Medicaid Moving Ahead in Uncertain Times: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2017 and 2018

Administrative Challenges, Priorities, and Conclusion

Challenges and Priorities in FY 2018 and Beyond Reported by Medicaid Directors

As one Medicaid director noted, “this is an extremely difficult and challenging time for Medicaid directors.” In FY 2018, the normal challenges of administering a complex program that consumes a large share of the state’s budget have been exacerbated by the uncertainty generated by debates at the federal level regarding the future of Medicaid policy and financing. The challenge of continuing to move forward on state level initiatives under these circumstances was echoed by a number of states. States therefore reported pressing ahead on a wide variety of priorities for FY 2018 and beyond, including: pursuing new Section 1115 demonstration waivers; implementing payment and delivery system reform initiatives; enhancing access to and delivery of behavioral health services, with a specific focus on tackling the opioid epidemic; implementing long-term services and supports reforms and improvements; and executing major systems projects.

Federal Legislative Proposals

ACA Medicaid Expansion

This year’s survey was conducted as Congress debated proposals to repeal major portions of the ACA, including the ACA’s Marketplace and Medicaid coverage expansions, as well as other proposals to fundamentally restructure Medicaid’s financing structure. The survey asked states about the implications of these proposals.

Most Medicaid directors from the 32 ACA Medicaid expansion states reported that they would not be able to continue covering the expansion population, or that coverage would be at substantial risk, if the ACA enhanced federal match for this population were terminated. These coverage losses would increase the number of uninsured. Medicaid directors also pointed to budget gaps and broader state economic consequences as well as increases in uncompensated care for hospitals and FQHCs without the expansion. A number of directors also highlighted the potential negative impacts on access to behavioral health services (especially, states’ ability to address the opioid epidemic). Directors also noted the difficulty of rolling back the expanded behavioral health services and delivery system changes that have been implemented in conjunction with the Medicaid coverage expansion. Two directors (from Minnesota and New York) also noted that coverage under their Basic Health Plans would also be at risk if the ACA were repealed. A few non-expansion state Medicaid directors reported that expansion discussions were currently on hold, or had been delayed, by the ongoing federal reform debate.

Proposed Federal Medicaid Financing Reforms

Federal legislative proposals under debate at the time of the survey called for fundamental changes in Medicaid financing by converting the current open-ended matching structure to a capped financing program under a per capita cap or block grant designed to ensure federal savings.

Almost all Medicaid directors expressed concern about the likely negative fiscal consequences tied to proposed limits on federal Medicaid spending. Medicaid directors were concerned about budget shortfalls and the potential need to make program cuts and reductions (e.g., to provider rates, optional benefits, and optional eligibility pathways) as they anticipated that inflation factors included in the proposals would not be adequate to cover projected costs, particularly for new and expensive pharmaceuticals and medical treatments, growth in the aging population who have greater needs for LTSS, or public health emergencies. A number of directors expressed concern that the caps would not account for current and past state efforts, including LTSS rebalancing and movement to risk-based managed care that have helped to contain program costs but would ultimately depress a state’s base year amount used to calculate state federal funding cap amounts under a per capita cap formula. Some Medicaid directors commented that the formulas should reward efficient states. Some directors mentioned that they welcomed potential new state policy flexibility under federal legislative proposals, but a greater number of Medicaid directors expressed concern that proposals to convert Medicaid to a per capita cap or block grant would not provide sufficient flexibility to enable states to make up for the reduction in federal funds. The National Association of Medicaid Directors has issued statements on recent legislative proposals and more broadly on health reform calling for Congress to carefully consider the impacts of legislative proposals on states.¹

Section 1115 Medicaid Demonstration Waivers

All new administrations can shape Medicaid through administrative actions and Section 1115 demonstration waivers. In March 2017, the Trump administration sent a letter to state governors² that signaled a willingness to use Section 1115 authority to “support innovative approaches to increase employment and community engagement” and “align Medicaid and private insurance policies for non-disabled adults.” The letter indicates a willingness to expand these policies to traditional Medicaid adults as well as a willingness to approve landmark program changes, like work requirements.³

While previous sections of this report capture Section 1115-related policy actions planned for implementation in FY 2018, the survey also asked states whether they are planning program changes under Section 1115 authority that would be implemented after FY 2018. Nearly half of states reported activity planned for implementation after FY 2018 – as part of Section 1115 waivers currently pending at CMS, Section 1115 concept papers submitted to CMS, or more preliminary waiver ideas/concepts still under development at the state level.⁴ Waiver components under consideration include a range of policies such as premiums and cost-sharing (including HSA-like accounts), work requirements, healthy behavior incentives, retroactive coverage waivers, behavioral health services and systems reform, and NEMT waivers. A few examples follow:

