It’s not new information that Medicaid costs and requirements are crippling state and federal budgets. What is new is that federal action is now being taken to repeal these burdensome requirements.

U.S. Senator Orrin Hatch (R-Utah) announced on May 3rd, 2011 Senate Bill 868, known as the State Flexibility Act. This novel piece of legislation introduced by the Senate Finance Committee is designed to repeal the Maintenance of Effort (MOE) requirements for Medicaid found in the Patient Protection and Affordable Care Act (PPACA), also known as ObamaCare.

The MOE provisions in section 5001(f) of PPACA force states to maintain

 “eligibility standards, methodologies, or procedures” under its state Medicaid plan, preventing flexibility and cost savings for states. This is because states are prohibited from decreasing Medicaid enrollment numbers or services offered under current PPACA legislation. However, millions of people will be added to the program thanks to PPACA, causing taxpayers and state budgets to suffer greatly under the weight of new expenses.

Presently, the CBO estimates that repealing the MOE requirements through the State Flexibility Act will save about $2.8 billion over the first four years and $2.1 billion in the years following. This translates into millions of dollars in savings for each state.

Although she did not lend her support to this particular bill, Health and Human Services Secretary Kathleen Sebelius has admitted that states need greater freedom to reform their individual Medicaid programs to better reflect and serve their states unique citizens. This admission has come after more than half of US states have resisted the strict guidelines imposed by PPACA, and called for autonomy.

The State Flexibility Act was created in the US Senate after governors from both sides of the isle requested that MOE requirements not be imposed on their states. Additionally, several states have submitted waivers to the federal government asking for exemption from the MOE provisions citing inability to meet or afford the obligations.