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Blanket Limits on Medicaid Services

August 18, 2011

Author: Geoffrey Hale

This year’s budget brought significant and wide-ranging changes to the state’s Medicaid program.  Not only have we seen an unprecedented expansion of Medicaid Managed Care and a dramatic alteration in the way services are provided, but the legislature also enacted significant cuts in the services themselves.  As of this spring, compression stockings, prescription footwear, and enteral nutritional formula are no longer available.  And beginning October 1, 2011, physical therapy, occupational therapy, and speech therapy will be capped at 20 visits a year.

More than the fact of these eliminations and reductions, what is perhaps most alarming about these changes is the form they have taken.  Rather than placing utilization thresholds on these services and supplies, these cuts are absolute.  This means that it is now impossible for any Medicaid beneficiary, who does not already meet one of the narrowly prescribed exceptions, to override the limits for medically necessary care. Now, compression stockings, prescription footwear, and enteral nutritional formula are not available at all to most beneficiaries; and physical therapy, occupational therapy, and speech therapy end after 20 visits.  Period.

The Cuts

Prescription Footwear

As of April 1, 2011, coverage for prescription footwear and associated inserts has been limited to growth and development problems in children, diabetics, and when a shoe is attached to a lower limb orthotic brace.  No other exceptions will be allowed.  According to the Medicaid Redesign Team’s proposal, over half of all prescription orthotics are for other purposes, which they believe should be adequately covered by off-the-shelf shoes and inserts available to treat minor foot problems.  Nevertheless, there is some concern that the elderly especially might be affected by this reduction, because properly fitted shoes and inserts are important for mobility and to prevent further complications. 

The Medicaid Redesign Team (MRT) estimates savings from this reduction at $7.17 million for the State during the first year, and $8 million thereafter.

Compression Stockings

Medicaid coverage for compression stockings also ended on April 1, 2011.  Exceptions are allowed only for pregnancy or to treat open venous stasis ulcers.  According to the MRT, pregnancy and open wounds only account for 25% of compression stocking prescriptions.  That means that the majority of Medicaid beneficiaries who might need compression stockings to treat other ailments will no longer have them covered through Medicaid.  The stockings will no longer be available for the prevention of ulcers, treatment of lymphedema without ulcers, or circulation disorders.  Patients with these ailments must find some other way to address their symptoms and do without the otherwise medically necessary care.  As with prescription footwear, the MRT believes off-the-shelf alternatives should adequately cover these other needs. 

The MRT estimates savings from this reduction at roughly $1 million a year for the State.

Enteral Nutritional Supplement

May 1, 2011 marked the end of Medicaid coverage for enteral nutritional supplements for most Medicaid recipients.  Enteral nurtitional formula coverage is available only to:

  • Tube-fed individuals, who cannot chew or swallow food;
  • Those with rare inborn metabolic disorders requiring specific medical formulas to provide essential nutrients; and
  • Children up to 21 years of age who require liquid oral enteral nutritional formula when there is a documented diagnositc condition where caloric and dietary nutrients from food cannot be absorbed or metabolized.

Prior authorizations approved before May 1, 2011, will be valid for the approved period of service, but then no longer available once the prior authorization expires.

According to the MRT proposal, these exceptions should preserve the benefit for those most in need, while others should be able to obtain necessary nutrition through other means.  According to the proposal, newer anti-wasting medications will help mitigate the need for nutritional supplements.  Nevertheless, there are concerns that those suffering from diabetes, renal disease, HIV, and cancer will suffer, if their nutritional needs cannot otherwise be met.

The MRT estimates this cut will save the State $15.1 million in the first year, and $16.8 million thereafter.

