Blended Match Rate Proposal Raises Red Flags – Say Ahhh! A Children’s Health Policy Blog

Last week just as Representative Cantor was making his
dramatic exit from deficit reduction talks with Vice President Biden, rumors
started to emerge that the idea of adopting a “blended matching rate” for
Medicaid and CHIP was gaining currency. 
The Obama Administration first put forth the idea in a deficit reduction
proposal it released in April of 2011, relegating it to a single bullet point in the section on how to secure $340 billion in savings from Medicaid
and Medicare.  Originally dismissed
as a placeholder for the Administration, it now seems that we need to take a
look at what it might mean for kids and families.  It would be far easier to do this if we knew the details of
the proposals under discussion, but based on the broad outlines of the proposal
we can at least flag some of the key issues to consider.

First, what the heck is a “blended matching rate”?   Currently, the federal government
matches state Medicaid costs at an average rate of 57% and CHIP at 70% (with
major state-by-state variation). 
Under the ACA, states must expand Medicaid to adults up to 133% of the
FPL.  For these “newly eligible”
people, the federal government will offer an even higher Medicaid matching
rate.  And when we say “higher,” we
really mean it — to ease the sting of the controversial new expansion, the
federal government will pick up 100% of the cost of the expansion for the first
few years, tapering down to a still very generous 90% by 2020.  So, yes, we basically will have three
different matching rates for Medicaid and CHIP.  (True confessions: 
Starting in 2014, there will actually be one other matching rate
available to a few states that expanded coverage to adults prior to enactment
of the ACA, but we are skipping the explanation of that one.  It won’t affect things much and is
unbelievably complicated.  If you
must know about it, check out this issue brief that my colleague Martha Heberlein and I did
on the financing of the Medicaid expansion for KCMU).

Under the “blended matching rate” concept, states would
receive a single, unified matching rate for everyone they serve in Medicaid and
CHIP.  If – and this is a massive,
huge “if” – the blended matching rate proposal were only used to simplify the
matching rate structure and NOT to cut Medicaid spending, it would probably
land at roughly 61% on average for the country.  In other words, the matching rate on average for new
eligibles would drop from 100% in 2014 down to 61% and for CHIP from 70% down
to 61%.  On the other hand, the
Medicaid matching rate would increase from 57% to roughly 61% for the much
larger group of people who already are eligible for Medicaid.  Of course, the dealmakers are looking
to save lots of money from Medicaid, not just to simplify the matching-rate structure.  So, it can be expected that that the
new blended matching rate would almost surely fall below 61%.  But, to complicate things further, the
Administration has suggested it might also build in a “countercyclical” element
to the new blended matching rate. 
No details yet, but earlier versions of this idea have had Medicaid
matching rates increasing during economic downturns so states have more help
when they need it the most, and falling during good economic times.

Speaking of massive, huge “ifs,” our friends at CBPP
recently released a paper that explains why it will be virtually
impossible to create a fair blended matching rate, at least until health reform
is up and running for a few years. 
Take a look if you can – it clearly and succinctly outlines the
challenges of trying to come up with a fair formula for “blending” in the cost
of a new eligibility expansion that has not yet occurred. 

Leaving aside for now the practical question of whether
it is doable, what might a blended matching rate mean for children and
families?  Most importantly, since
the new blended match will probably be designed to achieve federal savings,
there is a significant risk it will result in a cost-shift from the federal
government to states, localities, and ultimately Medicaid beneficiaries.  We don’t know exactly how big it will
be (yet), but states could respond by cutting provider reimbursement rates,
reducing benefits, etc..  Also,
remember that Governors are likely to demand more “flexibility” to make
these and other cuts if the deficit reduction deal cuts federal Medicaid

Second, a blended matching rate is likely to result in
even deeper antagonism toward the Affordable Care Act and its expansion of
Medicaid.  With many states already
complaining about the expansion – despite the federal government picking up the
entire cost of newly eligible for the first few years – it is hard to imagine
it going over well if the nation’s Governors must finance some 40% of the costs
of the Medicaid expansion.  Of
course states would get more help with the cost of their already-eligible
population, but in the intensely controversial environment surrounding health
reform implementation, it easy to imagine that this important counterpoint will
get lost. 

Finally, for children, there is the issue of what will
happen to CHIP.  CHIP always has
enjoyed relatively generous support from the federal government.  Due to its high matching rate, every
state opted into the program and half of all states (including DC) now cover
children to 250% of the FPL or above. 
While the stability protections (aka maintenance-of-effort requirement)
preclude states from rolling back on CHIP and Medicaid coverage for children
for the moment, it is hard to imagine that Congress will be able to hold this
line if it significantly drops the CHIP matching rate.  From a kids’ perspective, some have
argued that a blended matching rate is good because it would even out federal
support for Medicaid and CHIP-eligible children.  Many children’s advocates have long supported this idea
(including me), but, frankly, we were looking to raise the bar in Medicaid, not
see CHIP dragged down. 

The Obama Administration has argued that a blended
matching rate is a promising idea because it would simplify administration of
Medicaid and CHIP.  This is an
excellent point, and if Medicaid weren’t caught up in the intensely political
debates over deficit reduction and health reform implementation, it might be
worth pursuing some policy options for streamlining matching claims in
Medicaid.  But, in the current
environment where there already is enormous controversy surrounding the ACA’s
Medicaid expansion and tremendous pressure to cut Medicaid, it is a risky

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