What the Recent Medicaid 1115 Waiver Approvals in Massachusetts and Oregon Tell us About the Future of Medicaid Innovation
Post Written by Greg Allen, Senior Advisor, Innovative Care and Financial Models
CMS recently approved Massachusetts and Oregon’s Medicaid 1115 waivers, paving the way for new reforms, expanded access, and innovative programming. Within these multi-hundred page documents are clues as to where the Federal government wants Medicaid programs to go and what changes you may see in other proposed waivers.
Section 1115 demonstration waivers offer states an approved pathway to pilot new programs in Medicaid that do not currently meet federal rules, as long as the new programs are “likely to assist in promoting the objectives of the [Medicaid] program.” While these waivers have been used by many states to operate large programs like managed care and special efforts like ACOs and other delivery system reforms, recent approvals from the Trump Administration and the Biden Administration offer a sharp contrast in policy direction and in state flexibility versus federal discretion.
Medicaid 1115 waiver approvals under the Trump Administration focused on conditioning eligibility on work requirements and other restrictions, payment for institutional behavioral health services, and attempts to limit and cap federal Medicaid financing. By contrast, with the recent approvals in Massachusetts and Oregon as prime examples, the Biden Administration is charting a different course to emphasize waivers that expand, rather than restrict, Medicaid coverage and access to care. The Biden Administration has shelved work requirements and is phasing out premium requirements while actively encouraging states to propose waivers that continue the hallmark Affordable Care Act-era coverage expansions and also focus on eliminating health disparities and promoting whole-person care. CMS is actively promoting that states had better address Health Related Social Needs (HRSN) in their developing waiver playbooks.
Here we will take a short snapshot of the 1115 approvals just announced for Massachusetts and Oregon and see what the tea leaves are whispering about the future direction that other waiver approvals may take. But first let’s lay out some common themes we see across both approvals.
What the Massachusetts and Oregon Waiver Share
Expansion of Coverage including expansions of continuous eligibility for children, recently incarcerated and other medically and socially vulnerable populations
Continued Focus on Value Oriented and Accountable care including reauthorization of ACO structures, specialized work in primary care, behavioral healthcare and pediatrics
Efforts to Reduce Health Disparity and Funding to address Health Related Social Needs (HRSNs) (formerly known as the social determinants of health) including food, housing insecurity, and care management for high risk populations
Increases to Primary Care Reimbursement including mandates not to let Medicaid primary care rates fall below certain Medicare benchmarks
Additional Funding for Hospitals this includes more dollars for safety net hospitals meeting quality and health equity targets and additional DSRIP funding to further VBP advances in the hospital sector
Workforce Funding investments in residency training, loan repayment, and other projects to support increases in the primary care and behavioral health workforce; and
Updated Flexible Financing Authorities including a breath of life into previously canceled federal authorization pathways and provision of more headroom in previously shrinking waiver spending caps.
Massachusetts Waiver
As this writer is all too acutely aware, these federal waivers are typically approved after long and painful negotiations between state and federal officials. However, Massachusetts may have been lucky on this approval, as Massachusetts’ former Medicaid director Dan Tsai is now a deputy administrator for the Center for Medicaid and Medicaid Services.
Tsai said the Massachusetts and Oregon Medicaid waivers are about “thinking about the whole person when it comes to care.” Tsai also praised provisions implemented by both states that will let certain Medicaid members maintain continuous coverage for more than a year without having to renew their coverage. Prior to the COVID public health emergency, members had to renew their Medicaid insurance coverage annually and have their eligibility reconfirmed. Tsai said many people lose coverage at the renewal date, not because they are ineligible but because they don’t get the notification letter or do not take steps to renew their coverage. The new Massachusetts waiver will allow homeless individuals to maintain continuous coverage for 24 months without having to renew their coverage. Also, MassHealth enrollees recently released from correctional facilities will have 12 months of continuous coverage.
Funding to Safety Net Hospitals
Mass Medicaid has garnered, through an innovative Hospital Quality and Equity Initiative (HQEI), $400 million annually in expenditure authority for private acute care hospitals meeting safety net standards and up to $90 million annually in expenditure authority for the Cambridge Health Alliance (only non-state owned public hospital) to “strengthen and improve care quality and health outcomes among Medicaid beneficiaries.” To the extent these qualifying hospitals implement delivery system changes that measurably improve the care to Medicaid beneficiaries, including reducing health disparities, they earn performance payments based upon measures identified jointly by the state and CMS. Funding is made available at 25 percent for incentives around better data collection, 50 percent for equitable access and quality performance, and 25 percent for workforce development and competence incentives.
