TRENDS IN MEDICAID WAIVERS Judith Solomon Center on Budget and Policy Priorities Families USA Conference January 26, 2006

Key Considerations in Dealing with Waivers Process –Transparency –Public Input Financing – Cap on federal funds –Per capita caps –Global Caps Content –Waiver trends –Why a waiver??

Waiver Trends Consumer direction Defined contributions instead of defined benefits Personal health accounts Incentive accounts Delegation of authority to private entities Increased cost-sharing and reduced benefits Targeted benefits Long-term care waivers

Consumer Direction Health Savings Accounts and High Deductible Health Plans for Medicaid Increases cost sharing and risk for beneficiaries Based on untested assumptions –Increased cost-sharing will promote personal responsibility and decrease utilization of unnecessary care –Health plans will design attractive packages of services in order to compete for beneficiaries

Consumer Direction Relies on infrastructure that does not currently exist to support choices –Face-to-face enrollment counseling –On-line information regarding plans and providers, including cost and quality comparisons Misplaced reliance on beneficiary satisfaction with cash and counseling demonstrations

Defined Contributions Instead Of Defined Benefits FL and SC Beneficiaries provided with premiums to purchase coverage from health plans Can Opt-out of Medicaid by using premiums for employer-sponsored health insurance –No wrap-around coverage or protection from increased cost- sharing Presumes premiums can be risk adjusted to meet needs of different groups –Questionable given unpredictability of health care expenses –States goal of saving money and budget neutrality requirements may result in inadequate premiums

Personal Health Accounts SC Funds would be deposited in accounts and used to purchase health care services Medicaid would cover inpatient care and preventive services If funds depleted, beneficiary would have to pay for care until next deposit or until spent $250 out of pocket Similar to Health Opportunity Accounts in House reconciliation bill

Incentive Accounts FL, WV, KY Funds put in accounts based on healthy behaviors Can be used for co-payments and other non-covered health care expenses Can keep all or some portion when eligibility ends –FL and SC claim this feature as an expansion of coverage

Delegation of authority to private plans SC and FL Plans given unprecedented authority to determine what benefits they will cover for adults as well as the amount, duration and scope of covered benefits Yet risk for plans limited –(FL) Annual maximum benefit limits for adults and option to have state cover catastrophic care –(SC) Reinsurance

Increased cost-sharing and reduced benefits KY, SC and authorized in VT waiver No attempt to meet special waiver standards for cost-sharing Numerous soft limits on benefits even for children (e.g. 4 prescriptions per month in KY)

Targeted Benefits WV, ID, FL, SC, KY Different benefit packages for different groups (e.g. well elderly in WV) Lack of clarity regarding how individuals are classified and re-classified Packages determined by health plans in FL and SC

Long-term care waivers VT and KY Rebalancing long-term care by creating entitlement to home and community based services for some beneficiaries To limit costs, some individuals who previously could get nursing home care can be put on waiting list for services

Conclusion Waivers rely on untested and faulty assumptions Add complexity and new administrative structures to program that will increase costs Budget neutrality requirements, drive to reduce state spending, and increased administrative costs will likely result in decreased benefits and increased costs for beneficiaries

For more information: STILL RISKY BUSINESS: SOUTH CAROLINAS REVISED MEDICAID WAIVER PROPOSAL HEALTH OPPORTUNITY ACCOUNTS FOR LOW- INCOME MEDICAID BENEFICIARIES: A Risky Approach THE FALLACY OF USING CASH AND COUNSELING TO SUPPORT PROPOSALS TO CONVERT MEDICAID TO VOUCHERS OR HEALTH SAVINGS ACCOUNTS