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From Health Law Daily, November 18, 2014

CMS succeeds in constitutional fight over MaineCare coverage drop

By Melissa Skinner, JD

After the Maine Department of Health and Human Services (MDHHS) dropped Medicaid coverage for 19- and 20-year-old Maine children of families that are otherwise eligible for Medicaid, CMS’ disapproval of the Maine Medicaid program was upheld by the United States Court of Appeals for the First Circuit. Relying heavily on the Supreme Court decision in National Federation of Independent Business v Sebelius (NFIB), the First Circuit rejected MDHHS’ argument that the federal disapproval was unconstitutional because it was in violation of the Spending Clause and Maine’s right to equal sovereignty, and found that the disapproval was warranted under the Patient Protection and Affordable Care Act’s (ACA) (P.L. 111-148) provisions (Mayhew v Burwell, November 17, 2014, Lynch, S).

Background. According to the First Circuit, “from 1991 to the present, Maine’s Medicaid program, MaineCare, has provided Medicaid coverage to low-income individuals aged 18 to 20. Although considered children for Medicaid purposes, such individuals are considered ‘adults’ under Maine law.” In 2012, Maine proposed dropping this population from MaineCare coverage due to budget constraints. CMS disapproved of this amendment to the Medicaid program, finding that it was in violation of the provisions of the ACA. MDHHS attacked that disapproval, arguing that under NFIB it is “unconstitutionally coercive in violation of the Spending Clause and, independently, that it violates Maine’s right to equal sovereignty.” The federal government, as well as Maine Attorney General Janet T. Mills, who joined the action as an interested party-intervenor, responded that the disapproval was within the congressional spending power, which allows the federal government to condition federal Medicaid grants.

ACA. Before the expansion of Medicaid under the ACA, states were not required to cover non-disabled, non-pregnant children between the ages of 18 and 20 through Medicaid. However, states, including Maine, were permitted to and did provide such coverage. In 2009, as part of the American Recovery and Reinvestment Act (ARRA) (P.L. 111-5), Maine received stimulus funds to extend its current Medicaid coverage criteria through 2010. Subsequently, in 2010, the ACA’s “maintenance of effort” (MOE) provision was implemented. The MOE required states to maintain eligibility standards for an additional nine years in order to continue to receive funds. In this action, MDHHS claimed that the state did not have the opportunity to adjust its eligibility standards to drop the coverage of the 19- and 20-year-old population before the MOE went into effect.

NFIB. In order to determine whether the disapproval of the MaineCare coverage drop was unconstitutional, the First Circuit reviewed the findings and reasoning of the Supreme Court in NFIB, which rejected the required expansion of Medicaid under the ACA based on the Spending Clause. Specifically, the First Circuit noted that in NFIB, the plurality decision “found a Spending Clause violation because it determined that the Medicaid program expansion was an entirely new program, participation in which was a condition on continued receipt of pre-ACA Medicaid funds, and because the loss of pre-ACA Medicaid funds would have been so consequential to the states that states had no real option to refuse.”

Spending clause. Using that analysis, the First Circuit determined that the MDHHS claims under the Spending Clause in this action failed because, “the MOE provision applied to the long-standing provision of care to 19- and 20-year olds, unlike the new Medicaid program expansion first appearing in the ACA, is not a new program.” Rather, the court found the drop in coverage that resulted in the disapproval was “simply an unexceptional ‘alteration…of the boundaries’ of the categories of individuals covered under the old Medicaid program.”

Equal sovereignty. The court also rejected MDHHS’ argument pursuant to the theory of equal sovereignty. Specifically, MDHHS argued that the MOE provision “prohibited Maine from exercising the prerogative to design its Medicaid laws in ways that many of its sister states remain free to do.” The court found that this argument failed to hold weight because the ACA provision does not single out certain states for disparate treatment and does not constitute a “federal intrusion into a sensitive area of state and local policymaking.”

The case number is 14-1300.

Attorneys: Clifford H. Ruprecht (Roach Hewitt Ruprecht Sanchez & Bischoff PC) for Mary C. Mayhew, Secretary of the Maine Department of Health and Human Services. Joyce R. Branda, U.S. Department of Justice, for Sylvia M. Burwell, Secretary of the U.S. Department of Health and Human Services.

Companies: Maine Department of Health and Human Services; U.S. Department of Health and Human Services

MainStory: TopStory HealthReformNews CMSNews CoverageNews EligibilityNews MaineNews MassachusettsNews NewHampshireNews PuertoRicoNews RhodeIslandNews

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