The ACA and Recent Section 1115 Medicaid Demonstration Waivers
Under the Affordable Care Act (ACA), Medicaid plays a key role in efforts to reduce the number of uninsured by expanding eligibility to nearly all low income adults with incomes at or below 138% FPL ($16,105 per year for an individual in 2014); however, the Supreme Court ruling on the ACA effectively made the expansion a state option. As of November 2014, 28 states including DC are implementing the expansion. Under flexibility provided by the ACA’s Medicaid expansion, as well as pre-existing federal Medicaid law, the Medicaid expansion is being implemented differently across states in terms of what specific benefits are provided and how those services are delivered. To date, a limited number of states have obtained or are seeking approval through Section 1115 waivers to implement the expansion in ways that extend beyond the flexibility provided by the law. However, looking ahead, more states may pursue alternative models as a politically viable way to expansion in order to extend coverage and capture federal dollars.
This brief focuses on waivers related to implementation of the ACA Medicaid expansion to adults, with a particular focus on provisions that have been approved, denied, and those that are pending. Examining what the Centers for Medicare and Medicaid Services (CMS) has approved or not approved can help inform understanding of the parameters and limitations around what CMS is likely to provide for Section 1115 waiver flexibility for the Medicaid expansion.
Prior to the ACA, states could only cover childless adults and receive federal Medicaid funds by obtaining a Section 1115 waiver. In the absence of coverage provided through these waivers, which were required to be budget neutral for the federal government, childless adults generally did not have any other coverage options through Medicaid. Given these considerations, Section 1115 waivers that expanded coverage to these adults, who otherwise would have been uninsured, often included limited benefit packages, higher cost-sharing and/or enrollment caps designed to limit costs. Since the ACA expands Medicaid to nearly all low-income adults with significant federal funding, the need for and role of waivers to cover adults has fundamentally changed. A few states that had waivers in place prior to the ACA have modified and extended these waivers (Wisconsin, Indiana, Oklahoma and Utah), but this coverage is not eligible for the enhanced federal ACA matching funds for newly eligible adults. Some states implementing the Medicaid expansion are continuing to use waivers to provide coverage or assistance to individuals with incomes above 138% FPL (Minnesota, Vermont, Massachusetts and New York).
Using enhanced federal matching funds for those newly eligible for coverage, nearly all states (24 of 28 states) implementing the ACA Medicaid expansion are doing so as set forth by law, without a waiver. The majority of states implementing the expansion are doing so within federal rules and options to receive the associated enhanced federal matching funds for newly eligible. These states do not need a waiver, but implement the expansion by filing a State Plan Amendment (SPA). Like the traditional Medicaid program, the law provides states considerable flexibility to implement the expansion to adults. Due to this flexibility, the expansion will look different across states.
A limited number of states are pursuing Section 1115 waivers to implement the ACA Medicaid expansion in ways that do not meet federal rules and still access enhanced federal matching funds available for newly eligible adults. According to statute, waivers must be used to “promote the objectives” of the Medicaid program and under long-standing federal policy waivers must be budget neutral for the federal government. Under new transparency requirements passed as part of the ACA, expansion waivers have provided for opportunities for public comment in the process. To date, CMS has approved waivers to implement the Medicaid expansion in four states: Arkansas, Iowa, Michigan and Pennsylvania. The Pennsylvania expansion is currently scheduled to go into effect on January 1, 2015, but the newly elected governor may opt to implement a straight-forward expansion via a state plan change instead of the waiver.
|Table ES-1: Key Themes in ACA Expansion Waivers and Proposals|
|Premium Assistance||Premiums / Monthly Contributions||Healthy Behavior Incentives||Benefit Changes||Work Referral|
|Indiana (proposed)||x (optional)||x||x||x||x|
1Arkansas has proposed a waiver amendment to limit non-emergency medical transportation, require newly eligible individuals to participate in health savings accounts that require monthly contributions beginning at 50% FPL, and impose cost sharing consistent with Medicaid requirements for newly eligible individuals beginning at 50% FPL.
2 Iowa’s NEMT transportation waiver is limited to demonstration year 1. Iowa has a pending waiver amendment seeking extension to years 2 and 3.
3 The Pennsylvania expansion waiver is currently scheduled to go into effect on January 1, 2015 but the newly elected governor may opt to implement the expansion via a state plan amendment. Governor Corbett’s original waiver proposal included premium assistance provisions. Under the current waiver, Pennsylvania’s NEMT waiver is limited to demonstration year 1, with NEMT to be provided beginning in year 2. Governor Corbett had proposed additional benefit reductions for current beneficiaries that do not require waiver authority, and he was planning to use state-only funds outside of Medicaid to reduce premium contribution amounts for individuals who fulfill work requirements.
CMS has approved some provisions in the waiver requests, but also denied some provisions. Examining what CMS has approved and not approved can be instructive for other states that may seek waivers in the future to implement the expansion. CMS has approved waivers implementing the ACA’s Medicaid expansion through premium assistance, charging premiums; removing certain required benefits, and using healthy behavior incentives. (Table ES-1) In contrast, CMS has denied requests a number of waiver requests:
- Premiums for individuals with incomes < 100% FPL as a condition of eligibility;
- Cost-sharing amounts beyond those allowed under current law;
- Waivers of requirements to provide wrap-around benefits for EPSDT and free choice of family planning provider to the extent that Marketplace plans do not offer coverage for these services;
- Retroactive eligibility, and
- Work requirements as a condition of Medicaid eligibility
Several states have waiver amendments or proposals pending or in development. There is no deadline for states to participate in the Medicaid expansion; however, the 100% federal financing for those newly eligible begins to phase down after 2016 to 90% by 2020. Moving into the legislative sessions for 2015, other states continue to explore opportunities to use waiver authority to implement the Medicaid expansion. Arkansas, Iowa, and most recently Arizona have waiver amendments and Indiana has a waiver request pending at CMS. Other states, including Utah and Tennessee, are actively negotiating with CMS about submitting a waiver to implement the expansion. How CMS decides on future waiver proposals will continue to shape how waivers will be used for coverage post-ACA.
To ensure Section 1115 waivers fulfill their purpose as research and demonstrations projects, it will be important to evaluate their impacts. Waivers are intended to be research and demonstration projects, and federal law requires that they be formally evaluated. Recent waivers to implement the ACA Medicaid expansion include requirements for the states to conduct evaluations. Ensuring that evaluations occur and making evaluation findings publicly available will be important for enabling researchers, policymakers, and other stakeholders to identify and examine lessons learned from these waiver experiences. What happens with waivers between 2014 and 2016 also will be important to inform the use of the new state innovation waiver authority available in 2017, which will allow states to waive Marketplace coverage provisions and combine those waivers with Medicaid and CHIP waivers.Issue Brief