Hospitals that relay on uncompensated-care pools could see new federal support under the administration’s approach, an industry adviser said.

March 16—The healthcare leaders of the Trump administration this week urged states to take the lead of coverage through a range of approaches previously rejected by the Obama administration.

Health and Human Services Secretary Tom Price invited states to apply for Section 1332 waivers—especially those that involve high-risk pools or state-operated reinsurance programs—under the Affordable Care Act (ACA) and promised to have them reviewed on an “expedited basis.”

Such waivers allow states to avoid some ACA requirements—such as for qualified health plans—if they demonstrate that they can provide equally comprehensive access to quality health care and cover no fewer residents.

Price cited a waiver application by Alaska to fund, in part, a high-risk pool and state-operated reinsurance program for its ACA marketplaces, which were facing collapse.

“We encourage states interested in applying for Section 1332 waivers to reach out to the Departments promptly for assistance in formulating an approach that meets the requirements of Section 1332,” Price wrote in his March 13 letter to governors.

Price also joined newly confirmed Centers for Medicare & Medicaid Services Administrator Seema Verma in welcoming new Medicaid flexibility for states.

“We wish to empower all states to advance the next wave of innovative solutions to Medicaid’s challenges—solutions that focus on improving quality, accessibility and outcomes in the most cost-effective manner,” Price and Verma wrote in a separate letterthis week to governors.

The letter likely indicates that CMS will use a faster and easier process to consider Medicaid waivers, which states such as Texas, Florida, and Tennessee are all working on, industry advisers say.

The shift toward encouraging a wider range of waivers was expected, in part, because Verma previously worked for years as an adviser to states in crafting waiver proposals.

“I think she’ll be more open than the last administration to different state designs that are financially manageable,” Jeff Myers, president and CEO of Medicaid Health Plans of America, said in an interview. “We’re looking forward to working with her.”

The new approach will include “fast track” extensions of existing five-year waiver and demonstration projects. States have long complained that CMS approval of extensions frequently takes a year or more to obtain, even if minimal or no changes are included.

The federal healthcare leaders also pledged to rein in regulations to ease adoption of Medicaid managed care programs.

Kip Piper, who advises states on Medicaid expansion, described the letters as “unique and dramatic” by explicitly recognizing that states—not the federal government—are in the best position to manage the program. 

“This comes after years of rapidly increasing micromanagement of states and an avalanche of regulations,” Piper said. “It thoughtfully describes a vision for an improved, more collaborative relationship with the states—something that suffered in recent years.”

Arkansas will likely be one of the first states to seek a waiver as it looks to change the threshold of its current private-option Medicaid expansion for childless adults from 138 percent of the federal poverty line to 100 percent, Piper said. 

New Elements

The new approach will include policy approaches long rejected by the Obama administration.

For instance, the Medicaid letter indicated that the administration will accept work requirements for low-income adult beneficiaries. The Obama administration rejected Indiana’s push to include a work requirement in its Medicaid expansion.

The change may lead a couple of states to seek waivers that require nondisabled, non-pregnant working-age adults, especially those without children, to participate in training or work, Piper said. But he warned that opponents are likely to challenge such requirements in court.

“Any waivers allowing states to require able-bodied adults to seek work or training or impose more than nominal cost sharing will be challenged in court and regardless will take many months to prepare and approve,” Piper said

The Medicaid letter stated that alternative benefit designs that include health savings accounts (HSAs) and cost sharing will be encouraged. Also allowed will be premiums or other “contribution requirements.”

The agency also encouraged approaches that integrate Medicaid programs with employer-sponsored insurance coverage. Such an approach in Tennessee was approved by CMS but subsequently rejected by state legislators.

Other changes in approach at CMS include:

  • Allowing families to enroll in the same plan if some members are Medicaid-eligible and others are in commercial plans
  • Ending requirements to provide nonemergency transportation without cost sharing
  • Allowing more use of emergency department copayments to discourage overuse
  • Waiving regulatory requirements that impede continuous coverage, such as determining presumptive eligibility or retroactive coverage
  • Preventing the shift of resources to the expansion population and away from other traditional categories of beneficiary such as aged, blind, and disabled.
  • Providing states with more tools to address the opioid epidemic

AHCA Impact

The waiver push comes as Congress considers legislation, the American Health Care Act (AHCA), thatwould repeal and replace much of the ACA. According to the Congressional Budget Office, the AHCA would cut $880 billion in federal Medicaid spending over 10 years through the conversion of Medicaid to a per-capita-cap funding scheme and by cutting the federal matching rate.

Hospital advocates have urged greater state flexibility through waivers but warned the funding cuts could undermine that approach.

“Federal funds already allocated for Medicaid expansion should be earmarked to finance future Medicaid redesign efforts, rather than be siphoned away from the program,” Rick Pollack, president and CEO of the American Hospital Association, said in a written statement. “The bottom line is that Medicaid is an already underfunded program that pays providers less than the cost of care.”

Amid increasing questions about the likelihood that the AHCA will pass Congress, waivers are taking on increasing importance.

For administrations, “Waiver policy is typically a prominent feature of their Medicaid policy, in part because legislative changes to Medicaid are pretty tough, and I think we’re going to see that this year,” Joan Alker, a research professor at the Georgetown University McCourt School of Public Policy, said during a recent webcast. “Especially when the legislative side gets tougher, we see administrations looking to waivers.”

Hospital Impact

Hospitals in states that provide uncompensated-care pools, such as Texas, California, and Tennessee, may see more federal support for such arrangements.

“The Obama administration pressed states hard to expand Medicaid and disliked anything, including safety-net hospital funding, that took pressure off states to do federal bidding,” Piper said.

Piper disagreed with the assessment of some industry advisers that the Trump administration is less favorable to hospitals and noted that the Obama administration was “far from supportive of hospitals.” 

“The secretary and administrator are signaling their openness to state-based solutions of any kind as long as they are federal-budget-neutral and help improve outcomes, cost-effectiveness, or both,” Piper said. “This opens the way to new thinking to address the financing of charity care.”

Greater state flexibility also is likely to accelerate payment and delivery reforms.

“These will come in many flavors and will not always follow the Medicare approaches, but episode and condition-based payments will likely increase over time,” Piper said.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Friday, March 17, 2017