Section 1115 waivers: States’ Recent Use of This Tool to Change the Medicaid Landscape
August 7, 2018
Recently, important changes have been made to state Medicaid programs through the Section 1115 waiver; a demonstration waiver that allows states the flexibility to experiment with new and innovative ways to reduce costs, improve access, and enhance quality of care in the Medicaid program. Through 1115 waivers, states can obtain approval to make changes in eligibility, benefits, cost sharing and provider payments (Kaiser Family Foundation, 2011; Medicaid Program; Review and Approval Process for Section 1115 Demonstrations, 2012). Section 1115 waivers must be reviewed and approved by the Centers for Medicare and Medicaid Services (CMS) before they can be adopted by states. Currently, 38 states have an active Section 1115 waiver and 22 have one that is pending review (Kaiser Family Foundation, 2018). States have used these waivers to implement managed care, integrate behavioral and physical health service delivery, or provide coverage for additional populations into their Medicaid program (National Conference of State Legislatures, 2017).
Since January 2018, South Dakota, Illinois Louisiana and New Hampshire have had new waivers approved by CMS while Alaska’s is still pending approval. South Dakota’s first 1115 waiver provides full Medicaid coverage for former foster care youth up to age 26 who were residents of another state or territory on the date of aging out of foster care. The new waivers from Louisiana, New Hampshire, Illinois and Alaska target behavioral health and substance use disorder treatment in the midst of the opioid epidemic. For instance, the Healthy Louisiana Substance Use Disorder and the New Hampshire Substance Use Disorder Treatment and Recovery Access Section 1115 waivers provide opioid and other substance use disorder services to individuals temporarily residing in Institutions for Mental Diseases (IMDs). Prior to these waivers, these services were not matchable expenditures in Medicaid, and members often had to rely on emergency departments for opioid and substance use disorder treatments. Illinois’s waiver will implement 10 pilot programs for physical and behavioral health integration and substance use disorder treatment through inpatient and residential services, case management, home visiting, peer support, crisis intervention, and community and employment-based initiatives. If approved, Alaska’s waiver will create an integrated behavioral health system for beneficiaries with severe mental illness and/or substance use disorders that will include efforts to provide early interventions, community-based outpatient services, inpatient residential treatment and peer support programs.
During the same timeframe, multiple states including Arkansas, Indiana, and Mississippi, received approval from CMS to extend their existing waiver programs. The waivers were focused on a variety of topics including coverage for disabled children and premiums for the expansion adult population. Mississippi received approval from CMS for the first 10-year extension ever granted for its family planning waiver, which provides family planning services and supplies to eligible women and men (National Conference of State Legislatures, 2018). Meanwhile, Missouri withdrew its waiver request to create a limited benefit package for uninsured young adults with behavioral health crises. Iowa ended its Family Planning Network waiver program, which provided access to family planning services for adults under the age of 50 with incomes up to 300% of the federal poverty level (FPL) otherwise ineligible for Medicaid. A state family planning program was created in its place. The authority to provide coverage for aged and disabled individuals with incomes at or below 88% FPL in one Florida waiver was transitioned to the Florida Managed Medical Assistance (MMA) waiver, which is the state’s managed care model (Medicaid.gov, n.d.).
However, the greatest changes to state Medicaid programs came in the form of Medicaid work requirements. For the first time since the creation of the Medicaid program, the current administration has approved waivers requesting the implementation of community engagement and work requirements targeted at eligible adults. These waivers generally require up to 20 hours per week or 80 hours per month of employment, education, job training, or community service for those enrolled in the Medicaid program. State agencies believe that this requirement may facilitate the transition of Medicaid members to commercial insurance coverage and ultimately decrease overall costs incurred by the state for the program (MACPAC, 2018). Currently, only four states have had their requests approved: Arkansas, Indiana, Kentucky, and New Hampshire. Each of the approved states has expanded their Medicaid program under the Affordable Care Act (ACA) to include newly eligible adults. CMS has not yet approved requests from non-expansion states and has voiced concerns about the impact that doing so may have on current Member members in those states. A lawsuit was filed on behalf of 16 Kentucky Medicaid members against the approval of Kentucky’s new waiver. A federal district court overturned the approval on June 29th and stated that it did not take into consideration how the waiver may impact the provision of affordable health coverage for low-income individuals, which is the purpose of the Medicaid program. Multiple states have proposals that are pending approval including Arizona, Kansas, Mississippi, and Ohio. Other states have indicated that they plan to submit Section 1115 waiver requests to allow for work requirements.
