Medicaid Provisions in the American Rescue Plan Act

The American Rescue Plan Act, the COVID-19 relief package that became law on March 11, 2021, contains a number of provisions designed to increase coverage, expand benefits, and adjust federal financing for state Medicaid programs. These provisions are briefly described below and summarized in Table 1. Separate briefs summarize provisions in the new law relating to the Marketplaces and public health.

Coverage provisions

The law provides an additional temporary fiscal incentive to encourage states that have not yet adopted the Affordable Care Act (ACA) Medicaid expansion to do so. In addition to the 90% federal matching funds available under the ACA for the expansion population, states also can receive a 5 percentage point increase in their regular federal matching rate for 2 years after expansion takes effect. The additional incentive applies whenever a state newly expands Medicaid and does not expire. The new incentive is available to the 12 states that have not yet adopted the expansion as well as Missouri and Oklahoma, which are expected to implement expansion in July 2021. The increase in the regular matching rate is estimated to more than offset the increased state costs of expansion in these states for the first two years.

States have a new option to extend Medicaid coverage for post-partum women from the current 60 days to a full year. States that elect this option must provide full state plan benefits throughout the enrollee’s pregnancy and post-partum period and cannot limit benefits to only those that are “pregnancy related.” The new option is available to states for 5 years, beginning April 1, 2022.

Benefit provisions

The new law clarifies that COVID-19 vaccines and administration are covered without cost-sharing for Medicaid enrollees and provides 100% federal matching funds for this coverage. CMS previously had interpreted the Families First Coronavirus Response Act (FFCRA) vaccine coverage requirement to exclude certain enrollees receiving limited benefit packages. The coverage provision applies to all enrollees, except those eligible only for Medicare cost-sharing assistance (partial duals) or COBRA premium assistance, from March 11, 2021 through the last day of the 1st calendar quarter that begins at least 1 year after the COVID-19 PHE ends. The financing provision applies from April 1, 2021 through the last day of the 1st quarter that begins at least 1 year after the PHE ends.

The new law adds coverage of COVID-19 treatment services, without cost-sharing, for enrollees in the COVID-19 uninsured testing group and enrollees who receive alternative benefit plans (ABPs). This coverage includes specialized equipment and preventive therapies and treatment (if otherwise covered under Medicaid) of a condition that may seriously complicate treatment of COVID-19 for those presumed to have or diagnosed with COVID-19. The COVID-19 uninsured testing group was created by the FFCRA and is available at state option, with 100% federal matching funds, during the PHE. The benefit package for this group previously was limited to COVID-19 testing and testing-related services. Enrollees receiving ABPs include the ACA expansion group and other enrollees at state option. ABPs allow states to provide a benefit package based on a private insurance plan instead of the traditional Medicaid state plan benefit package. COVID-19 treatment services are required in ABPs from March 11, 2021 through the last day of the 1st calendar quarter that begins at least 1 year after the PHE ends. States providing COVID-19 treatment services in ABPs would receive the 90% enhanced federal matching rate for expansion adults or their regular federal matching rate plus the additional 6.2 percentage points under the FFCRA (ranging from 56% to 85% across states) for other populations.

States can receive a 10 percentage point increase in federal matching funds for Medicaid home and community-based services (HCBS) from April 1, 2021 through March 30, 2022. The new funds must supplement, not supplant, the level of state HCBS spending as of April 1, 2021, and states must  implement or expand one or more activities to enhance HCBS. HCBS help seniors and people with disabilities live independently in the community by assisting with daily self-care and household activities.

States have a new option to provide community-based mobile crisis intervention services with 85% federal matching funds for the first 3 years. The additional funds must supplement, not supplant, the level of state spending for these services in the fiscal year before the 1st quarter that a state elects this option. Services must be otherwise covered by Medicaid and provided by a multidisciplinary team to enrollees experiencing a mental health or substance use disorder crisis outside a hospital or other facility setting. These services generally do not have to be offered statewide, do not have to be comparable for all enrollees, and can restrict enrollees’ free choice of provider. The new option is available to states for 5 years, beginning April 1, 2022. The law also authorizes $15 million for state planning grants, to be awarded by the HHS Secretary as soon as practicable. 

The new law provides $250 million for state strike teams to be deployed to Medicaid-certified nursing facilities with diagnosed or suspected cases of COVID-19 among residents or staff. The strike teams will assist with clinical care, infection control, or staffing during the PHE.

Other financing provisions

The new law contains some other provisions that affect Medicaid financing. It provides 100% federal matching funds for 2 years, beginning April 1, 2021, for services received through Urban Indian health care organizations and Native Hawaiian health systems. It also eliminates the cap on the amount of rebates that manufacturers pay to Medicaid in exchange for coverage of their FDA-approved drugs on December 31, 2023, resulting in federal savings of $14.5 billion. The law also requires the HHS Secretary to recalculate states’ annual disproportionate share hospital (DSH) allotments to ensure that these payments are equal to what they would have been without the 6.2 percentage point increase in federal matching funds provided under the FFCRA.

Finally, the new law provides $8.5 billion in FY 2021 for provider relief fund payments to rural Medicaid, CHIP, and Medicare providers. These funds are available to compensate for health care related expenses and lost revenues attributable to the pandemic for rural providers who diagnose, test, or care for individuals with possible or actual COVID-19.