There is a Medicaid frontier, where states and federal administrators explore the scope and structure of programs, where decisions are made about things like eligibility, the permissibility of work requirements, premium payments, and delivery system changes. That frontier is the Section 1115 Medicaid waiver and its importance in shaping Medicaid has perhaps never been greater. Under the current administration, waivers are being used to give novel structural authority to the states and several states are jumping at the opportunity. This Strategic Perspective is intended to provide a snapshot of the current Medicaid waiver landscape (pending and approved waivers) and an analysis of the future and impact of those waivers.
Overview of Waivers
HHS grants waivers under Section 1115 of the Social Security Act (SSA) (42 U.S.C. §1315) to allow states to test new approaches to Medicaid administration that differ from current federal requirements. Waivers are granted when they are determined by the HHS Secretary to propose an initiative that is designed to promote the objectives of the Medicaid program." An implied requirement of the Section 1115 waiver is that it remain budget neutral for the federal government. Additionally, while the Secretary has significant authority to alter state programs through waivers, there are some components that the Secretary cannot waive—federal matching and constitutional rights (e.g., a fair hearing) are among those unassailable provisions.
The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) established additional transparency, public comment, and evaluation rules for waivers. A list of state waivers—approved, denied, and pending—can be accessed on the CMS website.
Section 1115 of the SSA limits approval of Medicaid waivers to circumstances in which a state seeks to create an "experimental, pilot, or demonstration project . . . likely to assist in promoting the objectives of the program." The "core objective of the Medicaid program," as defined by CMS, is "to serve the health and wellness needs of our nation’s vulnerable and low-income individuals and families." According to CMS guidance, to achieve the core objective, waivers should:
- improve access to high-quality, person-centered services that produce positive health outcomes for individuals;
- promote efficiencies that ensure Medicaid’s sustainability for beneficiaries over the long term;
- support coordinated strategies to address certain health determinants that promote upward mobility, greater independence, and improved quality of life among individuals;
- strengthen beneficiary engagement in their personal healthcare plan, including incentive structures that promote responsible decision-making;
- enhance alignment between Medicaid policies and commercial health insurance products to facilitate smoother beneficiary transition; and
- advance innovative delivery system and payment models to strengthen provider network capacity and drive greater value for Medicaid.
Broadening Waiver Constraints
Under the Trump Administration, states now have the ability to include previously unacceptable terms such as higher premiums for certain Medicaid beneficiaries, work requirements for others, and incentives for providers to submit performance data.
Extension of waiver period. CMS usually grants waivers for a five-year period, and may extend a waiver for an additional three years. However, on November 6, 2017, CMS announced that it will consider approving 10-year waiver extension requests for "routine, successful, non-complex" demonstrations. CMS made good on that announcement, on December 28, 2017, by granting Mississippi a 10-year waiver for a family planning services demonstration. CMS noted in its approval that it would rely on a streamlined approach for annual monitoring and reporting of the state’s demonstration.
Work requirements. The Trump Administration’s intentions to broaden the utilization of Medicaid waivers goes beyond duration. The most notable (and contentious) example of this is states’ inclusion of work requirements in waiver applications. The Trump Administration first signaled, via a March 14, 2017, letter, its willingness to approve work requirement waivers under Section 1115. Then, on January 11, 2018, the Trump Administration issued a letter to help states "test community engagement for able-bodied adults." The letter provided guidance to Medicaid directors on the types of considerations that should be included in waiver applications. States should clearly identify which eligibility groups would be subject to work or community engagement requirements. The letter specifically noted that states should make reasonable modifications available for individuals who are nondisabled for Medicaid purposes but who may have a disability under other provisions of state or federal law, and work requirements should be restricted to nonelderly, nonpregnant adult Medicaid beneficiaries who are eligible for Medicaid on a basis other than disability. CMS recommends that a wide range of activities satisfy states’ work requirements, such as career planning, educational programs, job training, caregiving, and volunteer or tribal employment (see Trump’s CMS endorses Medicaid work requirements, January 11, 2018).
As of January 2018, eight states—Arkansas, Arizona, Indiana, Kansas, Maine, New Hampshire, Utah, and Wisconsin—have pendingwaiver requests which, if approved, would require work as a condition of Medicaid eligibility for nondisabled, working-age adults in expansion or traditional Medicaid populations. Although the specifics differ among states, generally, the Medicaid employment waivers would require Medicaid beneficiaries to verify their participation a certain number of hours per week, in certain job related activities, including employment, job searching, or job training programs to receive health coverage.
