RECONCILIATION ACT OF 1996 -- P.L.  104-193
Signed into law: August 22, 1996
Effective: Immediately


Congress passed and President Clinton Aug. 22 signed into law P.L. 104-193, welfare reform legislation, which replaces the federal guarantee of cash benefits for all eligible poor with a state-run block grant system. The law substantially revamps federal programs intended to assist low-income people, including Aid to Families with Dependent Children, Supplemental Security Income, Food Stamps, and Medicaid.

The law:

  • Preserves Medicaid eligibility for families that qualify for the program under current Aid to Families with Dependent Children rules. This provision -- which the AHA fought hard to include in the legislation -- ensures that millions of women and children will continue to receive Medicaid coverage, which forestalls potentially dramatic increases in hospital uncompensated care costs.
  • Removes the federal guarantee of Medicaid coverage for legal immigrants -- perhaps as many as 600,000 by the year 2002 -- except for emergency medical and certain public health services.
  • Gives states the option of continuing to provide some Medicaid coverage to some current legal immigrants, but not new legal immigrants. States, for example, can opt to provide only long-term-care coverage for elderly legal immigrants.
  • Bans new immigrants from Medicaid coverage for five years. Then, states  determine their eligibility, based on the income of the immigrants or their sponsor. 

Implications for hospitals and health systems

As federal and state governments work to limit their share of health care costs for legal and illegal immigrants, the burden will fall increasingly on hospitals and health systems and localities. Hardest hit: states such as California -- home to 40 percent of the nation's immigrants who receive federal benefits -- and Texas, New York and Illinois, also with large numbers of immigrants.

The legislation's full impact can't be assessed until states begin to put their block grant programs into effect. States have until July 1, 1997 to show how they'll implement their new programs.

The AHA will work with our members and our state hospital and health system associations to minimize the uncertainty and confusion that is likely to result from the new law. In the meantime, here are some of the things you can do -- or start thinking about -- to prepare for  the Medicaid changes:

  • Work closely with your state hospital or health system association to get the latest information on how your state plans to implement its new block grant program. For example, be aware that states can choose to set up an eligibility system for Medicaid that's separate from its welfare programs, raising the possibility that not all Medicaid-eligible residents will be identified and enrolled.  States also can choose to drop coverage for recipients who refuse to work, and have leeway to adjust criteria in ways that can tighten -- or broaden  -- eligibility for the program.
  • Stand ready to work with social service agencies and the families of children who may no longer qualify for Medicaid assistance because they are no longer eligible for Supplemental Security Income. Most of these children will remain eligible for Medicaid, but some will not. Together, you'll need to explore other Medicaid eligibility options for those who fall through the safety net.
  • Maintain close contact with your state hospital or health system association to keep tabs on how your state will interpret the various limitations on Medicaid services to legal and illegal immigrants. And be prepared for some administrative headaches during the next several years as you attempt to verify whether a patient seeking care is a legal or illegal immigrant. The reason: the law gives the U.S. Attorney General and HHS until January 1998 to issue rules outlining the verification process that states and localities must follow. States get another two years to put the federal requirements into effect. 
  • Your planning should take into account that, as welfare recipients move into the work force, they may take jobs that provide little or no health care coverage. Thus, the number of uninsured individuals in your community could grow significantly over time.

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