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Section 1115 Medicaid Demonstration Waivers: The Current Landscape of Approved and Pending Waivers

Issue Brief
  1. In June 2018, the DC federal district court set aside the work requirement and other provisions that restrict eligibility and enrollment in the Kentucky HEALTH waiver approval and sent it back to HHS to reconsider. In November 2018, CMS re-approved the Kentucky waiver. In January 2019, the plaintiffs filed an amended complaint challenging CMS’s re-approval of the waiver, and briefing is underway.

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  2. Major areas of focus of current approved state Section 1115 waivers include: the implementation of alternative ACA Medicaid expansion models; eligibility and enrollment restrictions; work requirements; benefit restrictions, copays and healthy behaviors; delivery system reform initiatives; behavioral health; authorizing the delivery of Medicaid long-term services and supports (LTSS) through capitated managed care; and responding to public health emergencies and providing coverage for other targeted groups.

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  3. 42 U.S.C. § 1315.

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  4. Some states have multiple waivers, and many waivers are comprehensive and may fall into a few different areas.

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  5. Increasingly, states are using Section 1115 waivers to combine programs under one single authority (e.g., including authorities otherwise available under Section 1915 (b) managed care waivers and/or Section 1915 (c) home and community based services waivers, along with Section 1115 authority for other eligibility, benefits, delivery system, and payment reforms).

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  6. The Secretary’s waiver authority is limited to the provisions of 42 U.S.C. § 1396a, provided that waivers are demonstration projects that further Medicaid program objectives. 42 U.S.C. § 1315.

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  7. On August 22, 2018, CMS released a letter to state Medicaid directors describing current policies related to budget neutrality for Section 1115 Medicaid demonstration projects.

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  8. Kaiser Commission on Medicaid and the Uninsured, The New Review and Approval Process Rule for Section 1115 Medicaid and CHIP Demonstration Waivers, (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, March 2012), http://kff.org/health-reform/fact-sheet/the-new-review-and-approvalprocess-rule/.

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  9. Indiana filed an amendment to its pending extension on May 25, 2017 and Kentucky filed an amendment to its pending application on July 3, 2017. Neither state held a state-level public comment period before submission to CMS. Although the final regulations involving public notice do not require a state-level public comment period for amendments to existing/ongoing demonstrations, CMS has historically applied these regulations to amendments. However, these amendments were not to ongoing demonstrations but to a new waiver request (KY) and extension request (IN).

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  10. However, CMS relieved Montana from the requirement to evaluate its expansion waiver based on its participation in a cross-state federal evaluation.

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  11. Robin Rudowitz, MaryBeth Musumeci, and Alexandra Gates, Medicaid Expansion Waivers: What Will We Learn? (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, March 2016), http://kff.org/medicaid/issue-brief/medicaid-expansion-waivers-what-will-we-learn/.

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  12. The November 6, 2017 CMCS Information Bulletin (found at: https://www.medicaid.gov/federal-policy-guidance/downloads/cib110617-2.pdf) on Section 1115 demonstration process improvements also signaled CMS’s interest in moving toward reducing the frequency of reporting required for states to semi-annually or annually for certain demonstrations.

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  13. “About Section 1115 Demonstrations,” CMS, last accessed Jan. 29, 2019, https://www.medicaid.gov/medicaid/section-1115-demo/about-1115/index.html.

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  14. Federal law generally bars states from receiving “any such [federal Medicaid] payments with respect to care or services for any individual who has not attained 65 years of age and who is a patient in an [IMD].” 42 U.S.C. § 1396d (a)(29)(B).

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  15. One state, Vermont, currently has waiver authority for IMD mental health services, but those payments must be phased out between 2021 and 2025. Vermont had sought expanded waiver authority for IMD mental health services, and other states, including Illinois, Massachusetts, and North Carolina, had sought IMD mental health authority; all of these requests were denied by CMS. In the Vermont, Illinois, and North Carolina denials, CMS specifically cited its policy to not allow Medicaid payments for individuals who receive only mental health treatment in IMDs. Maryland also indicated that CMS had denied its request for IMD mental health payment waiver authority.

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  16. This CMCS Information Bulletin also outlines changes to the “fast track” federal review process for Section 1115 waiver extension requests, removing the requirement that states must have at least one full extension cycle without “substantial program changes” before they are eligible to be considered for the “fast track” review process. (The “fast track” process was designed to expedite the federal review of certain Section 1115 waiver extensions requests that meet specified criteria.)

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  17. Waiver provisions in some states may be approved but not yet implemented.

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  18. In December 2018, CMS approved Maine’s waiver, including work requirements, premiums, elimination of retroactive eligibility for traditional populations, which had been submitted by the LePage administration. When Governor Mills took office in January 2019, she declined to accept the waiver terms and conditions and indicated that Maine instead would make vocational training and workforce supports available to Medicaid enrollees.

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  19. In October 2017, CMS approved an amendment to Iowa’s waiver eliminating 3-month retroactive coverage for nearly all new Medicaid applicants. The retroactive coverage waiver applies to all other state plan populations, including low-income parents, children over age 1, ACA expansion adults, seniors, and people with disabilities. Pregnant women and infants under age 1 still qualify for retroactive coverage in Iowa. In 2018, the state restored retroactive coverage for nursing facility residents. CMS also approved retroactive coverage waivers in Florida (November 2018), New Mexico (December 2018), and Arizona (January 2019) which apply to waiver populations including seniors and people with disabilities.

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  20. Under the Kentucky HEALTH demonstration, adults required to and making monthly premium payments have a My Rewards incentive account that may be used to access additional benefits not otherwise covered. Enrollees can earn incentive funds for specified activities and can lose funds under certain circumstances including for each appointment missed without adequate notice of cancellation or good cause.

