By Katherine Jett Hayes

Background

Maintenance of Effort

The Affordable Care Act (ACA), in addition to expanding coverage to individuals with incomes below 133 percent of the federal poverty level (FPL), includes provisions designed to preserve existing Medicaid coverage — known as the maintenance of effort provision, or MOE^[1] — until the ACA is fully implemented. The ACA’s MOE provision requires states to maintain their current Medicaid eligibility standards, methodologies, and procedures until the Secretary of the Department of Health and Human Services (HHS) determines that a state Exchange is fully operational. For children, the ACA’s MOE extends through September 30, 2019. States may reduce eligibly for certain non-pregnant, non-adult populations with incomes over 133 percent of poverty, if the state certifies to the Secretary that the state will operate a budget deficit, or is projected to have a budget deficit. The HHS Centers for Medicare and Medicaid Services (CMS) has provided guidance to states on the MOE. For more information see previous Implementation Briefs here and here.

Legal Challenges to the ACA and Subsequent Guidance

Twenty-six states challenged the constitutionality of the Medicaid expansion included in section 2001(a) of the ACA, contending that the expansion was coercive and was not a reasonable exercise of congressional authority granted under the federal Constitution’s Spending Clause or Tenth Amendment. In deciding the issue, the U.S. Supreme Court determined in NFIB v. Sebelius^[2] that because the expansion was a significant change in the Medicaid program — in the words of the Court, a change in “kind” not merely “degree” — it constituted a “new program.” The Court also noted the size of the expansion in terms of state budgets and the lack of notice given states about Congress’s intention to make Medicaid a central element of a comprehensive system of national health reform. For these reasons, the Court held that withholding all Medicaid funding from states that fail to enact the expansion was unconstitutional,^[3] though it left the expansion in place as a state option. HealthReformGPS published an Implementation Brief addressing the implications of the Supreme Court’s decision for Medicaid. This brief examines the most recent legal challenge to the ACA by the State of Maine, which concerns the MOE provision.

Recent Action

Since the Supreme Court’s ruling in June 2012, some opponents of the ACA have argued that the MOE provisions of the law were invalidated along with the Medicaid expansion remedy. In a July 10, 2012 letter to Governors, HHS Secretary Kathleen Sebelius disagreed with that interpretation, concluding that the ruling applies only to the adult expansion and that the decision does “not affect other provisions of the law.”^[4] Further supporting the Secretary’s interpretation, a recently released report from the Congressional Research Service (CRS), a non-partisan congressional agency that provides research for Members of Congress and their staff, concluded that the MOE is unaffected by the Court’s ruling and thus remain fully enforceable as a basic program requirement.^[5]

At the same time, a number of states have sought to reduce Medicaid or CHIP eligibility since the ACA’s enactment. The State of Maine has taken action in recent weeks to set the stage for a legal challenge to the MOE requirement.^[6] On August 1, 2012, Governor LePage sent a letter to HHS Secretary Sebelius seeking expedited approval of a state plan amendment (SPA) to reduce Medicaid eligibility for certain populations, including parents and caretakers, young adults aged 19 and 20, and dual-eligible individuals, asking CMS to respond within 30 days.^[7] The State argues that the reductions for parents and caretakers fall within the scope of the MOE exception, which permits states to reduce coverage for non-pregnant, non-disabled adults with incomes over 133 percent of poverty, if the state certifies to the Secretary that the state will be operating under a budget deficit.

Maine also contends the MOE is “part and parcel of the Medicaid expansion that was struck down on June 28, 2012.”^[8] The state argues that under the American Recovery and Reinvestment Act,^[9] Congress established a temporary voluntary program providing enhanced federal match rates for states that chose to comply with a MOE requirement. That program was extended through June 30, 2011, as part of the Education, Jobs and Medical Assistance Act.^[10] The state further argues that the ACA froze eligibility without extending the enhanced match rate, turning a voluntary program into a mandate. Because the underlying Medicaid statutory enforcement mechanism is a loss of all Medicaid funding for states that fail to comply, the MOE is the same “gun to the head” included in the ACA Medicaid expansion. Finally, the letter requests that should the Secretary fail to either expedite or approve the request, CMS pay Maine for costs incurred by the state after October 1, 2012 for the population addressed in the SPA and for any litigation costs.^[11] In response to the letter, Acting CMS Administrator Marilyn Tavenner responded that the agency needed additional time to consider the request, indicating that federal regulations permit the agency 90 days to review state plan amendments.^[12] The response did not address Maine’s request for the cost of coverage and litigation.

Shortly after receiving the CMS response letter, the State filed a motion for injunctive relief with the U.S. Court of Appeals for the First Circuit. In addition to the standard procedural arguments that must be demonstrated before a court will issue injunctive relief (i.e., that the case will succeed on it’s merits and that the plaintiff will suffer irreparable harm, among others) the State argued that the ACA MOE is unconstitutional based on the Supreme Court Decision in NFIB v. Sebelius, calling the MOE provision a “gun to the head” of Maine. In arguing the merits of the case, the State uses the same line of reasoning outlined in the letter to Secretary Sebelius. The State asks the court to direct CMS to approve the SPA or order the federal government to pay Maine’s share of Medicaid costs incurred after October 1, 2012, pending outcome of the litigation.^[13]

In a single paragraph opinion filed by Chief Judge Lynch and Circuit Judges Howard and Thompson, the court denied the State’s request, concluding that the facts do not warrant relief. The State is expected continue litigation once the Secretary has issued a decision on the SPA, and is likely to challenge the MOE on the same basis that the ACA expansion requirement was challenged.^[14]