Medicaid Expansion in States Using Section 1115 Waiver

Medicaid Expansion in States Using Section 1115 Waiver

Medicaid was signed into law in 1965, authorized by Title XIX of the Social Security Act. Medicaid is a joint program – funded at both the federal and state level, and implemented at the state level – that helps to cover medical costs for some people with limited income and resources (Program). The federal government establishes certain parameters for all states to follow, and each state administers their Medicaid program differently, resulting in variations in coverage across the country.

In 2014, the Affordable Care Act (ACA) provided states the authority to expand Medicaid eligibility to individuals under age 65 in families with incomes below 138 percent of the Federal Poverty Level (FPL) and standardized the rules for determining eligibility and providing benefits (Obamacare). Moreover, the ACA stipulated that if a state did not choose to expand Medicaid in line with the new target (138 percent of FPL), then that state would lose all federal funding for Medicaid. However, the Supreme Court ruled in 2012 that this penalty was unconstitutional due to the rigidity of the (federal) ACA requirements for (state level) Medicaid implementation in relation to the issue of states’ rights (Liptak).

This ruling changed the law such that states that did not expand Medicaid coverage would lose access to only the additional federal funding allocated by the ACA for Medicaid expansion, but would still continue to receive their prior level of federal funding for the core Medicaid program. This essentially made Medicaid expansion optional. Additionally, the Section 1115 waiver was developed to allow states to implement their own models for Medicaid coverage expansion that did not comply with the original ACA rules, but still remain eligible to receive the additional federal funding that the ACA allocated for Medicaid expansion.

So what exactly is the Section 1115 waiver, and what are its consequences? Section 1115 of the Social Security Act gives the Secretary of Health and Human Services the authority to waive certain requirements of federal Medicaid statute and regulation. The ACA created an additional Section 1115A waiver authority, which established the Center for Medicare and Medicaid Innovation in order to test, evaluate, and expand different service delivery and payment methodologies (Section). The ACA does not change the key provisions of Section 1115, but it does require greater transparency in the Section 1115 Medicaid waiver approval and renewal process (On. Five). The waivers are approved for a certain period of time by CMS and must be renewed afterwards (Wishner). The Section 1115 waiver allowed states to use federal funding in non-traditional manners by giving them additional flexibility to test their own approach for reform.

So why did certain states choose to opt out or adopt waivers instead of following ACA standardized rules for expansion? Part of this question is answered by exploring the partisan politics surrounding ACA. The ACA was largely opposed by Republicans. It was only narrowly passed by Congress in 2010 due to thin Democratic majorities. All 178 House Republicans voted against the passage of ACA (The Politics). This number underlines the exacerbated partisanship in Congress and emphasizes the lack of consensus surrounding this reform. Likewise, a majority of states that have chosen to opt out of Medicaid expansion under ACA are Republican (Lavelle).

In addition to partisan politics, state concern with financing the surge in enrollment as a result of Medicaid expansion is another factor that has influenced some states to opt out or consider adopting a waiver. Even with the federal government paying 100 percent of the costs associated with newly qualified enrollees until 2017 and gradually declining that amount to 90 percent by 2020, states are concerned that the surge in enrollment is unaffordable (Palmer). The logic behind this concern follows that many people who qualified for Medicaid before the expansion – but who had not previously applied for Medicaid – will now be enticed to enroll, thus resulting in greater costs that are not exactly due to Medicaid expansion, since those individuals were already eligible before, and so will not be covered by the federal government.

To date, thirty-one states have either expanded Medicaid coverage with or without the waiver, and nineteen states have chosen to forego any Medicaid coverage expansion. Six states are currently operating Medicaid under Section 1115 waivers: Arkansas, Iowa, Michigan, Indiana, New Hampshire, and Montana.

Arkansas (AR) sought to expand Medicaid under the Section 1115 waiver by using funds as premium assistance to purchase coverage in Marketplace Qualified Health Plans (QHPs) for newly eligible adults. The goal for expansion was to increase the continuity of care, access to care, and marketplace QHP enrollment. Coverage groups included newly eligible parents ages 19-64 between 17-138% of the federal poverty level (FPL) and childless adults from 0-138% FP (Medicaid...Arkansas). These beneficiaries have the choice between at least two silver plans from the Quality Health Plans Marketplace (QHP). A plan is automatically assigned to a beneficiary if a choice is not made. The beneficiary typically has 30 days to change QHP after auto-assignment. The premiums for these plans are paid directly to QHP by the state. Beneficiaries are not responsible for any premium costs. However, cost sharing at the point-of-service varies based on the FPL of the individual. Beneficiaries from 0-138% FPL will make monthly contributions, no greater than 2% of income, to health savings (“Independence”) accounts that are to be used for co-payments and coinsurance (monthly contributions are $5 for beneficiaries 50-100% FPL, $10 for those from 101-115% FPL, $17.50 for those from 116-129% FPL, and $25 for those over 130-133% FPL (Medicaid...Arkansas). Groups that are exempt from premium assistance enrollment, as identified through state screening assessment, include the medically fail and people with “exceptional medical needs”.

Arkansas’ Medicaid expansion also provides services that are outside the QHP benefit package, such as Early Periodic Screening Diagnosis and Treatment for 19 and 20 year olds, free choice of family planning provider, and non-emergency transportation, through the state’s Medicaid fee-for-service delivery system (Medicaid...Arkansas). Through offering preventative services and increased access to care, these additional services function to improve the general health of the population. In retort, between 2013 and 2014, Arkansas’ plan cut its uninsured rate among non-elderly adults almost in half, dropping it from 27.5 percent to 15.6 percent, one of the largest