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New Medicaid Eligibles in Seven States Will Have a Unique Benefit Package

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In 2014, most states are choosing to cover new Medicaid eligibles with the same benefit package that current eligibles receive.
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However, new eligibles in seven states will receive a different benefit package as a result of flexibility created by the ACA. The ACA mandated that new eligibles should receive Alternative Benefit Plans (ABPs) that tie generosity of benefits to commercial benchmarks, but gave states flexibility to design custom, Secretary-approved benefits. States had until March 31 to submit state plan amendments (SPAs) defining their ABPs for retroactive coverage effective Jan. 1.

Due to the complexity of administering two separate benefit packages within Medicaid, most 2014 Medicaid expansion states (18 states and Washington, D.C.) have used the custom benefit option to maintain a single benefit package for all Medicaid enrollees-new and old. In some cases, states are covering additional benefits, such as extra preventive or habilitative services, to meet other ACA requirements. A few states stray from this trend, though. Three states have selected commercial benchmarks plans as the basis for their ABPs and four more states are using the Secretary-approved coverage option to create a custom benefit package that is different from their current offerings.

Over time, states could change their ABPs for new eligibles and may be more likely to select benchmarks that are different from their current benefit package. In this first year of the ACA eligibility expansion, the simplest option for states is to use the same benefit package for all eligibles, avoiding the need to alter managed care contracts and track enrollees separately. Furthermore, since newly-eligibles’ coverage is 100 percent federally funded through 2016, little incentive exists for states to narrow benefits. However, as federal funding decreases in 2017, it is likely that states will move toward less generous benefit packages, in particular affecting drug coverage for newly-eligible individuals.

A final rule from July 2013 clarified that outpatient prescription drug coverage under the ABP must, at a minimum, offer drug coverage consistent with the state’s essential benefit standards, but that manufacturer drug rebate agreements still apply for these individuals. This is dramatically different from the drug benefit in traditional Medicaid and means states or plans could establish closed formularies and exclude coverage for some drugs.

This article was excerpted from the April issue of Medicaid Monthly, which tracks the latest federal and state Medicaid activity in one comprehensive source. For access, contact Tiernan Meyer at

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