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How to tap the $250 billion federal waiver market


Waivers offer states an opportunity to expand programs beyond traditional services, giving them greater flexibility and innovation in care delivery and payment models.

In the ever-changing landscape of healthcare delivery, waivers offer an opportunity for states to expand programs and services beyond traditional Medicaid service confines, allowing greater flexibility and innovation in care delivery and payment models. Health plans can benefit, too, by contracting with states to increase enrollment and a share of federal and state healthcare dollars.

Health plans seeking to increase enrollment will find the best bet in the 28 states that are participating in Medicaid expansion. The expansion, mandated by the Affordable Care Act (ACA), extended Medicaid coverage to all non-elderly adults with incomes at or below 138% of the federal poverty level (FPL), and opened the doors to Medicaid for millions of uninsured adults who were previously excluded.

The ACA is funding 100% of expansion costs until 2016, after which funds will decline to 90% through 2020. The traditional Medicaid model is a 50/50 split of costs between states and the federal government. The mandate was deemed optional for states by a Supreme Court ruling in 2012, but the ACA also called for other non-optional Medicaid revisions such as a simplified enrollment process, new funding opportunities, and payment reform initiatives.

Related:The Medicaid expansion divide

States can use a variety of waivers to offer specialized benefits packages, restrict beneficiaries to specific provider networks, or expand Medicaid coverage to those who are outside the traditional parameters. Medicaid waiver programs were created by the enactment of the Omnibus Budget Reconciliation Act of 1981 to offer states greater flexibility and the ability to test new delivery models.


NEXT: Types of waivers


Types of waivers

1915(b) Managed Care Waiver:This waiver allows CMS to approve managed care plans that restrict the choice of healthcare providers for Medicaid beneficiaries; allow a county or local government to act as a broker in helping beneficiaries select managed care plans; allow the state to use savings from a managed care program to provide additional services to other Medicaid beneficiaries; or restrict the type and number of providers for specific Medicaid services. States can also use this option to waive statewide requirements and provide managed care in a limited area.

This type of waiver must be budget neutral, meaning the managed care plan cost must not exceed traditional fee-for-service Medicaid program costs. This waiver is typically approved for two years with a two-year renewal, or for five years for dual beneficiaries.

1915(c) Home- and Community-Based Care Waiver:This waiver allows a state to provide home- and community-based services under its Medicaid program, allowing for greater flexibility to keep beneficiaries out of an institutional setting, a service not typically covered under Medicaid. Services that can be offered under the HCBC waiver include case management, home healthcare, adult day care programs and respite care.

The waiver can be set up to target specific types of beneficiaries, such as children with development disabilities or older adults suffering from dementia. The program is limited to individuals who would need institutionalized care without the waiver program. Waivers are issued initially for three years but can be renewed for up to five years for dual beneficiaries. Most states use this waiver program.

Related:Plans take on risk with vulnerable populations

According to the Kaiser Family Foundation (KFF) 1915(c) waivers accounted for the largest share of Medicaid home and community-based services enrollment and the majority of Medicaid home and community-based services spending in 2011. In 2013, more than 536,000 people in 39 states were on waiting lists for a 1915(c) waiver, according to KFF.

Combination 1915(b) and (c) Waivers:This combination waiver can allow states to provide long-term care in a managed care setting or through a limited pool of providers, as well as to expand services beyond what is currently offered under the state Medicaid program. Federal requirements for each waiver must be met in order to combine these programs.

1115 Research and Demonstration Project:This program allows the Department of Health and Human Services to approve pilot or experimental projects that promote the goals of the Medicaid and Children’s Health Insurance Program (CHIP) while giving states more flexibility to try new healthcare delivery approaches or payment methods to improve patient care and healthcare spending. This waiver has been used to achieve cost-sharing increases, expand managed care, and purchase premiums for exchange coverage. It can also be used by states to cover services not typically provided under traditional Medicaid.

Programs created under this waiver must be budget neutral, and the waiver cannot be used to expand Medicaid services to new populations or offer new services. These waivers are generally approved for five years and can be renewed.

NEXT: Health plan opportunities


Health plan opportunities

While states are in control of applying for and requesting waivers from the federal government, health plans play a big role in implementing the programs.

PiperKip Piper, MA, FACHE, senior consultant with Sellers Dorsey and a member of the Managed Healthcare Executive advisory board, says there are many opportunities for health plans, particularly under Medicaid expansion, to enroll new members. “For health plans, that is a huge expansion of business,” Piper says.

