The Centers for Medicare and Medicaid Services (CMS) recently released guidance to help states align Alternative Benefit Plans (ABPs) under Medicaid programs with the Essential Health Benefit (EHB) requirements. Prior federal Medicaid law (Deficit Reduction Act of 2005, §1937 of the Social Security Act) has allowed states to design Medicaid benefit packages under their state plans. The Affordable Care Act (ACA) made changes to §1937 that become effective on January 1, 2014, which are:

• any ABP that will cover the optional Medicaid expansion population under the ACA must cover EHB  as described in ACA
• the Mental Health Parity and Addiction Equity Act applies to Alternative Benefit

CMS intends for the provisions of the recent EHB proposed rule, released on November 20, generally to apply to Medicaid. However, modifications will be provided in future rulemaking that will apply when furnishing EHB services to Medicaid beneficiaries. CMS' State Medicaid Director letter says, "[s]ection 1937 coverage options are a starting point for states to establish their [ABPs], and the process for ensuring coverage of and, as necessary, adding EHBs will mirror steps taken by issuers in the individual and small group markets … "

For states to develop a benefit plan that meets the ACA provisions, CMS proposes that (1) states initially choose a coverage option from the choices in §1937 and (2) then determine whether the §1937 option is one of the options that is available for defining EHBs in the individual and small group market (there is overlap between these options).

In future regulations, CMS intends to propose the following provisions, among others:

• The supplementation process for ensuring coverage of the 10 EHB categories is to be the same as proposed in ACA.
• The following EHB definition/options are to be adapted to Medicaid: (1) Habilitative Services: States will define the benefit and will request comment on the parameters for this benefit. (2) Pediatrics: For children enrolled in Medicaid, all medically necessary services generally are covered under the Early Periodic Screening, Diagnosis, and Treatment (EPSDT) benefit. Therefore, EHB supplementation is not necessary. (Note that EPSDT covers children to age 21; whereas, pediatric services under the EHB proposed rule would cover children for services under age 19.)
• Free choice of qualified providers continues.

States that wish to establish a new §1937 ABP or to modify an existing ABP substantially are required to publish public notice for public comment from stakeholders prior to submitting their State Plan Amendment to CMS.