The former administrators agreed that controversial Medicaid waivers may need to go forward to encourage more focus by states on Medicaid and to control costs. 

Aug. 23—Congress needs to undertake a careful overhaul to ensure Medicaid’s long-term stability, according to two former federal administrators of the program from opposing parties.

Andy Slavitt, acting administrator of the Centers for Medicare & Medicaid Services (CMS) under President Barack Obama, and Gail Wilensky, who led the CMS precursor agency under President George H. W. Bush, co-wrote an op-ed in JAMA outlining bipartisan Medicaid reforms for Congress to consider.

And indications suggest that such bipartisan agreement is possible, Slavitt said in an interview.

“There is some talk—I don’t know that it’s due to our paper—but there’s some political will to try to create a longer-term process to combine with a shorter-term focus on market stability,” Slavitt said, referring to the government-run individual insurance marketplaces that were created by the Affordable Care Act (ACA). “I don’t know whether it will happen or not, but it’s a good idea.”

Wilensky also has urged action.

“I have spent a little time reaching out to a few members [of Congress] but more on just the need to try come together more broadly with regard to healthcare reform that is not federal party-focused in the way that either the ACA ultimately was or the Republican House plan was,” Wilensky said.

The Medicaid review should focus on how to modernize the program in ways that get at cost drivers, capitalize on innovations in the private sector, and allow states the flexibility to innovate, according to Wilensky and Slavitt.

The former administrators outlined possible areas of bipartisan agreement in six subject areas:

  • Making Medicaid a more outcomes-based program
  • Improving financing
  • Ensuring proper access to care
  • Investing in a data, technology, and analytics infrastructure
  • Coordinating programs for dual-eligible beneficiaries and other populations
  • Reducing the administrative burden on states and allowing for more-rapid innovation

“Cost savings to Medicaid can best be achieved through substantive reform, rather than cuts that do not focus on changes to the underlying program,” the former administrators wrote about a program that spent $545.1 billion in 2015 and covered about 75 million beneficiaries by mid-2017.

The bipartisan guidance was in response to Republican legislation—rejected by the Senate in July—that would have cut up to $800 billion out of $5 trillion in expected spending over the next 10 years.

Hospital Impacts

Some of the proposed areas of compromise could have big impacts on hospitals finances. For instance, Wilensky and Slavitt believe too much funding comes from large supplemental pools (such as Medicaid disproportionate share hospital [DSH] payments and uncompensated-care pools).

“These pools decrease accountability because they are allocated without regard to patient care or even the numbers of people treated,” they wrote. “Any additional monies from reducing these pools should be transferred into the base rate physicians and hospitals are paid for seeing Medicaid patients, although the elimination of the special funding will need to occur gradually.”

Soon after publication of the article, the American Hospital Association wrote a letter to CMS in which it urged delaying the October start of ACA-mandated cuts to Medicaid DSH funding.

The former administrators also were supportive of CMS‘s proposal to issue more waivers and plan amendments for state Medicaid programs. They specifically hailed the March letter by Seema Verma, the current administrator of CMS, and Tom Price, MD, secretary of the Department of Health and Human Services, in which they urged states to apply for more waivers to advance innovative solutions.

The former administrators specifically highlighted Indiana’s waiver—known as the Healthy Indiana Plan (HIP) 2.0 and championed by then-Gov. Mike Pence before he was elected vice president—as a viable approach.

But the types of Medicaid changes effected by HIP 2.0 could come with financial downsides for hospitals in those states, according to one industry analyst. Specifically, reduced hospital spending under HIP 2.0 came from the model’s encouragement of primary care, penalties for nonemergent use of the emergency department (ED), and rewards for certain preventive healthcare activities.

“Historically there has been a tendency to push people back into the hospitals—either the [EDs] or the outpatient setting—because of difficulties sometimes in accessing the networks you need of physicians to treat them in more rational environments,” Wilensky said, referring to how HIP 2.0 has been different.  

The mixed financial results for hospitals under HIP 2.0 contrast with results from standard Medicaid eligibility expansions, which several studies have found generated broad financial benefits for hospitals.

Slavitt referred to the Indiana waiver and evaluations of its results as “a mixed story.”

“I would be wary of believing any conclusions until there is a full-on evaluation,” Slavitt said. “I have seen data points that are much more negative than that. Sometimes people find the data to tell the story that they believe. I’m sure there’s good parts and bad parts.”

But Slavitt said CMS should not necessarily reject incoming waivers that include provisions he may oppose, such as those seeking the use of enrollee premiums, expanded copays for nonemergency ED use, and limitations on presumptive eligibility and retroactive coverage.

“I don’t have to agree with them all, but having a nimble process like Administrator Verma outlined is a good idea,” he said. “It would be hypocritical of me to say, ‘They should be more nimble but only for ideas I like.’”

Although some have questioned the financial or health benefits of some state Medicaid waiver proposals, such as increasing work requirements or implementing drug testing, Wilensky said federal officials may need to allow such ideas.

“Sometimes if it is not clear that it is adding much, [but] if it’s not being harmful and gets the state more involved in having a stake in the Medicaid program, it may not be entirely bad,” Wilensky said.

While a few states have begun to propose far-reaching changes to their Medicaid programs through waivers, those may just be the tip of the state-level push for changes, Wilensky said.

Six states have submitted waivers seeking to add requirements for adult enrollees to work, submit to drug testing, or pay monthly premiums, according to published reports. Other states are waiting to see whether the policies are approved by the Trump administration before following suit.

“I’m not sure we know yet what that will look like six months or eight months from now, when we will have a little bit better idea of what it is that states that have been encouraged to come in with their waiver requests actually decide to do,” Wilensky said.  

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

Publication Date: Wednesday, August 23, 2017