Delivery system reforms. There are four states with pending waivers which, if approved, would implement Medicaid delivery system reforms: Kansas, New Mexico, North Carolina, and Virginia. Sixteen states have waivers that impact their delivery systems—this means these states are using waiver authority to authorize spending of federal dollars on delivery systems that otherwise would not be available under federal law. A common group of delivery system reforms (used by 10 of these 16 states) are known as Delivery System Reform Incentive Payment (DSRIP) initiatives. DSRIP initiatives, which arose under the Obama Administration, tie providers’ Medicaid reimbursement to performance metrics. Providers are subject, under DSRIP initiatives, to reporting and data collection efforts focused on improving clinical outcomes. Other delivery system reforms include efforts focused on care coordination and uncompensated care pools.
Fifteen states are using Medicaid waivers to impact the way behavioral health and substance abuse services are provided through Medicaid. These states have used waivers to expand Medicaid eligibility for specific populations or provide payment for services that would not otherwise be covered by Medicaid.
Alternative methods of Medicaid expansion. Seven states—Arizona, Arkansas, Iowa, Indiana, Michigan, Montana, and New Hampshire—have approved waivers to effectuate Medicaid expansion in ways that differ from expansion directly under the ACA (see Amendment of Healthy Indiana Plan implements Medicaid expansion, February 11, 2015) Some commonalities between these states include the use of premium assistance models, higher premiums than those otherwise authorized by federal law, prohibitions on non-emergency medical transportation, and healthy behavior incentives to reduce cost sharing. Indiana and Montana’s expansion waivers include controversial provisions barring expansion adults from re-enrolling in coverage (for a certain period, three or six months) if they are disenrolled for unpaid premiums. Three states—Kentucky, Maine, and Wisconsin—have pending waivers (outside of the expansion context) that seek to impose similar premium obligations on Medicaid beneficiaries, where failure to pay premiums can result in disenrollment from the state’s Medicaid program.
Concerns About Access to Care Under New Waivers
Prior HHS Secretaries have rejected Medicaid waivers on the grounds that "the demonstration would eliminate coverage for as many as 13,381 very low-income individuals for an approximate one-year period, which is not consistent with the general statutory objective to extend coverage to low-income populations" (Connecticut waiver disapproval, 2013) or that a demonstrations provisions "would undermine access to coverage and the affordability of care, and do not support the objectives of the Medicaid program" (Ohio waiver disapproval, 2016). HHS Secretaries historically have rejected work requirement waivers on the grounds that those requirements would not further program goals of promoting coverage and access.
Critics are concerned that many of the waivers currently pending before CMS are likely to result in the same sort of undermined access to coverage and affordable care that led to previous waiver denials. The Kaiser Family Foundation expressed concerns that the inclusion of non-health-related eligibility criteria like work requirements in Medicaid turns the program into a cash welfare program instead of a program focused on health care coverage. A Center on Budget and Policy Priorities (CBPP) study showed very little long-term employment gain, from work requirements and suggested that families in such programs would be more likely to end up in deep poverty (see Medicaid work requirements may be counterproductive, undo reform efforts, July 18, 2016). On the other side of the coin, proponents of the work requirement argue that the expansion of the Medicaid program to able-bodied adults provides a disincentive for those adults to work. Some states have advocated the inclusion of work requirements to ensure that beneficiaries have "skin in the game" (see Does Medicaid work with a work requirement?, March 29, 2017). The CMS letter on work requirements includes a long description of health benefits purportedly tied to work and community engagement, noting that "higher earnings are positively correlated with longer lifespan" and the "protective effect of employment on depression and general mental health."
Through the use of Section 1115 waivers, states and HHS have the power to dramatically reshape the frontier of the Medicaid program. From Medicaid eligibility expansions to eligibility limitations through things like work requirements, HHS has poised itself to grant novel waivers, a stance that promises to make 2018 a watershed in the program’s 53-year history. While it remains to be seen whether some pending Medicaid wavier requests will succeed in furthering the goals of the program, there is little doubt that the changes will have an impact.
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