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  21. In doing so, CMS is allowing the state to implement a restrictive policy provision that was not part of the original waiver application and was not subject to public comment.

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  22. These provisions apply only to adults without dependent children from 0-100% FPL. Wisconsin’s BadgerCare waiver covers childless adults ages 19 to 64 with income up to 100% FPL (without enhanced ACA matching funds).

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  23. 42 U.S.C. § 1916(j) and 42 U.S.C. § 1932(a)(2)(C).

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  24. On November 1, 2017, CMS issued a state Medicaid director letter revising the July 2015 guidance. The revised guidance continues to allow states to use Section 1115 waivers to pay for IMD substance use treatment services and affirms many components of the earlier guidance. For example, it notes that “states should indicate how inpatient and residential care will supplement and coordinate with community-based care in a robust continuum of care in the state” and directs states to “demonstrate how they are implementing evidence-based treatment guidelines.” The revised guidance requires certain demonstration components, such as residential treatment provider qualifications and capacity, opioid prescribing guidelines, access to naloxone, prescription drug monitoring programs, and care coordination between residential and community settings. States must report on core and state-specific quality measures, perform waiver evaluations, and are subject to a $5 million deferral per item for failure to comply with evaluation and reporting requirements.

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  25. The recently enacted federal Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act creates a new state plan option from October 2019 through September 2023, for states to receive federal Medicaid payments for non-elderly adults with SUD in an IMD up to 30 days per year.

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  26. Some waivers approved by the Trump Administration, such as Illinois and Vermont, note that those state “will aim for a statewide average length of stay of 30 days. . . to ensure short-term residential treatment stays.”

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  27. Several states have used Section 1115 authority to implement payment and delivery system reform initiatives which include incentives for plans and providers to address social determinants of health (often through “DSRIP” demonstrations). However, these demonstrations do not include funding/expenditure authority to directly pay for non-medical services that aim to address social determinants of health.

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  28. Uncompensated Care Pool funding was being phased down according to post-ACA guidelines established by the Obama Administration. These guidelines established that 1) uncompensated care pool funding should not pay for costs that would be covered in a Medicaid expansion, 2) Medicaid payments should support services provided to Medicaid beneficiaries and low-income uninsured individuals, and 3) provider payment should promote provider participation and access, and should support plans in managing and coordinating care.

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  29. Florida Managed Medical Assistance Program (MMA), Special Terms and Conditions, #11-W-00206/4, approved August 3, 2017, https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/fl/fl-medicaid-reform-ca.pdf.

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  30. Under Florida’s LIP, funding was set at $1 billion in SFY 2016 and $608 million in SFY 2017. CMS indicated the new LIP funding amount approved as part of the state’s extension request reflects “the most recent available data on hospitals' charity care costs.” Florida’s LIP funds may be used for health care costs incurred by the state or by providers (hospitals, medical school physician practices, and federally qualified health centers (FQHCs)/rural health centers (RHCs)) to furnish uncompensated medical care for uninsured low-income individuals up to 200% FPL.

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  31. Texas Healthcare Transformation and Quality Improvement Program, Special Terms and Conditions, # 11-W-00278/6, approved January 1, 2018 through September 30, 2022, https://hhs.texas.gov/sites/default/files//documents/laws-regulations/policies-rules/1115-waiver/waiver-renewal/1115renewal-cmsletter.pdf.

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  32. In its rejection of Massachusetts’ prescription drug formulary proposal, CMS said it would be willing to consider a closed formulary proposal under which the state agrees to negotiate directly with manufacturers and forgo all manufacturer rebates available under the federal Medicaid Drug Rebate Program.

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  33. The Trump administration rejected Massachusetts’ request for partial expansion to 100% of the FPL using the ACA enhanced match on June 27, 2018. The current administration did not make a decision on Arkansas’ partial expansion request in its March 5, 2018 approval of the Arkansas Works waiver amendment request.

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  34. The Obama Administration issued policy guidance, consistent with its legal interpretation of the ACA, indicating that states cannot receive enhanced federal ACA expansion funding unless they cover all newly eligible adults through 138% FPL.

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  35. In a CMS administrator letter to Kansas on May 7, 2018, CMS rejected Kansas’ proposal to impose a lifetime limit on Medicaid benefits for eligible beneficiaries.

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  36. Arizona proposed to redetermine eligibility every 6 months for all expansion enrollees and every 3 months for individuals who have a change in circumstance that results in non-compliance with waiver requirements.

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  37. In December 2017, CMS approved a five-year renewal of Texas’ Healthcare Transformation and Quality Improvement Program Section 1115 waiver. The waiver renewal decreases federal matching funds for the state’s DSRIP program between year one and year four, eliminating federal funding for DSRIP in the fifth year.[xxxvii]

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  38. Originally, DSRIP initiatives were more narrowly focused on funding for safety net hospitals and often grew out of negotiations between states and HHS over the appropriate way to finance hospital care.

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  39. Letter from Andrea J. Casart to Dawn Stehle regarding Arkansas’ draft evaluation design (Nov. 1, 2018), available at: https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ar/Health-Care-Independence-Program-Private-Option/ar-works-feedback-eval-dsgn-20181101.pdf.

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  40. Rachana Pradhan and Dan Diamond, “Trump wants to bypass Congress on Medicaid plan,” Politico, January 1, 2019, available at: https://www.politico.com/story/2019/01/11/trump-bypass-congress-medicaid-plan-1078885.

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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in Menlo Park, California.