Rewards are also in the mix for meeting milestones toward organizational/workforce competence as evidenced by providing accessible and culturally appropriate services. Based on member health status and health needs, hospitals can earn payments for effectively addressing gaps in access to and the quality of care.
To fund at least parts of this the waiver includes a new version of an assessment on hospitals, which the Baker administration, Legislature, and state hospitals had previously negotiated. The new assessment is expected to yield federal matching funds and result in an annual $600 million increase for the hospitals sector, especially those that primarily serve low-income Medicaid and Medicare patients. The assessment is a progressive assessment that requires more from hospitals with better financial positions. The assessment revenue is matched by the federal government, pooled, and then redistributed under a formula that moves more to community hospitals that care for a higher ratio of lower income patients.
The approval encourages MassHealth providers to partner with community-based providers to address the root social causes of health concerns. Concerns like lack of access to nutritious food and housing insecurity top the list of HRSNs that both Massachusetts and CMS are targeting in the “whole person approach” to health.
Primary Care
Historically underfunded in almost every state, the waiver dedicates $115 million a year for primary care payment and service enhancements which Governor Charlie Baker has said will help the state expand the delivery system for primary care through a system that rewards team-based, high-value health care. Primary Care “...has always been, from my point of view, underfunded in healthcare generally,” said Gov. Baker.
The waiver includes “pop-up” payment enhancement requirements if the state’s payment rate falls below 80 percent of what Medicare would pay for similar services.
Massachusetts’ waiver also furthers the state’s rich history in testing service delivery changes to drive value. The waiver continues piloting new primary care payment models which attempt to more fully pivot primary care payment away from volume and toward a value-based framework. The primary care model features increased clinical and care delivery benchmarks where primary care physicians must utilize enhanced team-based care, further behavioral health integration, and increase access to more integrated community based care. Primary Care ACOs will contract with the state to offer a prospective payment to participating primary care physicians. Massachusetts is phasing out fee-for-service payments for a defined set of primary care services delivered to Primary Care ACO enrolled beneficiaries.
Behavioral Health and Workforce
MassHealth has continued and expanded authority in the waiver to operate existing and new services through Specialized Community Support Programs (CSPs) and the Flexible Services Program (FSP) for individuals with psychiatric or substance use disorder. CSP services are outreach and supportive services to help patients with behavioral health diagnosis access essential medical services. The waiver supports a more intensive form of CSP for beneficiaries who are experiencing homelessness or are justice-involved while living in the community. The Mass waiver also provides authority to pay for targeted CSP tenancy supports for beneficiaries facing eviction as a result of behavior directly related to their behavioral health condition.
The Flexible Services Program (FSP) enables MassHealth ACOs to provide targeted services to address HRSNs. ACO members with higher clinical needs can be made eligible for tenancy preservation and nutrition supports. FSP services in the package offer time-limited housing supports, medically-tailored and time-limited food assistance and nutrition education.
Another interesting component of the MassHealth waiver is the earmarking of $43 million over five years for residency training and loan repayment for Medicaid behavioral health clinicians. Governor Baker has remarked that one of the biggest reasons people have trouble getting mental health appointments today is a lack of clinicians in the field, which relates to a lack of funding for clinicians.
“One of the biggest challenges we have in behavioral health is we haven’t funded it adequately for a long time,” Baker said. The waiver pumps jet fuel into the Baker administration’s behavioral health roadmap, a plan to increase access to behavioral health care.
The workforce recruitment and retention program also targets primary care in addition to the behavioral health providers with student loan repayment programs and includes a family nurse practitioner residency program.
Financing the Waiver in Massachusetts
Somewhat in a departure from usual practice, CMS does not specifically call out how much funding is incrementally included in this new waiver. Instead, public materials reference a $67.2 billion agreement between Massachusetts and CMS. This figure includes all the gross value of the prior waiver, so it is not that helpful in isolating new funding. Incremental gross dollars in this new waiver likely fall in the range of $4-5 Billion depending on how you count roll over dollars.
