CMS OKs $6.2B California Medicaid Waiver

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By Laura Mahoney

Nov. 2 — California health-care officials will launch initiatives to overhaul payments and care delivery to the state's uninsured and Medicaid populations under a scaled-back $6.2 billion waiver agreement announced Nov. 1.

The five-year extension of the state's Section 1115 waiver makes California the first state to use financial incentives to boost preventive care for Medicaid enrollees and the uninsured, and the first to include social services such as housing assistance under the Medicaid umbrella.

Funding could increase beyond $6.2 billion after the first year as the Centers for Medicare & Medicaid Services and the California Department of Health Care Services continue to negotiate funding for some elements, DHCS State Medicaid Director Mari Cantwell said in a Nov. 1 e-mail announcement.

“This is a critical step in the waiver renewal process and we appreciate all of the hard work done thus far with CMS,” Cantwell said. “However, much work remains as we develop the details of the waiver programs and components through the [special terms and conditions].”

The waiver replaces a $10 billion, five-year waiver that expired Nov. 1 and continues programs that are part of California's Medicaid expansion and state benefits exchange created under the Affordable Care Act. In addition, it approves the launch of new programs.

New Programs

Two pilot programs approved under the waiver are:

• Whole Person Care Pilot, through which counties can target high-risk populations such as the homeless or mentally ill using managed care plans, county behavioral health systems, hospitals, social service providers and other community-based organizations, with $1.5 billion in federal funds over five years; and
• Global Payment Program, to shift separate funding for disproportionate share hospitals and uncompensated care into one payment pool, giving public hospitals and safety-net providers more flexibility in spending the money at the same time they are expected to improve outcomes, with $236 million the first year and amounts in future years to be determined based on a study to be completed in spring 2016.


Other key elements of the waiver include:

• payment system changes for public and district hospitals that shift away from Medicaid payments based on cost and volume of care provided and toward incentives based on quality and outcomes, called Public Hospital Redesign and Incentives in Medi-Cal, with $3.2 billion over the five-year waiver; and
• the Dental Transformation Initiative to improve dental care outcomes, with $750 million over five years.


Smaller Than $17 Billion

The state and federal health-care agencies said their agreement outlines the major components of the waiver in concept, with a temporary extension of the current waiver through Dec. 31 while they work out the details.

California's originally asked for $17 billion in federal funds in its waiver application submitted in March, but the total was slashed after the CMS rejected California's request to share savings the state's Medicaid improvements would bring by giving those savings back to the state. Instead, the waiver contains only elements that have state and local funding elements alongside federal spending, California Association of Public Hospitals President Erica Murray told Bloomberg BNA Nov. 2.

Overall, the waiver contains all the initiatives public hospitals wanted, she said.

“We're excited to get to work, and we're pleased with the waiver's recognition of the essential role of public health-care systems,” Murray said.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif., at

To contact the editor responsible for this story: Brent Bierman at