Appendix A: Federal Medicaid Payments for Uncompensated Care at IHS Facilities in Arizona and California

Recently, CMS has approved Section 1115 waivers that include provisions designed to improve the financial viability of IHS- and tribally-operated facilities. Section 1115 of the Social Security Act authorizes the Secretary of HHS, at the request of a state, to waive certain requirements of federal Medicaid law to enable the state to experiment with different approaches to delivering or paying for services. Section 1115 also authorizes the Secretary to provide federal Medicaid matching funds for state costs that would not otherwise be matched under current rules, subject to an overall budget neutrality limit.

As of July 2011, almost half of the roughly 278,000 American Indians and Alaska Natives residing in Arizona were enrolled in the state’s Medicaid program.¹ In 2010, Arizona made cutbacks in Medicaid eligibility and benefits to reduce state spending, closing enrollment for childless adults with incomes below 100% of the federal poverty level (FPL) and eliminating coverage of certain optional services such as adult dental care. As a result of these reductions, IHS- and tribally-operated facilities would no longer receive reimbursement for poor childless adults unable to enroll in the program due to the enrollment cap and optional services no longer covered by Medicaid. However, because the federal government pays 100% of the cost of covered services provided to American Indians and Alaska Natives through IHS- or tribally-operated facilities, the state would not realize any savings from the reductions in these services provided by these facilities to American Indians and Alaska Natives

In April 2012, CMS approved an amendment to Arizona’s existing section 1115 waiver that enables IHS- and tribally-operated facilities to continue to receive federal Medicaid funds for services provided to these childless adults and for these optional services, even though they are no longer covered by the state Medicaid program. Specifically, under the waiver, the federal government will pay IHS- and tribally-operated facilities for uncompensated care costs that stem from services provided to adults with incomes below 100% FPL who are no longer able to enroll in Medicaid and the provision of optional services that are no longer covered by the program to Medicaid-eligible individuals. According to the waiver approval, this “will enable the State to evaluate how this approach impacts the financial viability of IHS and 638 [tribal] facilities and ensures the continued availability of a robust health care delivery network for current and future beneficiaries.”²

In April 2013, a similar waiver amendment was approved in California that allows the state Medicaid agency to make supplemental payments to IHS facilities, including tribal facilities, to take into account the burden of providing care to certain uninsured adults and for optional services that are no longer covered by the state Medicaid program. The waiver approval states this will enable the state “to test the effects of the payments on the financial viability of IHS and 638 [tribal] providers and determine if Medicaid funding under the demonstration results in an increase in the volume of primary care services delivered to Medicaid beneficiaries, an increase in the capacity to deliver such services by participating providers.”³

Appendix B, Table 1

Issue Brief