February 10, 2010

1115 WaiversWaivers at a glanceComparison of California to Massachusetts and New York

Opportunities and challenges

Medicaid 1115 Waivers

California’s 1115 Waiver Currently a hospital waiver with $180 million

a year in coverage Provides vital funding for the safety net Expires September 2010 Necessitates a negotiation and

renewal/extension

Medicaid 1115 Waivers

Waiver Basics Medicaid rules highly prescriptive Authorized by section 1115 of the Social Security

Act Great flexibility provided by a 1115 Waiver Can make changes to a small portion of program –

or at the other end of the spectrum, a state’s entire Medicaid program can be placed under a waiver

Some provisions are not waiveable under any circumstances

Waivers have been a key element of health reform in many states

Medicaid 1115 Waivers

Costs Not Otherwise Matchable One of the most powerful provisions in section 1115

allows the Secretary of HHS to grant approval of costs not otherwise matchable or CNOM

The most common use of CNOM is for coverage of nondisabled childless adults because there is no other legal mechanism to extend Medicaid eligibility to these individuals

State and local program spending can also be approved as a CNOM

The “catch” is that there has to be budget neutrality “room” for CNOM expenditures, as they can only be counted on the “with waiver” side of the equation

Medicaid 1115 Waivers

Budget Neutrality Budget neutrality – which is not a legal or regulatory

matter – prevents the federal government from spending more than would/could be the case in the absence of the waiver

Budget neutrality is negotiated between the state and federal government

Key elements of the negotiation are the: “With waiver” cost projections “Without waiver” theoretical baseline cost (and what can

be counted is negotiable) The inflation factor by which the “without waiver”

baseline can grow Budget neutrality can be calculated in the aggregate,

on a per capita basis, or a combination of the two

Medicaid 1115 Waivers

Sources of Savings States have found savings from a number of

sources Managed care Redirection of DSH Pooling of UPL or other funds Other savings

Medicaid 1115 Waivers

Ca., Mass and NY ComparedCHCF Published Paper Comparing 3 states’

waiversWaivers are similar in many waysMass demonstrates how a state can use a

waiver to expand coverage for the uninsuredN.Y. demonstrates how state can reorient

spending from institutional care and use savings for coverage and programs in the state

http://www.chcf.org/documents/policy/Medicaid1115Waiver.pdf

Medicaid 1115 Waivers

Medicaid SpendingAll 3 states have similar FMAP ratesN.Y covers 27%, Mass. 19%, and Ca. 29% of

populationNew York and Massachusetts has among the

highest per enrollee spending in the nation ($9,656 and $8,300, respectively, in 2006)

California spends less per enrollee than almost any other state ($4,528).

Easier for high cost states to reduce their per enrollee spending and use savings

California has already achieved significant Medicaid savings.

Medicaid 1115 Waivers

Federal Safety Net SupportA second disadvantage for CaliforniaFederal government’s indigent care per resident

contribution is three times higher in Massachusetts and almost twice as high in New York as it is in CaliforniaMass $164, N.Y. $96, Ca. $50

A larger portion of Ca’s population is uninsured.Mass 7.9, N.Y. 13.6 Ca. 18.6

175% DSH cap makes it costly to redirect DSH funds to coverage

Medicaid 1115 Waivers

Managed CareMassachusetts and New York expanded Medicaid

managed care through 1115 waiversAllowed to reinvest the federal share of savings

to cover uninsured or for other programsCa. expanded managed care during the same

periodExpansions were not done under an 1115 waiver,

so California gets no credit for these savings. As of June 2007, 60% of Medicaid beneficiaries

in Mass. were enrolled in managed care, 62% in N. Y. and 51% in California.

Medicaid 1115 Waivers

OpportunitiesWaiver provides opportunity for increased federal

funding forHospitalsCovering the uninsuredCoverage initiativesState

The larger the waiver the more funding opportunityOpportunity to improve Medi-Cal program and

improve integration and delivery of careCa. has been successful in past in improving

programs and obtaining significant federal funding from waivers .

Medicaid 1115 Waivers

Issues and Challenges for California Ca. federal baseline funding is insufficient to

achieve sufficient federal funds to meet all needs

Ca. will need to receive credit for savings already achieved through managed care and other changes

Baseline will also need to be increased to reflect changes such as a hospital fee.

The federal flexibility needed to recapture savings – in effect – to treat California like other states – would come at a cost to the federal government

Medicaid 1115 Waivers

Challenges State general fund crisis makes it difficult to

invest in the improvements needed For more than 25 years, CA has endured

significant pressures on the state budget Created a reimbursement system that

encourages the delivery of inpatient hospital care

Low physician and primary care rates Severely compromise CA’s ability to create

health delivery system reform in lower cost more coordinated care settings

Medicaid 1115 Waivers

Challenges FMAP cannot be waived All new federal funds must have a match from non-

federal government funds The federal government would expect significant

reforms and improvements in Medi-Cal and possibly increased coverage in exchange for budget neutrality flexibility

Federal government may want to require DSH and other support to indigent care be shifted to coverage Required in Mass. Mass. has 3 times the funding per resident as Ca.

Medicaid 1115 Waivers

Conclusion1115 Waiver provides an opportunity for

CaliforniaFederal government has significant flexibility

in waiver approvals-no federal rulesCan be approved without federal legislationWaivers are state specific-while other states

look at precedence-it can be tailored to state. Historically 1115 waivers have provided

California with significant additional funding.

Medicaid 1115 Waivers