Proposed Medicaid Section 1115 Waivers in Maine and Wisconsin

While the future of legislation to repeal and replace the Affordable Care Act (ACA) and make fundamental changes to the structure and funding of the Medicaid program is uncertain, states and the Administration may achieve major changes to Medicaid through the use of Section 1115 Medicaid waivers. Section 1115 Medicaid demonstration waivers provide states with an avenue to test new approaches that further the objectives of the Medicaid program in ways that differ from what states can do under current law. On March 14, 2017, the Centers for Medicare and Medicaid Services (CMS) sent a letter to state governors that signaled a willingness to use Section 1115 authority to “support innovative approaches to increase employment and community engagement” and “align Medicaid and private insurance policies for non-disabled adults.” Wisconsin submitted a waiver amendment request to CMS in June 2017 and Maine submitted a waiver application to CMS in August 2017.

Unlike previous waivers that encompass the ACA’s Medicaid expansion, Wisconsin and Maine are seeking waiver authority to make significant changes to Medicaid that would affect non-expansion Medicaid populations. The proposals seek to impose welfare-like restrictions and make other changes to eligibility and enrollment, premiums and cost-sharing, and benefits to traditional populations that are not allowed under current law. Maine’s changes would primarily affect traditional Medicaid adults, such as low-income parents (up to 105% of the federal poverty level, FPL, $20,420/year for a family of 3 in 2017), former foster care youth, those receiving Transitional Medical Assistance, those receiving only family planning services, and people with HIV up to 250% FPL ($30,050/year for an individual in 2017). Wisconsin’s changes would affect childless adults up to 100% FPL ($12,060/year for an individual in 2017), who are covered under an existing waiver at the state’s regular federal matching rate, rather than through the ACA’s Medicaid expansion.

Wisconsin and Maine’s proposals include provisions that have not been approved in any state (such as work requirements, drug testing, and time limits). Previously, CMS had not approved state waiver requests to require that Medicaid beneficiaries work as a condition of eligibility, on the basis that such a provision would not further the program’s purposes of promoting health coverage and access. Maine and Wisconsin’s waiver proposals also include other provisions that have not been approved to date including drug screening and testing (WI), and eligibility time limits (both states).

A number of provisions have never been approved for traditional, non-expansion populations (such as lock-outs for failure to pay premiums). Some policies, such as authority to impose premiums (as well as premium reductions for beneficiaries who participate in healthy behavior programs), eliminate non-emergency medical transportation, and eliminate retroactive eligibility, have been approved in some Section 1115 Medicaid expansion waiver states. Indiana also has Section 1916 (f) waiver authority to test graduated copayments of $25 for non-emergency use of the emergency room with a control group. However, no Section 1115 waivers approved to date for any Medicaid population include premiums as a condition of eligibility or coverage lock-outs for non-payment for those under 100% FPL.

Several provisions included in Maine and Wisconsin’s proposals are being tested and evaluated in other states’ waivers, with preliminary data and evidence of negative consequences for beneficiaries and administrative costs and complexities for states, health plans, and providers. Available data about healthy behavior programs in Iowa, Michigan, and Indiana suggest that complicated provisions require extensive administrative resources and beneficiary education to implement.  Additionally, Indiana’s health accounts, coverage lock-out for premium non-payment, and requirement that individuals pay a premium before coverage starts result in some eligible individuals not accessing or losing coverage. A substantial body of research cites access to care barriers created by premiums and cost-sharing. Some conservative policymakers contend that work requirements are ineffective in the health care context, while others contend that such requirements may be ineffective over the long-term in the TANF program on which the proposals are modeled. An assessment of state drug testing programs in TANF found high administrative costs with few drug users identified.

Both states’ waiver proposals estimate less coverage under the waiver. Under its waiver proposal, Wisconsin projects that enrollment will be 5,102 lower under the waiver compared to without waiver estimates in the fifth year of the demonstration. Of this reduction, 4,262 would be disenrolled from the time limit and 840 from the premiums. The state assumed 2-4% reduction in enrollment due to premiums, pointing to research that demonstrates a 5% rate of premium non-payment. A large body of research shows that premiums can serve as a barrier to obtaining and maintaining Medicaid and CHIP coverage among low-income individuals, particularly those with incomes below poverty. Maine anticipates that its proposed waiver would cover 55,000 fewer eligible member months but with an increase in per member per month costs from $799 to $815, comparing the “without waiver” estimates to the “with waiver estimates” in the fifth year of the waiver. Maine estimates that the number of covered beneficiaries would decline regardless of waiver implementation but that the decline “may slightly increase over the short-term” due to the waiver provisions. Maine also estimates that costs will increase because the “able-bodied” adults expected to lose eligibility under the waiver have lower costs compared to other coverage groups. Under long-standing policy, CMS has required Section 1115 waivers to be budget neutral to the federal government, meaning that federal costs under the waiver should not exceed what they would have been absent the waiver.

Review of these waiver proposals could be on a fast timeline. Wisconsin seeks to amend an existing waiver (with some proposed changes required by state law), while Maine is requesting a new waiver. Wisconsin received 1,043 comments at the state level and made some minor adjustments to the amendment (e.g., to monthly premiums, emergency room copays, and drug screening and testing provisions) before submitting to CMS. Maine received comments from 180 people, over ¾ of which were opposed to the waiver. Before submitting the waiver to CMS, Maine made some changes related to premiums (imposing flat fee premiums for income bands starting at 51% FPL and exempting those enrolled through breast and cervical cancer), the ED copay (lowered from $20 to $10 and provides a list of exempt diagnosis codes), the work requirement (exempts those with breast and cervical cancer and those caring for an incapacitated adult), removal of the missed appointment assessment and excluding long-term care services from retroactive eligibility waiver.  If approved by CMS, Maine estimates it would be ready for implementation six months after receiving approval, while Wisconsin would implement no sooner than one year later. Key proposed waiver provisions in each state are compared in Table 1 below, with more detail about each state’s proposal provided in the Appendix.