February 10, 2010

1115 Waivers Waivers at a glance Comparison 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 Compared CHCF Published Paper Comparing 3 states’ waivers Waivers are similar in many ways Mass demonstrates how a state can use a waiver to expand coverage for the uninsured N.Y. demonstrates how state can reorient spending from institutional care and use savings for coverage and programs in the state Waiver.pdf Waiver.pdf Medicaid 1115 Waivers

Medicaid Spending All 3 states have similar FMAP rates N.Y covers 27%, Mass. 19%, and Ca. 29% of population New 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 Support A second disadvantage for California Federal 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 California Mass $164, N.Y. $96, Ca. $50 A larger portion of Ca’s population is uninsured. Mass 7.9, N.Y Ca % DSH cap makes it costly to redirect DSH funds to coverage Medicaid 1115 Waivers

Managed Care Massachusetts and New York expanded Medicaid managed care through 1115 waivers Allowed to reinvest the federal share of savings to cover uninsured or for other programs Ca. expanded managed care during the same period Expansions 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

Opportunities Waiver provides opportunity for increased federal funding for Hospitals Covering the uninsured Coverage initiatives State The larger the waiver the more funding opportunity Opportunity to improve Medi-Cal program and improve integration and delivery of care Ca. 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

Conclusion 1115 Waiver provides an opportunity for California Federal government has significant flexibility in waiver approvals-no federal rules Can be approved without federal legislation Waivers 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