Pending Waivers⁵

• Kentucky⁶ has a waiver pending that seeks changes to its traditional Medicaid expansion. The state proposes implementing sliding scale premiums, requiring premium payment before coverage is effective, and locking those above 100 percent FPL out of coverage for six months for premium non-payment. The state seeks to require work as a condition of eligibility for most adults, proposes locking beneficiaries out of coverage for six months for failure to timely renew eligibility, and proposes waiving NEMT (an otherwise required benefit). Kentucky also submitted an amendment to its pending application. The amendment seeks to change the work requirement from a graduated requirement⁷ to a flat 20 hour/week requirement, adds disenrollment and lock-out provisions for failure to timely report changes to income or employment or for making false statements involving work verification, and removes a proposed expansion of presumptive eligibility sites included in the original waiver application.⁸
• Massachusetts has submitted an amendment to its MassHealth waiver to better align coverage with commercial plans. Under the terms of the amendment, the state would enroll higher income, non-disabled adults in the state’s Marketplace and prohibit Medicaid enrollment for certain populations with access to affordable employer coverage. The state also proposes to eliminate some of the wrap around benefit requirements for premium assistance, increase cost-sharing, implement narrow provider networks in MassHealth’s Primary Care Clinician Plan (to encourage enrollment in ACOs and MCOs instead), establish a closed formulary focused on drug efficacy, and leverage a specialty pharmacy network to reduce drug costs.⁹
• Wisconsin¹⁰ has submitted an amendment to its BadgerCare Reform demonstration.¹¹ As directed by state law, they seek to amend their existing waiver for childless adults to require monthly premiums for childless adults from 51 percent to 100 percent FPL, with a coverage lock-out of up to six months for non-payment. The state proposes to offer premium reductions for completion of a health risk assessment and healthy behavior program. The state also seeks to require, as a condition of eligibility, that childless adults complete a drug screening, and if indicated, a drug test at application and renewal and would require childless adults ages 19 to 49 to work or participate in job training for 80 hours per month. In addition, the state seeks to limit childless adults’ eligibility to 48 months followed by a six-month lock-out,¹² proposes to use Medicaid funds to pay for residential SUD treatment up to 90 days in institutions for mental disease for all Medicaid enrollees, and seeks authority to charge an $8 copay for emergency department utilization by childless adults.¹³

Concept Papers

• Alaska has developed a waiver concept paper that proposes a comprehensive behavioral health system transformation with increased access to behavioral health screening, intervention, and support services in community-based settings and via telehealth. It also proposes enhanced behavioral health services to targeted populations, such as “super-utilizers”, the homeless, and justice-involved populations, and integrating behavioral and physical health care through a new Administrative Services Organization (ASO) arrangement.¹⁴
• New Mexico reported plans to make targeted modifications to improve its existing Centennial Care managed care program. These include but are not limited to LTSS reforms to support improved care transitions, a uniform benefit package for most Medicaid adults, enhanced care coordination for justice-involved and other target populations, expanded healthy behavior incentives, a waiver of retroactive coverage requirements, and fees for missed appointments.¹⁵ The state also reported that it would like to create a DSRIP-like program for nursing homes.

Other State Priorities and Challenges

Payment and Delivery System Reform Initiatives

As noted in previous survey reports, many states are continuing to develop and implement significant initiatives that restructure delivery systems and payment structures with the goals of improving the quality of care and patient health outcomes and containing costs. One director anticipated that since federal Medicaid funding may be reduced in the future, it was more important than ever to keep making progress on delivery system reform and value-based purchasing efforts. Payment and delivery system reform efforts mentioned include value-based purchasing approaches (e.g., alternative provider payment models (APMs)), efforts to integrate physical and behavioral health, managed care expansions and reforms, integrated care partnership initiatives that engage providers at the point of service to improve care for patients, Accountable Care Organization initiatives, and multi-payer quality efforts.

Substance Use Disorder (SUD) Treatment Initiatives

With overdose deaths across the country continuing to increase, a majority involving opioids (including prescription opioids and heroin), many states are taking steps through Medicaid and other channels to reverse these trends. A number of Medicaid directors identified addressing the opioid epidemic or expanding SUD treatment efforts as a top Medicaid priority, including directors from a number of states that are seeking federal waiver authority to offer residential SUD services.

Long-Term Services and Supports

Medicaid is the nation’s primary payer for long-term services and supports (LTSS) and LTSS is also a major cost driver in state Medicaid budgets. It is therefore not surprising that a number of Medicaid directors identified LTSS reforms as a top priority for FY 2018 and beyond. Some of the initiatives mentioned included MLTSS efforts, 1915(c) waiver redesign projects, rebalancing initiatives, and other LTSS redesign efforts.

Medicaid Infrastructure Development

Most Medicaid programs have undertaken major system development projects in recent years, most notably for new eligibility systems and for new Medicaid Management Information Systems (MMIS). Several states listed the development and operationalization of these projects as a major priority in FY 2018. These Medicaid infrastructure initiatives are critically important for the success of the major delivery system and payment reforms that are often being implemented concurrently. Medicaid programs also need the systems capability to implement quality improvement, provider and MCO monitoring, data analytics, and cost control strategies.

Conclusion

This report provides information about the current landscape of state policy decisions for Medicaid during a time of great uncertainty about the future of the Medicaid program, as Congress may continue to consider reforms that could substantially roll back coverage in many states and dramatically change the financing structure of the program which has been the foundation of the federal-state Medicaid partnership. While some states are pursuing opportunities to reshape this partnership through Section 1115 demonstration waivers, others are continuing to press ahead with efforts to rebalance their long-term services and supports systems, and with delivery system and payment initiatives designed to improve health care and health outcomes and lower costs. At the same time, many states are mobilizing to address the nation’s continuing opioid epidemic by utilizing their Medicaid programs to expand access to substance use disorder treatment. Based on the findings of this survey, state Medicaid programs continue to take significant actions, both large and small, to move toward greater value, better health, and improved service for the over one-in-five Americans who are now served by the program.