Physical Therapy, Occupational Therapy, and Speech Therapy

Speech therapy, physical therapy and occupational therapy will each be limited to 20 visits per year as of October 1, 2011.  These limits will apply to all practitioners in private practice settings, hospital outpatient departments, and in free-standing clinics.  They will not apply to hospital inpatient settings, skilled nursing facilities, or in facilities operated by the Office of Mental Health or the Office of Persons with Developmental Disabilities.  They will also not apply to Medicaid recipients under the age of 21, to people with developmental disabilities, and to people with traumatic brain injuries.  As far as any possible problems are concerned, the MRT proposal notes dryly, “It is possible that some persons may require service in excess of the limit.” 

The MRT estimates these cuts will save the state $2.47 in the first year, and $4.94 million a year thereafter.

Advocacy Concerns

All of these cuts are blanket restrictions of services or medical equipment.  The changes enacted by the legislature and signed into law by the governor offer no opportunity to overcome these new restrictions - even if the services or equipment are medically necessary. 

All of these limits are cause for concern.  It appears that the limits - and the failure to provide any opportunity to alter them for the sake of individual medical needs - violate federal Medicaid requirements.  While States may establish reasonable standards for determining the extent of Medicaid coverage for mandatory equipment and services, 42 U.S.C. § 1396a(a)(17), they must still ensure that the amount, duration, and scope of such equipment or services are reasonably sufficient to achieve their purpose, 42 C.F.R. § 440.230(b).  Federal law also prohibits states from placing arbitrary limits on the provision of medical assistance based solely on diagnosis, type of illness, or the condition of the recipient.  42 C.F.R. § 440.230(c).  Furthermore, states must ensure that medical services are equal in amount, duration, and scope for all categorically needy recipients.  42 U.S.C. § 1396a(a)(10)(b), 42 C.F.R. § 440.240(b)(1).

In response to a Second Circuit decision allowing Connecticut to maintain an exclusive list for covered durable medical equipment (DME), the Centers for Medicare and Medicaid Services (CMS) (then the Health Care Financing Administration) issued a “Dear State Medicaid Director” letter prohibiting just such exclusive lists.  See DeSario V. Thomas, 139 R.3d 80 (2d Cir. 1996), cert. granted decision vacated and remanded sub nom, Slekis v. Thomas, 525 U.S. 1098 (1999).  The CMS DeSario letter prohibits limitations on DME that provide no “reasonable and meaningful procedure for requesting items that do not appear on a State’s pre-approved list.” 

Federal courts have generally granted the DeSario letter considerable deference, and even applied it’s reasoning beyond DME.  In the Eighth Circuit, for example, the court has held that “a state’s failure to provide Medicaid coverage for non-experimental, medically necessary services within a covered Medicaid category is both per se unreasonable and inconsistent with the stated goals of Medicaid.”  Lankford v. Sherman, 451 F.3d 496, 511-512 (8th Cir. 2006).  A state Medicaid agency, the court found, must have a meaningful procedure for requesting non-covered items. 

Unfortunately, the Second Circuit has been less willing to limit states’ discretion in areas other than DME. In Rodriguez v. City of New York, 197 F.3d 611 (2d Cir., 1999), the Court held that New York’s refusal to fund safety monitoring as personal care services did not violate the Medicaid Act.  Courts in the Southern and Western Districts of New York have recently dismissed challenges to limits on transgender related care - holding that federal Medicaid law does not confer unambiguous rights that can be enforced in federal court because states have considerable discretion to define covered services.  Casillas v. Daines, 580 F.Supp.2d 285 (S.D. N.Y. 2008).  Ravenwood v. Daines, 2009 WL 2163105 (W.D.N.Y. 2009).

The fact that the legal situation in the Second Circuit is complicated does not mean that the new limits cannot be challenged.  We are currently exploring strategies for how best to contest the new limits.  In the meantime, advocates who request fair hearings for clients who have been harmed by the new restrictions, should present a copy of the CMS DeSario letter in support of their challenge.  Even if state Administrative Law Judges are constrained to follow the new limits on coverage, arguments regarding federal requirements could be presented in an Article 78 proceeding.  You can access the DeSario letter on the CMS website at:    


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