Health Reform WK-EDGE Healthy Adult Opportunity offers states flexibility in managing Medicaid programs
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Friday, February 7, 2020

Healthy Adult Opportunity offers states flexibility in managing Medicaid programs

By Rebecca Mayo, J.D.

CMS announced a new initiative that will grant states greater flexibility in Medicaid program requirements such as retroactive coverage, cost-sharing limits, presumptive eligibility, and more.

The new Healthy Adult Opportunity (HAO) initiative will allow states to focus more on value-based care and offer the flexibility to administer and design Medicaid programs within a defined budget. According to CMS, the states are in the best position to assess the needs of their respective Medicaid-eligible populations and to drive reforms that result in better health outcomes. To that end, CMS is allowing states that implement HAO demonstrations to have extensive flexibility to test alternative approaches to implementing their Medicaid programs, including the ability to make many ongoing program adjustments without the need for demonstration or state plan amendments that require approval (CMS Letter, SMD: 20-001, January 30, 2020).

Approval and monitoring. CMS is providing a simplified application template that will make it easier for states to apply by guiding them through the full range of policy decisions. The template will also accommodate proposed transitions from existing or pending section 1115 demonstrations. CMS will determine whether a demonstration will be approved on a case-by-case basis, which will depend on the details of each application. CMS will determine whether the demonstration, with the flexibilities requested, supports the goals of the demonstration and is likely to promote the objectives of the Medicaid program.

States will be required to provide baseline data on a set of Adult Core metrics, as well as on a set of quarterly continuous performance indicators relating to enrollment and retention, access and quality of care, health outcomes, and financial management. They will also report other effects for testing policies under HAO demonstrations, such a community engagement and federal matching funds for services provided during an Institution for Mental Diseases stay consistent with CMS guidance for substance use disorder or Serious Mental Illness and Severe Emotional Disturbance. These metrics and indicators will be reported throughout the demonstration and states will be expected to engage in rapid course correction if needed. States will also be expected to conduct interim and summative impact evaluations for each demonstration period of performance, consistent with academic standards and guidance provided by CMS.

New flexibility. The HAO initiative is focused on coverage provided to adults under age 65 who qualify for Medicaid on a basis other than disability or need for long-term care services and supports and who are not covered in the state plan. This includes individuals who became eligible for Medicaid under the Patient Protection and Affordable Care Act, also called the new adult group. States will have the opportunity to impose conditions of eligibility on coverage under a HAO demonstration that do not generally apply to Medicaid coverage under state plans, such as community engagement requirements. They may also choose to set income standards for eligibility for coverage, and or limit coverage to a target population such as individuals with substance use disorder or HIV/AIDS. States will be allowed to design coverage plans to be more consistent with insurance benefits provided through the Exchanges, rather than the traditional Medicaid benefit package, and pay for services that cannot traditionally be funded by Medicaid. States may also adopt a closed formulary in line with Essential Health Benefit requirements in order to gain greater negotiating power in prescription drug spending. In order to encourage compliance with quality and cost goals, states will be able to use any combination of fee-for-service and managed care delivery systems and will have flexibility to alter these arrangements over the course of the demonstration.

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