Current Trends in Medicaid 1115 Waiver Requests: Are They Schemes to Avoid Compliance with Disfavored Requirements?

Emily Boyd
Associate Editor
Loyola University Chicago School of Law, JD 2019

States looking for flexibility or creativity in implementing Medicaid programs can apply for waivers from the Secretary of Health and Human Services (HHS). According to the Medicaid and CHIP Payment Access Commission (MACPAC), waiver use is quite extensive—resulting in “wide variations in program design, covered services, and eligible populations among states and even within states.” As of September 2017, 33 states account for 41 approved waivers, and 18 states have 21 total pending waivers. The scope of these waivers traditionally broadens eligibility and creates new programs in states where Medicaid needs are not expressly recognized by federal law. Current pending applications suggest, however, that states seeking waivers now do so as a means to circumvent Medicaid program requirements they disagree with.

MACPAC specifically provides helpful background information on Section 1115 and the changing scope of waiver usage:

…beginning in 1994, states sought 1115 waivers more frequently to alter eligibility, benefits, and delivery systems. For example, states used 1115 waivers to provide targeted benefits to individuals with HIV/AIDS, mandate enrollment in a specific capitated managed care plan, and enhance cost sharing for certain populations. Today, Section 1115 is primarily used to negotiate flexible program parameters, rather than to create experiments focused on answering specific research questions.

Medicaid waivers under Section 1115 of the Social Security Act are intended as a means for HHS to approve state projects and demonstrations aimed at promoting the objectives of the Medicaid and Children’s Health Insurance Program (CHIP) programs. However, proposed 1115 waivers must still meet general criteria set forth by CMS. These criteria help determine if the proposal meets the Medicaid/CHIP program objectives. A proposed program under 1115 should:

  1. Increase and strengthen overall coverage of low-income individuals in the state;
  2. Increase access to, stabilize, and strengthen providers and provider networks available to serve Medicaid and low-income populations in the state;
  3. Improve health outcomes for Medicaid and other low-income populations in the state; or
  4. Increase the efficiency and quality of care for Medicaid and other low-income populations through initiatives to transform service delivery networks.

Changes in healthcare created changes in waivers

The Affordable Care Act (ACA) somewhat changed the use of 1115 waivers. By early 2015, the ACA had initiated a trend of states using 1115 waivers as a workaround rather than a tool.  According to the American Bar Association Health eSource, states unwilling or unable to expand under traditional Medicaid began utilizing waivers to alter coverage. This was a stark change from 1115 waivers historically, where states used waivers to alter cost sharing, modify provider payments, and provide emergency coverage, as well as expand coverage.

For example, in 2002, Colorado was approved for “Adult Prenatal Coverage in CHP+.” It permitted the state to expand coverage to uninsured pregnant women with family incomes above 133 percent, and up to 185 percent, of the Federal Poverty Level (FPL). Eligible women were covered for the duration of the pregnancy, and up to 60 days postpartum. An amendment, approved in 2006, increased coverage to pregnant women up to 200 percent of the FPL. The waiver was also approved for extension that same year, prolonging coverage through September 2009.

Additionally, in 2000, Maine was approved for a “Health Care Reform Demonstration for Individuals with HIV/AIDS.” The demonstration provided health care access to individuals with HIV with incomes up to 250 percent of the FPL. Eligible individuals were provided with a comprehensive package of services aimed at effectively treating HIV early. The waiver was renewed three times, expiring at the end of 2014.

Colorado and Maine exemplify the kind of flexibility and creativity in care delivery that the 1115 waiver was intended to promote. Yet in current applications, states are proposing 1115 waivers to avoid compliance with certain tenets of Medicaid. Provisions such as work requirements, drug testing, and lock-out periods have never before been approved, and are all aimed at decreasing the number of Medicaid-eligible individuals in each state requesting them.

However, the possibility of approval for such measures is growing more and more likely. An Issue Brief released by the Kaiser Family Foundation illustrates some of the trends in pending 1115 waivers that implement the ACA’s Medicaid expansion. Four states (Arizona, Arkansas, Indiana, and Kentucky) have requested a work requirement of some variety as a determinant of Medicaid eligibility. Arizona proposes a time limit on coverage, and income verification. Arkansas seeks to limit expansion eligibility to 100 percent of the FPL. Indiana and Kentucky both have pending waivers that include provisions that would lock out beneficiaries for failure to renew eligibility in a timely manner.

The previous administration denied waiver requests in this vein, specifically for work requirements. To date, the current administration had not made a decision on any of the pending waivers.  In March of this year, however, CMS issued a letter to state governors that may indicate forthcoming action. The Kaiser Family Foundation states that the letter “signals a willingness to use Section 1115 authority to ‘support innovative approaches to increase employment and community engagement’ . . .  The CMS letter indicates a willingness to expand these policies to traditional Medicaid adults as well as a willingness to approve landmark program changes, like work requirements.”

Is this legal non-compliance? The impact of approval

Policy arguments relating to the implementation of work requirements in Medicaid focus on whether Temporary Assistance for Needy Families (TANF)-style work requirements revert Medicaid into a cash welfare program, rather than a provider of health insurance. And while such measures to decrease eligible beneficiaries may decrease government expenditures, at face value, these plans appear to contradict the objectives of Medicaid. The proposed changes to Medicaid are controversial and unprecedented, but beyond their specific requirements, what would their approval signal in terms of compliance?

If approved, these waivers would work less as they were intended—to expand Medicaid in states that have unique ideas on how to provide for its needy population—and more as applications for exemption. What would be the incentive to comply with Medicaid law as written? Would Medicaid law and regulation then be a malleable book of suggestions that a state can simply request exemption from?

Approval of 1115 waiver proposals in opposition to the spirit of the Medicaid program essentially eliminates the enforcement of Medicaid laws. If the current administration approves just one waiver allowing the imposition of work requirements, lifetime caps on eligibility, or lock-out periods, more states will follow suit. Any Medicaid regulations disfavored by a state would be subject to a low-threshold process to avoid compliance with federal law.

States looking to add additional Medicaid requirements to beneficiary eligibility must therefore do so in a manner that promotes the program and the intention of 1115 waivers. True, unprecedented changes are not inherently noncompliant. However, Medicaid laws are codified to preserve the program and ensure access to care. Allowing states to waive compliance with the very requirements that accomplish those goals might eliminate any benefits the program has in a given state.  Therefore, states should endeavor to test the parameters of Medicaid through creative hypotheses rather than expressly reject and seek to avoid enacting the program as written.