The most recent 1115 waiver request, in Maine, has drawn concerns from hospitals that it appears primarily aimed at reducing eligibility and coverage.

Sept. 14—Hospitals have had mixed reactions to the earliest Medicaid waivers considered by the Trump administration, based on widely varying expected financial impacts.

Tom Price, MD, secretary of the U.S. Department of Health and Human Services, and Seema Verma, administrator of the Centers for Medicare & Medicaid Services (CMS), wrote a letter to governors in March pledging to move past “rigid and outdated” federal views of state Medicaid waivers.

The move spawned a wave of Medicaid waiver requests and in the coming weeks may result in the first approval of an 1115 waiver that would modify coverage features.

Early Medicaid waivers—not linked to coverage—seemed to have positive hospital impacts.

For example, not-for-profit and public hospitals were expected to financially benefit from a five-year extension that the Trump administration approved in August of Florida’s 1115 Medicaid waiver, according to an analysis by Moody’s Investors Service, which deemed the waiver a credit positive for those entities. The waiver “allows the state to operate a capitated Medicaid managed care program and a low-income pool (LIP) to provide continuing support for the safety net providers that furnish charity care to the uninsured,” according to a CMS release.

Moody’s expected the waiver—the first 1115 waiver approved by the new administration—to help hospitals defray the cost of providing services to uninsured patients in the state, which has not expanded Medicaid eligibility under the Affordable Care Act. The Trump administration’s waiver decision reversed the Obama administration’s ban on waiver funds for uncompensated care attributable to a decision not to expand Medicaid.

“The largest beneficiaries include safety-net hospitals, children’s hospitals and providers treating a high percentage of Medicaid, uninsured and underinsured patients,” the Moody’s report stated.

Cindy Mann, a partner at Manatt and formerly the director of the Center for Medicaid and CHIP Services under President Barack Obama, said in a media briefing this week that the sharp increase in Low-Income Pool annual funding from $608 million to $1.5 billion has piqued other states’ interest in waivers.

However, the Florida Hospital Association noted that the impact of the federal increase was diminished because state legislatures have used the money to cut funding for hospitals by $521 million.

Coverage Concerns

A new waiver request from Maine drew a sharply different response from hospitals.

That state tweaked its 1115 request following objections from hospitals in the state, but the final application that was submitted in August still left concerns about adverse impacts, according to Jeffrey Austin, vice president of government affairs and communications for the Maine Hospital Association (MHA).

Hospital concerns arose when the state developed the waiver without any input from the provider community, “at least none that we are aware of,” Austin said in emailed comments.

“We’re willing to work with [the state agency that authored the application] to help craft program changes, even changes that could result in less reimbursement to providers, but we need to be at the table,” Austin said.

Another concern was that the waiver appeared primarily aimed at reducing eligibility and coverage, such as via new work requirements, monthly premiums, and asset tests for Medicaid enrollees. 

“Obviously, reducing coverage for individuals has a direct and negative impact on hospitals,” Austin said. “It is unclear how recipients would respond to these new requirements, but it seems safe to say that they are created and designed to further reduce the number of people receiving MaineCare coverage.”

MHA has concluded that about 76,000 fewer people are covered by Medicaid in the state, which did not expand eligibility under the ACA, compared with five years ago. 

Hospitals in Maine also are worried about how the state will use the savings that are expected to accrue from the waiver. Gov. Paul LePage proposed cutting the Medicaid program in the state budget this year.

“As such, there is no assurance that any savings produced by these changes will be used for Medicaid,” Austin said.

Future Directions

These sorts of state Medicaid approaches, which were rejected by the Obama administration—and expanded versions of those approaches—are expected to get a much friendlier reception from the Trump administration, according to Matt Salo, executive director of the National Association of Medicaid Directors.

“There’s very much a desire in the new administration to be the administration that says yes to a lot of different states’ innovations,” Salo said.

Pending 1115 waivers include those from Arkansas, Kentucky, Indiana, Iowa, and Massachusetts, according to a Kaiser Family Foundation report.

Mann said many of the coverage-related waivers that are up for consideration appear likely to make obtaining and keeping coverage more difficult.

Less clear are the impacts on states’ delivery system transformation efforts, such as changes aimed at better integration of mental health care. For instance, Mann said it remains to be seen whether new coverage requirements affect so-called churn—the movement of beneficiaries into and out of the program—which in turn could affect delivery system transformation efforts.

John McCarthy, founding partner of Speire Healthcare Strategies and former director of the Washington, D.C., and Ohio Medicaid programs, defended the desire of some states to eliminate retroactive eligibility, under which hospitals can enroll beneficiaries presumptively going back three months. Retroactive eligibility encourages people to not apply for Medicaid after obtaining needed services, he said, although he acknowledged that eliminating the policy raises provider concerns about a loss of payment.

Mann expects a broader range of waiver proposals to eventually emerge from the states

Possible elements of future waivers, according to McCarthy, include the use of narrow networks, limits on or exclusions of certain nonmedical benefits, benefit restrictions such as behavioral health-only coverage, and block grants.

The new administration and the states seeking waivers are not trying to curtail coverage, McCarthy said, but they are looking for ways to slow the growth of cost in a program that has rapidly expanded in recent years to cover 74.4 million people.

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

Publication Date: Thursday, September 14, 2017