Eligibility systems for many human services programs are highly outdated. This can render operations cumbersome, raise administrative costs, create obstacles to effective data use, make changes costly and slow, present burdens for consumers, and create other inefficiencies in eligibility determination. Although state agencies recognize these constraints, the federal funding environment has historically not provided generous support for major system overhauls.
Federal officials are implementing ACA in a way that permits states, for a limited time only, to address this longstanding problem. For goods and services that are furnished by the end of calendar year 2015:
- the federal government will pay 90 percent of Medicaid programs’ IT development costs for eligibility systems; and
- an exception to normal cost-allocation rules relieves human services programs, under some circumstances, of the need to share in the cost of IT development that benefits both Medicaid and human services programs.2
Federal funding levels for eligibility system modernization are now available that have not been experienced in the history of health and human services programs, and it is not clear when or if this opportunity will recur. States could pursue targeted upgrades to strategically selected functions within their eligibility systems. Alternatively, states could implement more sweeping changes, integrating health and human services programs’ eligibility systems across the board, using more generous federal funding to accelerate such development and lower the state share of costs.
A state is not required to expand Medicaid eligibility in order to qualify for these funds. All Medicaid programs, whether or not they expand eligibility, must now use data-driven eligibility procedures, and enhanced federal funding is available in every state to support the investments needed to make such procedures possible.
The opportunity is clear. But to take advantage of it, state officials need to understand the background and basic ground rules of the cost-allocation exception, which are described in the next sections of the paper.