The New Rules of Waivers and State Plan Amendments

On Tuesday November 7th, the federal Department of Health and Human Services outlined its new criteria for reviewing states’ efforts to experiment with their Medicaid programs. In a press release sent out by the Centers for Medicare and Medicaid Services (CMS), Director Seema Verma outlined her “vision” for the Medicaid program, which includes a new approach to 1115 Demonstration Waivers, their associated review and implementation processes, as well as changes to the review of State Plan Amendments and the creation of Medicaid “Score Cards.”

To gauge the strategic intent of any organization, it is important to understand the vision of that organization and the principles inherent in that vision. In the context of CMS and Medicaid, the Director wants to “reset the federal-state partnership” and “not accept the hollow victory of numbers covered.” Notably, the Director’s focus on beneficiaries involves having enrollees achieve their “highest potential,” stating “CMS believes that meaningful work is essential” and that “every American deserves the dignity and respect of high expectations.” This vision is communicating a different idea about Medicaid as an entitlement, using Departmental authority to renegotiate the responsibility of enrollees in achieving coverage. To do this, CMS has identified several tactics for this new strategic direction in regards to waivers:

1115 Waiver Application and Approvals

  • CMS will pare down the regulatory requirements for submission, making states only submit what is legally necessary for evaluation
  • Special Terms and Conditions (STCs) will be focused on flexibility for states and CMS will try to offer standard language
  • Approval process will offer expedited approval for waivers that are similar to other states and CMS will “presume” that such waivers are within statutory requirements under 1115 laws
  • Waivers may now be approved for up to 10 years
  • CMS will offer a new “fast track” process for 1115 waivers and State Plan Amendments (SPAs)
  • States can submit waiver information to CMS for before the publicly reported official submission
  • Budget neutrality guidance is still being developed but could be adjusted based on states’ input

Previously, the general criteria CMS used for evaluating 1115 waivers was as follows:

  • Increase and strengthen overall coverage of low-income individuals
  • Increase access to, stabilize, and strengthen providers and provider networks that serve Medicaid and low-income populations
  • Improve health outcomes for Medicaid and other low-income populations
  • Increase efficiency and quality of care of Medicaid and other low-income populations through initiatives to transform service delivery networks

The new evaluation criteria for 1115 waivers are as follows:

  • 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.

Looking at these changes, a few things become apparent.

1)  The process associated with regulatory oversight of Medicaid programs is relaxed, including provisions that diminish public inspection of waiver proposals and expand the limits of budget neutrality.

2)  There is a clear reorientation of the program to put more of the responsibility of coverage in the hands of beneficiaries as opposed to state Medicaid agencies or the federal government.

3)  The financing of Medicaid can be renegotiated away from reimbursement of medical services to activities that either connect to commercial insurance, promote personal responsibility, or address social determinants (i.e. non-medical services).

While federal legislation terminating Medicaid as an entitlement was not successful, the Administration is pursuing a number of sub-regulatory tactics to fulfill its vision of a Medicaid program that encourages personal responsibility. Some of the proposals will indeed make it easier for states to enact policy in a more efficient and cost-effective manner. Despite evidence suggesting that able-bodied Medicaid beneficiaries are already working and that coverage itself is an economic ladder, this new vision is intended to disrupt the normal process of coverage in favor of more “skin in the game” on the part of consumers. The ultimate result of this vision, however, may be less fiscal and public oversight of experimental policy. Given the pending efforts of Ohio to pursue work requirements and consumer cost sharing through waivers, an understanding of this new orientation will be fundamental in conceptualizing how Medicaid will be delivered in the state for years to come.