States Focus on Quality and Outcomes Amid Waiver Changes: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2018 and 2019

Challenges and Priorities in FY 2019 and Beyond Reported by Medicaid Directors and Conclusion

States reported a wide variety of priorities for FY 2019 and beyond, including implementing managed care, payment and delivery system reform initiatives; undertaking major information technology system procurements and upgrades; amending or pursuing new Section 1115 demonstration waivers; continuing to tackle the opioid epidemic; and managing their Medicaid budgets.

Over two-thirds of states reported improving quality and focusing on health outcomes as a key priority. Consistent with survey findings in recent years, most states are continuing to develop and implement initiatives to improve the quality of care and patient health outcomes while containing costs. States are doing this through managed care expansions, reforms, and improvements; value-based purchasing initiatives; and other delivery system reforms. In addition, a number of states mentioned addressing the opioid epidemic and expanding the availability of SUD treatment as top priorities (sometimes through Section 1115 demonstration waivers mentioned below).

A number of states mentioned implementation or pursuit of new Section 1115 demonstration waivers or waiver amendments as key priorities beyond 2019. Section 1115 Medicaid demonstration waivers provide states an avenue to test new approaches in Medicaid that differ from federal program rules. While previous sections of this report capture Section 1115 waiver-related policy actions implemented in FY 2018 or planned for implementation in FY 2019, the survey also asked states whether they are planning program changes under Section 1115 authority that would be implemented after FY 2019. The most frequently reported waiver concepts for implementation after FY 2019 address behavioral health services and/or the IMD exclusion, followed by waivers that would implement work and community engagement requirements. Many waivers require significant administrative time and resources to develop, negotiate with CMS, and implement. Waivers also often necessitate system changes (MMIS and/or eligibility), contracting with new support vendors, MCO coordination (including contract amendments), outreach and engagement of members, providers, and other stakeholders, state regulatory changes, and other administrative tasks. For additional details on pending or approved Section 1115 waivers, see the KFF Medicaid Waiver Tracker.

Continuing to tackle the opioid epidemic is another key priority for states in FY 2019 and beyond. New federal legislation expected to be signed into law as this report was being finalized, the Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act, contains a number of provisions related to Medicaid’s role in helping states provide coverage and services to people who need SUD treatment,¹ particularly those needing opioid use disorder (OUD) treatment. These provisions include the ability to use federal Medicaid funds for services in “institutions for mental disease” (IMDs) for nonelderly adults for up to 30 days from October 1, 2019 to September 30, 2023; required coverage of all FDA-approved drugs for medication-assisted treatment (MAT) from October 2020 through September 2025; required suspension of Medicaid eligibility for individuals under age 21 or former foster care youth up to age 26 while incarcerated, and restoration of coverage upon release; creation of new demonstrations to help states increase Medicaid SUD provider capacity; and tighter prescription drug oversight.

As in the past, a significant number of states reported information technology systems projects currently underway or planned as high priorities. These are usually related to Medicaid Management Information Systems (MMIS) procurements and eligibility system upgrades and replacements. A few states commented on the need to redesign their MMIS procurements to meet new federal MMIS architecture “modularity” requirements, which are intended to promote the reuse of technical solutions among states, minimize customization and configuration needs, and increase vendor competition. States also commented on the need for system improvements or enhancements to better support other program objectives related, for example, to delivery system reform and value-based purchasing, quality improvement, provider and MCO monitoring, data analytics, and cost control strategies.

States noted that a number of federal regulations pose challenges for Medicaid agencies. Medicaid agencies must comply with ongoing changes in federal and state laws and regulations. Passage of the ACA in 2010, for example, was followed by years of administrative efforts and initiatives to implement the coverage expansions and other Medicaid policy changes required by the ACA and its related regulations. This year’s survey asked states to describe any notable expected administration effects or challenges of recent or anticipated federal regulations. Key findings include:

• States most frequently noted challenges related to the implementation timeline for the electronic visit verification system as required under the 21st Century Cures Act (although the compliance deadline was recently extended from January 1, 2019 to January 1, 2020 for personal care services and to January 1, 2023 for home health).
• Several states cited compliance challenges with the Access Rule, which requires states to develop and periodically update Access Monitoring Review Plans and to perform access reviews when FFS reimbursement cuts are proposed.
• Some states noted challenges with the provider enrollment and screening requirements in the Medicaid managed care regulation.
• Some states cited ongoing challenges with the HCBS Settings rule that establishes requirements for the qualities of settings that are eligible for reimbursement as Medicaid HCBS.
• A few states also pointed to challenging budget implications of the Home Health Rule, as it requires documentation of a face-to-face encounter between a certifying physician and a home health beneficiary and also expands the definition of medical equipment and supplies that are covered under the home health benefit.

Since the survey was fielded, the administration issued proposed rules related to changes in federal “public charge” policies that govern how the use of public benefits may affect individuals’ ability to enter the U.S. or adjust to legal permanent resident (LPR) status (i.e., obtain a “green card”). In anticipation of these regulations, a few states mentioned challenging potential effects including concerns that the anticipated policy changes would further burden the state’s safety net and public health system by depressing Medicaid and CHIP enrollment or result in fear of accessing services, which could increase uncompensated care costs or the frequency of adverse labor and delivery events.

Conclusion

State actions in FY 2018 and FY 2019 show that the Medicaid program is constantly evolving in response to federal policy changes, the economy, and state budget and policy priorities. With less economic stress, more states reported expansions or enhancements to provider rates and benefits (including expansions for community based long-term services and supports and behavioral health services) as well as a focus on improvements in outcomes and value through delivery system reforms and requirements imposed on managed care plans. On the other hand, consistent with policies promoted by the Trump administration, an increasing number of states are pursuing demonstration waivers that include provisions that could result in enrollment declines such as work requirements and retroactive eligibility elimination or restriction. As states continue to work to tackle the opioid epidemic, new federal legislation (the SUPPORT Act) could help states provide coverage and services to people who need SUD treatment. Looking ahead, the trajectory of the economy, the direction of federal policies around Medicaid Section 1115 waivers, and the outcomes of state and federal elections in November 2018 will be factors that continue to shape Medicaid in FY 2019 and beyond.