Many of the details for how dollars get attached to performance are left to negotiations still to come and guidance still to be developed, but the structure of the funding is laid out (although at times obliquely) in the new waiver. During the current extension period, the MassHealth Waiver includes the following expenditure categories - some existing, some modified, some new and all somewhat promising as tea leaves for what could be approved in coming state waivers:
Hospital Quality and Equity Initiative (HQEI) - as discussed previously
HRSN Expenditure - as discussed previously (funding details to come in to-be-developed implementation plan)
DSH-like Pool- Payments that offset Medicaid FFS and managed care underpayment, and uncompensated care for uninsured and underinsured (DSH – shortfall and uninsured).
UC Pool- Uncompensated care pool restricted to charity care for uninsured and underinsured, aligned with CMS uncompensated care pool policy as applied in other states (UCC – uninsured care). CMS will only make changes to the base methodology during the negotiation of another demonstration extension with the Commonwealth; and
DSRIP-Final performance period of the DSRIP program, ending March 31, 2023, and some close-out activities that phase down over the course of the demonstration period. Many of these are calculated on a PMPM basis and the major components include:
Flexible HRSN services and supports;
Primary Care investment including EHR interoperability and training;
Safety Net Provider Payments (SNPP). VBP and quality incentives phase down/close-out payments associated with the prior demonstration period and tied to DSRIP accountability to be paid to Safety net hospitals;
Public Hospital Transformation and Incentive Initiatives (PHTII). Includes close-out payments associated with the prior demonstration period and tied to DSRIP accountability from the prior demonstration period to be paid to Cambridge Health Alliance.
MassHealth Waiver Requests Denied (so far, as CMS has not officially shut the door on most of this)
Access to care and health outcome programs for special populations including justice-involved individuals with health care access challenges.
Medicaid coverage to juvenile justice population during their commitment
Medicaid Coverage for justice-involved adults 30 days prior to being released for correction settings.
Expenditure authority to operate a Hospital at Home program including authority to pay for clinic services delivered via telehealth (when neither the provider nor member is at the clinic)
Oregon Waiver
The Oregon Waiver approval, like Massachusetts, includes some notable eligibility enhancements for Medicaid and some very innovative efforts focused on broadening social care for certain higher risk populations.
One of the signature components of the Oregon demonstration is to ensure children on Medicaid keep their coverage until 6 years of age without families needing to renew coverage. CMS, in its approval release said, “This will minimize red tape for both families and the state and help to ensure access to care throughout this critical period of early childhood.”
The state will also expand coverage of health-related social needs (HSRN) to include food assistance and housing support, part of a larger effort by Oregon and CMS to close health equity gaps. Interestingly, as a clear sign of the times, the state has received approval to focus additional HRSN resources on individuals facing health and social challenges brought on by extreme climate events.
“We need to address unmet health-related social needs, such as new authorities for evidence-based nutritional assistance and medically tailored meals and housing support and support such as air filters and air conditioners for Medicaid recipients who are experiencing extreme climate events that we are seeing more frequently on the West Coast,” said Oregon Governor Kate Brown.
Oregon looks at major life transitions, like losing housing or being impacted by extreme weather, as “trigger events” that cause higher-risk Medicaid members to lose access to their health care providers thereby triggering worse health outcomes. Oregon’s waiver offers new social supports to members if they experience these types of events.
Health-related social needs services in Oregon are scheduled to begin in 2024-2025. Individuals eligible for the services include:
Children with special health care needs (up until age 26)
Children who are child welfare involved
Homeless individuals or those at risk of homelessness
Members enrolled in both Medicaid and Medicare
People being released from prison and jail
Those at extra risk because of extreme weather events
The HRSN services can include:
Housing supports may include one or more of the following components:
Rental assistance or temporary housing (e.g., rental payments, deposits, utility assistance) for up to 6 months
Home modifications (e.g., ramps, handrails, environmental remediation)
Pre-tenancy and tenancy support services (e.g., housing application, moving support, eviction prevention)
Housing-focused navigation and/or case manager
Nutrition supports including:
Linkage to food resources (e.g., application support for SNAP and WIC)
Nutrition and cooking education
Food prescriptions (for up to 6 months) and healthy food boxes/meals
Medically tailored meal delivery
Protection from Climate Events Supports may include one or more of the following components:
Payment for devices that maintain healthy temperatures and clean air, including air conditioners, heaters, air filters and generators to operate devices when power outages occur
The waiver also envisions changes to the state’s quality program to address health equity gaps. These changes include more diverse representation on quality committees and adding upstream measures to the performance program including measures like providing culturally responsive services in a member's preferred language.
