A final rule from CMS gives states what it calls “unprecedented” control over designing their Medicaid programs, including adjusting benefit packages to more closely match them with patient needs.

The rule implements provisions of the Deficit Reduction Act of 2005, the latest regulation to implement the administration’s agenda of aligning Medicaid more closely with private insurance, and giving states more control over their Medicaid benefits. Many of those regulations, however, are the subject of a congressional moratorium.

“This new rule recognizes that states are in the best position to design plans that provide Medicaid beneficiaries better health care for the same or even lower cost,” said CMS Acting Administrator Kerry Weems, in a prepared statement. “With this flexibility, beneficiaries will have more choices and greater control over their health care decisions.”

States can now offer beneficiaries health care that has the same value as plans that are being offered to other populations in the state, via alternative benefit packages called “benchmark plans.” These plans are models states can use to design new programs, and provide similar flexibility given to states under the State Children’s Health Insurance Program (SCHIP). Benchmark coverage includes:

• The standard Blue Cross/Blue Shield preferred provider option service benefit plan under the Federal Employees Health Benefit Plan;
• State employee coverage;
• Coverage that is offered by the largest commercial health maintenance organization in the state; or
• Coverage that the Secretary of Health and Human Services approves.

These options let states ensure benefits meet the specific patient needs. In some cases, state employee benchmark coverage may be more generous than the state Medicaid plan. Approved coverage may offer the opportunity for disabled individuals to obtain integrated coverage for acute care and community-based, long-term care.

For individuals who cannot afford employer health insurance premiums, states have the option of paying part of the employee premium to make it more affordable, so the employee can maintain private coverage. These proposed rules also give states the flexibility to provide wrap-around and additional benefits, such as dental coverage.

CMS also published a final rule that gives states the flexibility to change current premiums and cost sharing requirements. Individuals with family income below 100 percent of the federal poverty level can be charged only “nominal” cost sharing and premiums. Higher out-of-pocket charges can be charged to individuals with incomes above 150 percent of the FPL. As in SCHIP, all cost sharing must be limited to no more than 5 percent of the family’s income. The 2008 FPL for a family of four is $21,200.

Both final rules are available from the Federal Register.