What Does CMS Approval of First COVID-19 Section 1115 Waiver in Washington Mean for Other States?

Prior to the pandemic, the Trump Administration was encouraging and states were pursuing a range of changes to state Medicaid programs through Section 1115 waivers that ranged from waivers to enable states to receive federal Medicaid funds for services delivered in an institution for mental disease (IMD) for treatment of substance use disorder or serious mental illness, condition Medicaid eligibility on meeting work requirements, and, more recently, not to apply an array of federal rules in exchange for capped federal financing. The focus of Section 1115 waivers has taken a sharp turn to using waivers as a vehicle to respond to needs tied to COVID-19. Historically, Section 1115 authority has provided states with broader flexibility to expand coverage and/or provide uncompensated care to address the direct impact of natural disasters and public health emergencies (like New York City after 9/11, Hurricane Katrina, and Flint Michigan) on state Medicaid and Children’s Health Insurance Program (CHIP) programs. State actions under Section 1115 can help complement what states are doing under other emergency authorities (e.g., Section 1135 and 1915 (c) Appendix K) as well as their own existing authority to respond to emergency needs if approved by CMS.

In response to the COVID-19 public health emergency, CMS developed a new Medicaid section 1115 demonstration opportunity and application template. These demonstrations are intended to enable states to provide medical assistance in ways to help protect the health, safety and welfare of individuals and providers affected by COVID-19. There are requirements for monitoring and evaluation, but CMS is not requiring states to submit calculations showing that the waiver would be budget neutral to the federal government like traditional waivers due to the unprecedented emergency nature of the pandemic. These demonstrations can be retroactive to March 1, 2020 and will expire no later than 60 days after the end of the public health emergency. To date, at least 15 states have submitted Section 1115 COVID-19 related emergency waivers.

CMS approved the first emergency COVID-19 Section 1115 waiver for Washington on April 21, 2020. Most of the approved provisions in the waiver relate to long-term services and supports (LTSS) and follow the “pre-printed” waiver and expenditure authorities outlined in the CMS template. Most of the provisions extend HCBS flexibilities available under 1915 (c) home and community-based services waiver Appendix K to beneficiaries receiving LTSS under SPA authorities. The changes can help support HCBS enrollees and providers.

In the letter to the state, CMS noted that some provisions requested by the state were not approved and others were still under consideration.

  • New temporary coverage: CMS did not approve the state’s request to establish a temporary eligibility group for individuals with incomes at or below 200% FPL. Washington had proposed using Medicaid funds to provide additional subsidies for people enrolled in Qualified Health Plans (QHPs) with income at or below 200% FPL to allow individuals to purchase and use Marketplace coverage with no or low out-of-pocket costs.
  • Coverage for COVID-19 treatment for the uninsured: CMS is continuing to review Washington’s request for Medicaid expenditure authority to create a Disaster Relief Fund to cover costs associated with the treatment of uninsured individuals with COVID-19, housing, nutrition supports and other COVID related expenditures.
  • Other provisions still under review: Other requests under continuing review include the state’s request to make retainer payments to HCBS providers beyond the 30-day limit, other payments to providers beyond those approved, and to allow transportation brokers to directly provide Non-Emergency Medical Transportation (NEMT).

Based on the Washington approval, it is not clear whether/when/how far CMS will go beyond the template to approve other state requests. Similar to CMS’ approach to reviewing/approving Section 1135 emergency waivers, CMS has approved provisions in the template but noted they will continue to consider other requests. During state stakeholder calls, CMS has said they will consider other available federal funds before approving state requests for expenditure authority for certain activities. For example, CMS pointed to relief funds available through CARES as rationale for not approving Washington’s request to cover treatment costs for the uninsured through Medicaid. In addition to Washington, other states have turned to Section 1115 waivers seeking additional flexibility to address pressing health coverage, benefit, delivery, and payment issues. For example, states are seeking to provide temporary housing for homeless individuals who test positive for coronavirus, extend/broaden coverage of home delivered meals, and the authority to use Medicaid funds to cover coronavirus-related testing and treatment for individuals in jails and prisons. During state stakeholder calls, CMS has noted they will not be approving Medicaid expenditure authority now for housing or additional nutrition services nor will they approve provisions that states could implement through other authorities. As the cases and deaths from the pandemic continue to rise, states continue to struggle to address the myriad of issues related to COVID-19. Whether CMS will consider other state requests and how quickly they will respond are outstanding questions.