benefit packages described in § 440.330 for the identified Medicaid population to which it will be offered.

(b) Required coverage.  Benchmark-equivalent health benefits coverage must include coverage for the following categories of services”

(1) Inpatient and outpatient hospital services.

(2) Physicians’ surgical and medical services.

(3) Laboratory and x-ray services.

(4) Well-baby and well-child care, including age-appropriate immunizations.

(5) Emergency services

(6) Family planning services and supplies and other appropriate preventive services, as designated by the Secretary.”

Arguments against the rule include worries that the Benchmark or Benchmark-Equivalent Benefit packages are overly restrictive in their allowance for benefits, and therefore, will deter needy individuals from receiving appropriate care.  Specifically, the low-income populations are argued to be at risk.  Cutting against these arguments is the fact that The Rule is only an option for the state.  Therefore a state is not required to switch the standard benefit package with a Benchmark Package or a Benchmark-Equivalent Package.  Furthermore, the General Accountability Office’s assessment of The Rule has projected a $2.3 billion cost savings from 2006-2010, and, as such, arguments in favor of the rule are founded in cost savings.  The GAO’s assessment may be accessed at:

Developments since enactment include numerous state application for, and approval of, alternative benefits under the DRA.  These states Include West Virginia, Kentucky, Virginia, Idaho, Washington, Wisconsin, Kansas and Missouri.  These plans require either mandatory or voluntary enrollment and target specific subpopulations.  Wisconsin’s Badgercare Plus Benchmark Benefit Plan, for instance, requires enrollment for pregnant women and infants with incomes between 200% and 250% of the federal poverty level.  But, as with many of the plans, provides additional services to this specific subpopulation.  As such, it may be concluded that, at least in part, the documented cases of states switching to Benchmark plans derive from a desire to increase health care services for specific, at risk, subpopulations of the specific state as opposed to a general desire to cut costs.  The CMS’s assessment of these plans may be accessed at:

Because this rule maximizes state flexibility to target specific subpopulations of the needy, assures that beneficiaries get quality care and reduces the federal budget deficit, it would seem that the benefits of The Rule outweigh the possibility of diminished care.

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