State Implementation of the Optional Provisions of the Deficit Reduction Act

Although mandated by federal law, Medicaid always has been fundamentally a matter of state business, primarily because states administer the program and receive only partial federal reimbursement for state expenditures. As health care costs have burgeoned over the past few decades, states have encountered growing pressure on numerous areas of their economies and budgets. In response, states increasingly desire permissible ways to reduce Medicaid costs, lobbying intensely for increased flexibility within federal Medicaid standards. The push for Medicaid reform is evident in the Deficit Reduction Act (DRA), which developed in part as a response to state-level dissatisfaction with existing Medicaid program options such as waivers. The DRA spells significant changes for Medicaid, as it institutes deep revisions of some of the program's core elements. The most significant components of the DRA's reforms include the expansion of state options and the simplification of the option approval process. This article examines the newly available options that will most notably affect Medicaid services to the elderly, especially long-term care services, and it summarizes program revisions under consideration or active development