The Path to New York’s New 1115 Waiver Request: DSRIP Success & How We Got Here

Written by Kalin Scott, Chief Innovation Officer

In August of 2021, the New York State Department of Health submitted a concept paper to the Centers for Medicare and Medicaid Services (CMS) outlining a Medicaid 1115 waiver demonstration request for $17 billion over 5 years. To learn more about the concept paper, check out this previous post that breaks down the key components of the ask. If approved, this would be the biggest infusion of federal funds into delivery system reform in the nation’s history. 

How did we get here? The state’s approach builds on a decade of Medicaid reforms and efforts to improve New York’s health care delivery system. Read on for more context around what led to the state’s current ask.

New York’s 1115 Waiver

New York has had an approved Section 1115 Waiver–-the Medicaid Redesign Team Waiver (previously known as the Partnership Plan)—for more than 20 years. More than 80% of New York’s 6.4 million Medicaid members are served by managed care, which is one of the major programs authorized through the waiver. The waiver has also served as a platform on which the state has built innovative policy and programmatic initiatives through periodic amendments. One notable example is the state’s Delivery System Reform Incentive Payment (DSRIP) program, which was approved in 2014, and expired in early 2020.

1115 waivers are authorized under Section 1115 of the Social Security Act and granted by the federal government to allow state Medicaid programs to test innovative health care coverage and/or delivery programs that promote the objectives of the Medicaid program. 1115 waivers must be budget neutral, which means that expenses with the waiver will not exceed expenses had the waiver not been granted. The Secretary of Health and Human Services approves 1115 waivers and delegates CMS to work with states to review, negotiate, and finalize waiver demonstration requests. Frequently, states are encouraged to align waiver programs and priorities with an administration’s policy agenda and model new efforts from recently approved demonstrations in other states. New York’s DSRIP program was inspired by previous federal-state partnerships on delivery system reform in other states including Oregon, California, Texas, and New Jersey.

1115 waivers are generally approved for three or five years, though CMS under the Trump Administration approved several 1115 demonstrations for ten years. New York’s 1115 waiver would have expired in March of 2021 – earlier this year, state officials submitted a technical waiver extension request for three years. CMS granted a one-year extension, through March 2022, to allow time for negotiation and budget neutrality updates.

Building on DSRIP Success

The state’s DSRIP program, which operated from 2014 to 2020, set overarching goals to reduce avoidable hospital use by 25% and move 80-90% of all Medicaid managed care contracts from fee-for-service payment into VBP arrangements. Results reflected in the August 2021 concept paper emphasize the success of DSRIP: by year 5 of the program, New York saw a 26 percent reduction in Potentially Preventable Admissions (PPAs) and an 18 percent reduction in Potentially Preventable Readmissions (PPRs.) The state also met and exceeded its VBP goals: by 2020, more than 80% of all Medicaid managed care contracts were in VBP Level 1 arrangements and more than 35% were in upside and downside (Level 2 and 3) arrangements. The state also cites that Medicaid spending per recipient in 2019 was less than in 2011, as a result of DSRIP, VBP and other Medicaid Redesign initiatives. These results are significant and the state’s August 2021 concept paper is the first published announcement by the state on the program’s success.

A quick recap, if NY DSRIP is new to you

New York based its first DSRIP request on the demonstrated success of the state’s Medicaid program in bending the cost curve after the state generated $17 billion in federal savings and improved quality outcomes through Medicaid Redesign Team (MRT) initiatives dating back to 2011. CMS approved the initial DSRIP request in April 2014 and committed $8 billion of federal investment to DSRIP and DSRIP-related programs through March 2020. 

DSRIP focused on improving outcomes for Medicaid members by transforming the state’s health care delivery system, reducing avoidable hospital use across the state, creating integrated delivery systems, and supporting the move toward value-based payment arrangements. 25 Performing Provider Systems (PPS) — collaboratives of providers and community-based organizations assigned to specific regions in the state — implemented population health, clinical improvement, and system transformation projects at a local level, earning performance payments once specific milestones and metrics were achieved.

In addition, New York committed to shift 80–90% of all Medicaid managed care payments to value-based arrangements by March 202), as outlined in the state’s VBP Roadmap. DSRIP laid the foundation for the state’s current focus on promoting VBP and addressing social determinants of health, which are major components of this latest ask.

DSRIP was successful in incentivizing place-based collaboratives of health and social care providers and moving to value. These efforts have resulted in improved outcomes for Medicaid members, reshaped New York’s health care delivery system, and garnered attention from across the world.

The program included a planning year (Year 0), an implementation and performance period of five years beginning in 2015, and ended in March 2020. Over the course of its implementation, New York worked with other states interested in implementing and expanding delivery reform system efforts, and Washington, Massachusetts, North Carolina, New Hampshire and Rhode Island have since received federal approval to implement similar programs.

Is this the state’s first request for investment to follow up the DSRIP program?

No. In September 2019, the state released a concept paper and sought public feedback on what would serve as the second phase of DSRIP. After a thorough stakeholder engagement process, in December 2020, the state submitted a DSRIP 2.0 request asking for $8 billion over four years. The program outlined in the December 2020 request would have continued DSRIP for one year, focusing on a specific set of activities and potentially narrowing down the number of PPSs that could participate. The remaining years of the program would have funded new entities that would replicate DSRIP best practices, focusing on SDOH, and implementing advanced VBP arrangements. Investments were also planned for workforce development, support for safety net providers, and aligning state and federal policy priorities. The request was not acted upon by CMS under the Trump administration.

In May of 2020, New York submitted another 1115 waiver request under an opportunity extended by CMS under the COVID-19 Public Health Emergency (PHE) declaration. The request for 2.75 billion over one year focused on multiple activities to respond to the pandemic, and support and mobilize providers, including PPS, in response activities. This action was not approved by CMS.

How can you be involved and learn more?

The state shared its most recent concept paper with stakeholders in August through its MRT listserv and provided context on the overall ask. At this time, the state is not requesting public feedback. This is not a formal request to CMS and there is no pending action (approval or disapproval) from CMS at this time. Concept papers are intended to socialize ideas with CMS and allow the state and CMS to begin discussions on the state’s ask and approach, along with an opportunity to address CMS’s questions and feedback. A formal waiver submission from the state will be required to move forward on this approach.

There is no guarantee that CMS will grant this (or any) request, but the CMS team will likely review and discuss the concept paper with the state. If there is interest, CMS and the state will begin to negotiate program and financial elements, the state will build this approach out in much more granular detail, and at some point, the state will submit a formal waiver/waiver amendment request.

Typically, new 1115 waiver demonstrations and amendments to 1115 waivers require states to follow CMS public transparency requirements - which include a 30-day public comment period at the state level, and a second 30-day public comment period at the federal level. While the state has not yet initiated that process, the opportunity to share comment will be available in the future.

To learn more, watch this space—we’ll have further breakdowns of the state’s ask in the future. In the meantime, if you have specific questions, areas you’d like to learn more about, or want to share your own take on the state’s request, get in touch at kalin.scott@hsg.global or @kalinscot on Twitter.