Medicaid change allows dramatic expansions.

• Position: Medicaid Catastrophic Coverage Act of 1988's 1902r2 option - On First Reading

Whether Congress actually intended to revolutionize Medicaid when it passed a little-known provision in 1988 is a multi-million dollar question. Referred to as the "1902(r)(2) option," it may be a loophole similar to the provider tax bandwagon jumped on by more and more states to generate a Medicaid match.

Once the buried language amending section 1902(r)(2) of the federal Medicaid statute was discovered in the Medicare Catastrophic Coverage Act of 1988, it was interpreted to mean that states have much more flexibility to expand their Medicaid populations. Word spread among state Medicaid programs, and a few states leapt at the chance to capture much-needed federal money to cover more of their uninsured populations.

Vermont-which was using state-only money to finance health insurance for low-income children and pregnant women who did not qualify for Medicaid-applied to the Health Care Financing Administration (HCFA) to amend its Medicaid plan. The state now receives its nearly 60 percent federal match for eligible children through age 17 with family income up to 225 percent of the federal poverty level, and pregnant women with income up to 200 percent.

The state of Washington expanded eligibility up to the poverty level for children through age 18, receiving a 55 percent federal match. Delaware also uses Medicaid funds to help finance its new children's health insurance initiative. With a federal match of 50 percent, Delaware covers children up to age 18 from families with low incomes.

Minnesota received permission from HCFA to expand its Medicaid eligibility to 275 percent of the poverty level for children through age 18 and pregnant women. Pending legislative approval, the expansion will become effective July 1, 1993.

Other states use the 1902(r)(2) option differently. For example, Maryland and North Carolina exclude parents' income when determining Medicaid eligibility for pregnant teenagers. South Carolina expands Medicaid...