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Feds Introduce State Medicaid Saving Plans Feds Introduce State Medicaid Saving Plans

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Feds Introduce State Medicaid Saving Plans


Health and Human Services Secretary Kathleen Sebelius(Chip Somodevilla/Getty Images)

The federal government, in an effort to help states reduce Medicaid costs, announced two new ways for states to pay for people enrolled in both Medicare and Medicaid.

Health and Human Services Secretary Kathleen Sebelius said on Friday the agency's aim is to help states cut costs without eliminating benefits or kicking people off the rolls. But Sebelius could not avoid talking about this weekend’s upcoming negotiations between the White House and congressional leaders on a deal to reduce the deficit and raise the debt ceiling. Any plan is widely expected to cut funds from Medicaid in some way.


“There’s no question that there is discussion under way on how we deal with health care entitlement programs,” Sebelius said in a conference call with reporters. “States who want to take on Medicaid costs now have an incredible toolbox in which they can choose tools that work for them.”

Sebelius defended an administration plan to use one formula to determine how much money states get from the federal government, as opposed to the current system of using different formulas for different populations. The so-called “blended rate” is one potential Medicaid cost-saver being discussed in the deficit talks.

“I think there are ways that a blended rate could provide some administrative simplification for states, but other proposals that have been tossed around … use it as a way to reduce federal contributions,” Sebelius said. “It doesn’t necessarily lower contributions to states. It really depends what the premise is.”


The new payment models announced by HHS on Friday aim to get states and the federal government to work together and share in any savings generated when treating people who are both Medicare and Medicaid enrollees. Known as “dual eligibles,” people in both programs are often the sickest and costliest patients to cover.

There is little coordination between the federal government and states for the dual eligibles, and each program picks up different pieces of their health-spending tab. For example, Medicare, which is fully funded by the federal government, pays for hospital admissions; Medicaid, which is split between state and federal funds, pays for nursing-home stays.

One new financial model would tie states, the federal government, and insurance companies together, with each receiving a set amount of money to cover all health care for each enrollee.

Another would have states and the federal government sign an agreement to share in savings generated by efforts to reduce costs and improve quality of care. For example, under the current system, states that help keep dual eligibles out of the hospital see little financial gain from their efforts, because Medicare pays for hospital stays. That could change under this new plan.


HHS also announced on Friday a demonstration project for states to bring down hospital admissions from nursing homes and set up a technical center to assist states that want to bring down costs.

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