By Robert B. Barnett Jr., J.D.
The Government Accountability Office found gaps in the transparency requirements imposed by the Affordable Care Act on state Medicaid demonstration projects, which allow states to amend the demonstration projects without public scrutiny.
While CMS has done a good job of complying with the transparency requirements established by the Patient Protection and Affordable Care Act (ACA) when states request Medicaid demonstration projects (usually involving public comment), gaps exist in the process that allow states to amend existing demonstration projects, for example, by imposing work requirements, without the same level of public scrutiny that was imposed when the state applied for the project. The 2012 transparency regulations issued as a result of the ACA covered demonstration project applications but not the amendments to those projects, leaving amendments to be governed by HHS guidance issued in 1994, which do not require the same level of public scrutiny. HHS has concurred with the Government Accountability Office’s (GAO) recommendation that CMS develop a policy for determining when a proposed amendment is substantial enough to warrant compliance with the transparency requirements (GAO Report, GAO-19-315, May 17, 2019).
Demonstration projects. States are encouraged to experiment with what are referred to as Section 1115 demonstration projects to test new ideas and concepts for administering Medicaid. Demonstration projects are now a significant part of the Medicare landscape, with 43 states operating at least part of their Medicaid programs under demonstration projects. In fiscal year 2016, 30 percent of all federal Medicaid spending was spent under demonstration projects.
The ACA required that HHS establish procedures to ensure transparency in approvals of new demonstrations and extensions to existing demonstrations (projects are initially granted on 5-year terms). In 2012, HHS issued regulations that included requirements that states seek public input on all proposes made to CMS and include certain information in public notices and applications. CMS was then required to seek additional public input through a 30-day comment period at the federal level. After approval, states are required to monitor and evaluate their demonstrations to ensure that the outcomes are transparent. GAO was asked to examine CMS’s transparency requirements for demonstration projects to determine CMS’s level of compliance.
Findings. The GAO study determined that CMS was generally doing a good job of ensuring transparency and complying with the ACA requirements. CMS, for example, has developed a checklist for transparency compliance. The GAO found that CMS completed its checklist review for all 11 applications for new demonstrations or extensions that CMS approved between January 2017 and May 2018. CMS has also developed and implemented procedures for seeking public input and for making the input publicly available.
GAO also discovered, however, two big gaps in the process as they apply to the transparency requirements: (1) when states amend their applications and (2) when states amend existing programs. The 2012 ACA regulations do not apply when states seek to amend existing demonstrations. Those amendments are governed by HHS guidance issued in 1994, well before the ACA was enacted. Indiana and Kentucky, for example, both recently submitted proposed changes. Indiana sought requirements that non-disabled beneficiaries work for 20 hours per week to maintain eligibility. Kentucky sought to reduce its phase-in for a 20-hour per week requirement from one year to three months. CMS required neither state to solicit public input, although both did hold a public comment period. Furthermore, Indiana’s and Kentucky’s applications for the changes were handled differently, with Indiana but not Kentucky being subjected to limited transparency requirements. As a result, the GAO determined that CMS’s policies lacked criteria for determining when changes warranted additional comment periods. When states changed their applications in mid-review, CMS had no policy at all for reassessing the changes.
Recommendations and response. The GAO made two recommendations that CMS: (1) develop and communicate a policy for determining when changes to a pending Section 1115 demonstration application are considered major and thus prompt a new review of the application against the transparency requirements and (2) develop and communicate a policy whereby demonstration amendments that may have a "significant impact" are subject to transparency requirements that are comparable to those for new demonstrations and extensions.
HHS concurred with the recommendations and stated that it intends to develop (1) standards for determining when changes are so substantial that it should seek additional public input and (2) a process for informing states and the public about the additional comment period.
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