In most states, he explains, any new enrollees covered by a waiver program would be enrolled through the health plan. But states have the option now of delivering care through waiver programs to Medicaid managed care plans or through private health plans.

“Depending on which line of business you’re in, you might be able to get these new enrollees, you might not,” he says.

States might shy away from using Medicaid managed care plans, Piper says, because they want their expansion to appear private and expose new enrollees to plans that look more like private insurance. Waivers also outline what services are covered and what premiums and copayments are permitted.

Related:Texas inquires about Medicaid expansion while Arizona faces challenges

Health plans want to pay particular attention to what waivers are being proposed in their states and what the budget limitations are, he adds. States must maintain budget neutrality, and plans will have to assure states that there are enough dollars in their proposal because if the states go over their budget cap, they will have to pay 100% of the program cost without matching funds from the federal government.

Health plans also have a huge opportunity to help bring down the cost of providing care for dual beneficiaries with comorbidities. “They’re very expensive, very vulnerable populations,” Piper says, adding that those individuals usually have Medicare and Medicaid fee-for-service plans, but not managed care. The population group consists of about 10 million people with generally poor outcomes who cost $270 billion per year. “It’s a huge business opportunity for plans to improve care delivery,” says Piper.

Piper says health plans also have an opportunity to improve the way 1915(c) waivers are used. Many services provided under that waiver have been enacted by county agencies or local non-profits in an unmanaged fashion, Piper says. About 25 states are now looking at managing those waiver programs with the help of health plans, which Piper says is a new, potentially $250 billion market for health plans.


NEXT: Health plans in action


Health plans in action

States, including Wisconsin and Indiana that are partnering with health plans, are realizing a large influx of newly-eligible, low-income, childless adults, says Piper, resulting in expanded health plan membership. In Iowa and Arkansas, Piper says, states allow beneficiaries to buy plans on insurance exchanges with Medicaid dollars.

PalmerIn Wisconsin, the BadgerCare Reform waiver allows the state to provide services to childless adults ages 19 to 64 with incomes that do not exceed 100% of the FPL. The program is administered under a Section 115 Demonstration Project Waiver that began on Jan. 1, 2014, and runs through Dec. 31, 2018. It provides full Medicaid benefits, including enhanced mental health benefits, and substance abuse treatment and prevention benefits. Prior to the initiation of the waiver program, these services were not available to childless adults living within poverty limits. The program is managed by the beneficiary’s choice of HMO, depending on where they reside, according to Claire Yunker of the Wisconsin Department of Health Services.

Iowa Department of Human Services (DHS) Director Charles M. Palmer announced in a recent

news release

that the cost of delivering Medicaid in Iowa has increased by 73% since 2003 and totaled more than $4.2 billion last year--$1.5 billion of which came from the state. Palmer said in the statement that hiring health plans to coordinate care and manage spending would save the state money.

Related:Iowa, Arkansas receive approval for Medicaid cost-sharing provisions

“Nationally, about 70% of Medicaid beneficiaries have their healthcare administered by health plans,” Palmer says. “Modern health plans are better equipped to bear the risk and the state can continue working to emphasize quality improvement within our healthcare delivery system.”

McCoyIn Iowa, the Iowa Health and Wellness Plan is open to individuals with incomes below 133% of the FPL that meet existing Medicaid eligibility requirements. Premiums are waived for all beneficiaries in the first year, but premiums ranging from $5 to $10 per month are permitted for members with incomes between 50% and 133% of the FPL.

Individuals with incomes at or below 100% of the FPL may participate in the Iowa Wellness Plan, which allows them to choose a provider from a specific state network. The plan is managed by Coventry Health Care, which was acquired by Aetna in 2013.

Those with incomes at 101% to 133% of the FPL are eligible for the Iowa Marketplace Choice Plan, which allows members to obtain healthcare coverage from select insurers on the health insurance exchange marketplace, and the premiums are paid with Medicaid dollars.

Amy Lorentzen McCoy of the Iowa DHS says there are 33,249 beneficiaries currently enrolled in the Marketplace Choice program, and 8,220 in the Iowa Wellness Plan through Coventry. The remaining eligible beneficiaries are in the wellness plans’ fee-for-service option, she says.

NEXT: Chart of waivers available in each state


Rachael Zimlich is a writer in Columbia Station, Ohio.

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