States to See Greater Flexibility on Medicaid Waivers: HHS’s Price

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By Victoria Pelham

The Trump administration’s new HHS leadership is affirming its intent to give states more freedom in running their Medicaid programs—beginning with a review of the current waiver process.

The agency will look at ways to give states and governors greater autonomy over Medicaid by encouraging the use of new state-tailored strategies that could boost health access or outcomes, Health and Human Services Secretary Tom Price pledged March 10. HHS officials will work alongside lawmakers looking to overhaul the health-care system.

“Our states know best how to care for their citizens—particularly their most vulnerable populations who receive healthcare coverage under Medicaid,” Price said in a statement.

The safety-net insurance covers more than 70 million people at a total $550 billion price. A GOP proposal making its way through Congress would repeal the Affordable Care Act, implement per-enrollee ceilings on federal Medicaid spending and gradually end the Medicaid expansion. If this plan becomes law, analysts project states would likely experience a trade-off for this greater flexibility with increased costs.

`Desperately Welcomed.’

State Medicaid directors are encouraged by the “critically important and desperately welcomed” promises of increased flexibility, Matt Salo, executive director of the National Association of Medicaid Directors, said. He added that they hope to work closely with new health-care leadership to achieve these goals.

“We’ve asked for a rethinking of how the state-federal partnership has worked around a macro level, how regulations work,” Salo told Bloomberg BNA. “States—despite the fact that we actually administer Medicaid and we pay for half the program—we’ve always been treated as one of many stakeholders in the federal government’s regulations.”

But their position in implementing the health-care program for the poor is entirely different from others like hospitals, nursing homes or managed care plans, he noted.

“We’ve said, ‘No, we’re equity partners here.’”

The NAMD laid out its legislative priorities for 2017 at the beginning of the year and began asking for a larger seat at the table amid discussions of health-care overhauls. Though they have not taken an official partisan stance on any of the proposals, Salo said state Medicaid directors are trying to inject their detailed understanding and consideration of nuances into the Medicaid debate.

Regardless of what changes are borne out of the current repeal-and-replace Obamacare climate, the state Medicaid leaders hope to make their growing programs more harmonized and efficient. Much of this includes a focus on state flexibility.

Among other fixes, the organization has called for:

  •   extended approvals of state 1115 demonstration waivers already found to be successful, rather than continual “administratively burdensome” renewal processes;
  •   allowing the use of more interwoven funding from various federal sources to bring together patient care under a holistic umbrella; and
  •   steps toward addressing the growing, high cost of prescription drugs in Medicaid (such as states’ ability to exclude certain medicines from coverage).
Further, at an administrative level, the local officials want speedier interactions with the federal government (especially on waivers) and the chance to be included in the development of Medicaid regulations and to examine them before they’re passed, according to NAMD policy documents shared with Bloomberg BNA.

State Medicaid directors “collectively believe that the partnership between states and the federal agency has not evolved to reflect the Medicaid program of the 21st century.”

“Increasingly, federal regulations and guidance are divorced from the practicalities of operating a Medicaid program,” the group said in a December briefing on “laying the groundwork for a successful” partnership in the first 100 days of the new administration. “Nor can federal regulators reasonably be expected to conceive of the universe of innovations states may wish to pursue.”

Possible Flexibilities

Centers for Medicare & Medicaid Services officials are still not fully in place. Price was confirmed in February, but the Trump administration’s pick to head Medicare and Medicaid, Seema Verma, has not gone before a full vote. That vote is scheduled for March 13.

Another possible leader is Brian Neale, who has yet to be publicly announced but is expected to take charge of the Center for Medicaid and CHIP Services.

Salo said signs are pointing to the government listening to their concerns, but it remains to be seen to what degree.

Verma, founder of health-care consulting firm SVC Inc., was instrumental in crafting Indiana’s unique Medicaid expansion waiver, the Healthy Indiana Plan 2.0. The program grew the state’s Medicaid coverage to those living below 138 percent of the poverty level but also implemented several strict elements such as cost sharing, health savings accounts, rewards for healthier behaviors and a six-month lock-out period for failure to pay premiums. Its success has been contested, as the Hoosier State works to renew its waiver.

She was also heavily involved in guiding other states’ waivers.

She credited her time dealing with state Medicaid waivers as her guide to determining what works and what doesn’t, in official testimony answers to the Senate Finance Committee obtained by Bloomberg BNA.

“I’ve also been able to learn what the federal government asks for and how they ask for it can slow or stop innovation,” she said. “My experience at the state level reminds me that Washington often doesn’t know best.”

This could be a sign of what’s to come under Price’s and Verma’s leadership.

The nominee said she will work to make the waiver process better and cut back on “redundant paper-pushing.”

As part of that effort, her agency would look at the part demonstration evaluations play and question the use for waivers when a state’s long-term demonstration has already shown positive outcomes. She called the current system “inflexible,” even for “routine” tweaks in Medicaid programs.

“It is imperative that states are able to partner with CMS in a joint effort to update and modify their Medicaid programs to better serve their citizens,” Verma said in her official answers to Congress.

“If states are mired in paperwork and forced to redirect resources to unnecessary federal requirements, that means less resources are available to their most needy citizens,” she said.

Salo noted that he hopes flexibilities extend to the ideas the NAMD has endorsed and believes that would “make perfect sense.”

He sees the federal government tackling “low-hanging fruit,” such as successful waiver renewals not needing additional review to become part of a state plan; making it easier to extend ideas from already approved waivers (like health savings accounts) to other states; or scrapping outdated, nonsensical waivers for managed care or home and community care, for example, which have become industry standards.

“Why are we still having to do the ‘Mother, may I?’ to get there?” Salo asked.

Fewer Dollars

Though states are eager to have more freedom in operating their safety-net health-care programs, the prospect will likely arrive in the context of fewer dollars.

The American Health Care Act, the latest Affordable Care Act repeal-and-replace proposal, would shift the cost over to states, advocates have warned, likely leading to cuts in benefits and eligibility that would harm health-care access. Medical groups like the American Medical Association have come out against the bill.

The Center on Budget and Policy Priorities estimates the per-capita caps and expansion funding freezes the bill proposes would shortchange states $370 billion, including by not adjusting for the threat of future epidemics or the cost of future medications. Even with annual adjustment trend rates factored in, costs to states would likely exceed the federal spending ceilings by 0.2 percentage points each year while states have to account for costs above their ceiling, the CBPP projects.

“In the context of reform, if there’s going to be fewer dollars attached, the conversation has to turn very aggressively to statutory legislative flexibilities,” Salo said.

To contact the reporter on this story: Victoria Pelham in Washington at

To contact the editor responsible for this story: Brian Broderick at

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