Oregon Financing:
DSHP is back! Many states have been unsuccessful in the last few years at authorizing or reauthorizing matching funds for Medicaid known as Designated State Health Programs (DSHP) that allow states to use existing funding the State provides for services “that CMS has determined are likely to assist in promoting the objectives of Medicaid” as a source of state match to draw down federal Medicaid dollars. CMS has now decided to approve section 1115 demonstrations that provide federal funding for DSHPs, under certain circumstances. CMS is approving federal matching funds for Designated State Health Programs (DSHP) to enable Oregon to implement new demonstration programming reviewed previously. This is really big news. While these approvals will, per CMS, “limit both the size and scope of DSHP, and apply additional parameters and guardrails'' just opening the DSHP door, in concert with the changes to how CMS will allow states to calculate budget neutrality, will certainly give states some breathing room as most could not drawn down any additional federal Medicaid without these added flexibilities. The DSHP resource will be capped at no more than 1.5 percent of the state’s total Medicaid spend during the demonstration period.
Waiver Requests Not Being Approved at this Time
Funding for community-led health equity interventions, managed by new Community Investment Collaboratives (CICs)
Medicaid services for youth in juvenile correctional facilities as well as all individuals in jail or other local/tribal correctional facilities.
Limited Medicaid benefit package to adults in prison or IMDs for up to 90 days prior to release
Removing prior authorization requirements for for American Indian/Alaska Native beneficiaries
Medicaid coverage for the Special Diabetes Program for Indians (SDPI) and extending coverage of new health-related social need services to tribal members not enrolled in a Coordinated Care Organization (CCO).
Also, the state was able to cover some services requested to be funded through the waiver through state plan amendments instead; these include changes to CCO rate setting, some pharmacy flexibilities, expedited Medicaid enrollment through SNAP and authority to cover peer-delivered behavioral health services without a corresponding plan of care from a physician or other licensed practitioner.
Reading the Tea Leaves
So that’s a lot of tea leaves, but what do they tell us? Well, for one thing I am feeling hopeful that the national Medicaid reform door is open again. A while back, we all started a rocky but rewarding journey to rethink healthcare and then COVID, combined with some larger federal policy changes, stomped on the pause button. But these recent CMS approvals show that HHS is willing to have discussions with States again about how to direct progressive change in health care (and behavioral health care) delivery.
There are four main takeaways from these approvals for me:
Value based care is not going away. With Medicaid, Medicare, and other government sponsored insurance at over 50 percent of national insurance expenditure and most large private payers also pushing value, no one can prudently bank on a fee-for-service future.
States can again propose progressive reforms with new federal dollars in the venture without the requirement that something else be cut to make room.
Eligibility expansions and continuous coverage facilitation are likely rubber stamp approvals especially for children as CMS rekindles ACA coverage policy direction.
Social Care will begin to take center stage at the reform play. Recognition is deeping that excess spending in healthcare is driven more by social barriers than things we can fix with pills and scalpels.
This is an extremely promising set of changes and will be critical to reheating reform for Medicaid programs. In New York, with DSRIP funded reforms, we reduced avoidable hospital use by 26 percent in five years. It is impossible to appropriately fathom the amount of suffering avoided and joy regained by making such a significant change in the way patients interact with their healthcare providers.
And then a global pandemic struck. COVID took its toll on our systems. It took its toll on all of us. We lost lives. We lost providers. We lost some energy for change. Out of necessity, we became reactive and less proactive.
However, today is it possible we are approaching a new, more positive tipping point in health care? While there is still much cause for concern, perhaps there is also much cause for hope.
Hope that we truly can build back better. Then we can rise.
Understanding Medicaid 1115 waivers and their implications on your institution’s future will be key to your Medicaid strategy in 2023. If you’re an entity looking to develop its Medicaid strategy, reach out to our team to learn more about how we can support your goals.
About the Author: Greg Allen is Senior Advisor, Innovative Care and Financial Models at HSG. Connect with him on LinkedIn