The implementation of work requirements has been controversial, as they have the potential to push eligible adults already receiving Medicaid off of the program as well as prevent new adults from enrolling in the program. The verification requirements may also discourage eligible individuals from continuing their Medicaid enrollment (MACPAC, 2018). Arkansas’ waiver went into effect on June 1, and over 7,000 Medicaid members failed to meet the reporting requirements for the month of June (Hellmann, 2018). Beyond the barriers members face to obtaining and maintaining employment, there are multiple barriers to just reporting work or other activity such as knowledge of and access to technology. In a 2016 National Health Interview Survey, 30% of members reported never using a computer, 28% reported not using the internet, and 41% reported not using email (Garfield, 2018). Those in favor of work requirements believe that they will help individuals out of poverty, however, 51% of adult Medicaid members are already working full-time and still qualify for Medicaid based on income (Garfield, 2018). Additionally, a recent report estimated that only 6% of those eligible adults who are not already working, will not qualify for exemptions (Kaiser Family Foundation, 2018). Many are questioning the purpose of going through such lengths to impose this requirement if it will only impact a small proportion of individuals. An analysis released by Fitch Ratings demonstrated that Kentucky’s Medicaid costs increased by over 40% after implementing work requirements, mostly attributed to increased administrative costs (Japsen, 2018). The new verification procedures may create higher costs for the state while providing coverage for less people.
The recent waiver requests and approvals, especially those focusing on opioid/substance use disorder treatment and work requirements, reflect a shift in state Medicaid program priorities. The Institute for Medicaid Innovation will continue to monitor changes to state Medicaid programs through Section 1115 waivers in our state fact sheets and new information will be included through annual updates as it emerges.
Centers for Medicare & Medicaid Services. (2012). Medicaid Program; Review and Approval Process for Section 1115 Demonstrations. Retrieved from https://www.gpo.gov/fdsys/pkg/FR-2012-02-27/html/2012-4354.htm
Garfield, R., Rudowitz, R., Musumeci, M., Damico, A. (2018, June). Implications of Work Requirements in Medicaid: What Does the Data Say? Retrieved from https://www.kff.org/medicaid/issue-brief/implications-of-work-requirements-in-medicaid-what-does-the-data-say/?utm_campaign=KFF-2018-June-Medicaid-Work-Requirements
Hellman, J. (2018, July). More than 7,000 fail to meet Medicaid work requirements in Arkansas. Retrieved from http://thehill.com/policy/healthcare/397260-more-than-7000-fail-to-meet-medicaid-work-requirements-in-arkansas
Japsen, B. (2018, July). Trump’s Medicaid Work Rules Hit States With Costs and Bureaucracy. Retrieved from https://www.forbes.com/sites/brucejapsen/2018/07/22/trumps-medicaid-work-rules-hit-states-with-costs-and-bureaucracy/#7e9889b966f5
Kaiser Family Foundation. (2011, June). Five Key Questions and Answers About Section 1115 Medicaid Demonstration Waivers. Retrieved from https://kaiserfamilyfoundation.files.wordpress.com/2013/01/8196.pdf
Kaiser Family Foundation. (2018, July). Medicaid Waiver Tracker: Which States Have Approved and Pending Section 1115 Medicaid Waivers? Retrieved from https://www.kff.org/medicaid/issue-brief/which-states-have-approved-and-pending-section-1115-medicaid-waivers/
Lee, C. (2018, June). Only Six Percent of Adult Medicaid Enrollees Targeted by States’ New Work Requirements Are Not Already Working and Are Unlikely to Qualify for an Exemption. Retrieved from https://www.kff.org/medicaid/press-release/only-six-percent-of-adult-medicaid-enrollees-targeted-by-states-new-work-requirements-are-not-already-working-and-are-unlikely-to-qualify-for-an-exemption/
Medicaid.gov. (n.d.). State Waivers List. Retrieved from https://www.medicaid.gov/medicaid/section-1115-demo/demonstration-and-waiver-list/index.html
Medicaid and CHIP Payment and Access Commission. (2018, June). Medicaid Work and Community Engagement Requirements. Retrieved from https://www.macpac.gov/wp-content/uploads/2018/02/Medicaid-work-and-community-engagement-requirements.pdf
Medicaid Program; Review and Approval Process for Section 1115 Demonstrations, 42 C.F.R. 431, subpart G (2012).
National Conference of State Legislatures. (2017, December). Medicaid 1115 Waivers by State. Retrieved from http://www.ncsl.org/research/health/medicaid-1115-waivers-by-state.aspx
National Conference of State Legislatures. (2018, January). Mississippi Lands First 10-Year Medicaid 1115 Waiver Extension. Retrieved from http://www.ncsl.org/blog/2018/01/10/mississippi-lands-first-10-year-medicaid-1115-waiver-extension.aspx