COVID-19 Break in Regulation of Waivers for State Medicaid Agencies

Perri Nena Smith

Senior Editor

Loyola University Chicago School of Law, JD 2021


COVID-19 was an unexpected pandemic that hit the United States, causing Centers for Medicare and Medicaid Services (“CMS”) to rush to make accommodations for the states. States administer their Medicaid programs following a state plan and under the regulation of federal rules. With approval, states are allowed to amend their state plan and apply for waivers to improve the effectiveness of their Medicaid program. During COVID-19, the Trump Administration made available for states to apply for 1115 waivers, creating a new section labeling 1115(a), the 1135 waiver, and Appendix K to amend 1915(c) waivers for national emergencies. As of May 2020, CMS reported over 200 approved waivers across multiple states.

Description of waivers

Section 1115 of the Social Security Act gives the Secretary of Health and Human Services (“Secretary”) authority to approve experimental, pilot, or demonstration projects that promote the objectives of the Medicaid and Children’s Health Insurance Program (CHIP) programs. CMS labels approved 1115 waivers, demonstrations. Under this authority, the Secretary may waive specific provisions of the Medicaid law to give states additional flexibility to design and improve their programs. Section 1115(a) is an opportunity for states to address the COVID-19 pandemic by temporarily modifying a number of authorities and allowing flexibility to assist in enrolling and serving beneficiaries in Medicaid.

The 1135 waiver of the Social Security Act enables the Secretary to ensure that sufficient health care items and services are available during an emergency. The Act also provides that providers may be reimbursed for such items and services and exempted from sanctions for such noncompliance that is absent any determination of fraud or abuse.

Appendix K is used during emergencies to amend states existing 1915(c) waivers. Section 1915(c) waivers are used to develop home and community-based services (HCBS). HCBS waivers offer long-term care services and support in the home or community. Most states including the District of Columbia already have existing 1915(c) waivers except Arizona, Rhode Island, and Vermont. However, Arizona, Rhode Island, and Vermont have applied and been approved for Appendix K waivers under the authority of the 1115 waivers. The Appendix K option is available to states that provide HCBS coverage to beneficiaries under the authority of a section 1115(a) demonstration.

Regulatory exceptions made by CMS

CMS has approved two new demonstrations for New Hampshire and Washington under the 1115(a) waiver. The demonstrations are approved through the date that is 60 days after the Public Health Emergency (“PHE”) described in section 1135(g)(1)(B) of the Act. Under 1115(a), CMS has waived several regulatory requirements during this PHE. Typically, 1115 waivers require the state to prove that the demonstration will be budget neutral. Budget neutral means the demonstration saved the federal government more money than the program cost. Budget neutrality is a significant component of the 1115 demonstration. CMS did not require the state to submit budget neutrality calculations for the approved section 1115(a) demonstrations. Additionally, states are exempt from conducting a state public notice and input process and will receive an expedited decision  for the section 1115(a) demonstration that addresses the COVID-19 public health emergency. Appendix K also excludes the public notice requirements normally applicable under 1915(c).

1135 waivers are only available during emergency periods, and there are no state regulatory requirements to administer the modifications not established in 42 U.S.C. 1320(b)(5). CMS has allowed the following health care items and services to be modified or waived under section 1135: temporarily suspend prior authorization requirements; extend existing authorizations for services through the end of the public health emergency; modify individual timeline requirements for state fair hearings and appeals; allow changes to the provider enrollment requirements to permit states to enroll out-of-state quickly or other new providers to expand access to care; and adjust public notice and submission deadlines for certain COVID-19 focused Medicaid state plan amendments, enabling states to make changes faster and ensure they can be retroactive to the beginning of the emergency. These modifications are in addition to the multiple “blanket waivers” approved by the administration through 1135 that do not require individual state approval.


Current regulation for the waivers

Although CMS waived some states’ requirements for the 1115(a) waivers, states are still required to monitor the approved request. No later than one year after the end of the demonstration addressing the COVID-19 PHE, CMS requires the state to submit a consolidated monitoring and evaluation report to describe the program’s effectiveness in addressing the COVID-19. States will also be required to track expenditures and show cost-effectiveness of those expenditures.

The approved 1135 waivers do not express any reporting requirements or additional compliance requirements in CMS letters to the states. However, under 42 U.S.C. 1320(f) congress is requiring a report from the Secretary evaluating 1135 waivers and future recommendations.