Medicaid and SCHIP State Plan & Waiver Authority

Medicaid and SCHIPState Plan & Waiver Authority Stephanie Anthony, Deputy Medicaid DirectorMassachusetts Office of Medicaid January 2008

Table of Contents • What is Medicaid? • What is SCHIP? • Medicaid and SCHIP State Plan • Medicaid and SCHIP Waivers • Recap and Outlook for Future

What is Medicaid? • Medicaid or Medical Assistance • Title XIX of the Social Security Act (codified at 42 USC 1396) • Health benefit entitlement program created by Congress in 1965 for low-income children, families, seniors and people with disabilities • Jointly funded by the federal government and the states • Federal reimbursement for program expenditures is called Federal Financial Participation (FFP) • Federal reimbursement matching rate is called Federal Medical Assistance Percentage (FMAP) • 2008 FMAPs range from 50.00% to 75.84% and depend on the average income in a state compared to the national average (FMAP is 50% in MA) • Administrative expenditures are matched at 50% for all states • Enhanced match for certain expenditures (i.e., systems development) • Called different names depending on the state • With SCHIP, called MassHealth in Massachusetts

What is Medicaid? (2) • There are mandatory (e.g., physician, hospital, nursing facility, lab/x-ray) and optional (e.g., dental, prescription drugs, occupational therapy, and home and community-based long-term care services) Medicaid services • There are mandatory and optional Medicaid population categories (i.e., children, parents, pregnant women, and disabled individuals with income above the mandatory levels) • Individuals must be categorically and financially eligible for Medicaid to receive services • Federal Medicaid statute and regulations set “floor” of what states must do regarding administration, eligibility, benefits, delivery systems, cost-sharing, and information systems • States have flexibility to design their programs to fit their needs and to do more

What is SCHIP? • State Children’s Health Insurance Program (SCHIP) • Title XXI of the Social Security Act (codified at 42 USC 1397) • Created by Congress in 1997 for “targeted low-income uninsured children” (i.e., children in families with income too high to qualify for Medicaid but too low to afford employer/private insurance) • Jointly funded by the federal government and the states • SCHIP expenditures are eligible for federal financial participation (FFP) • Enhanced federal matching rate (enhanced FMAP) • Enhanced FMAPs range from 65.00% to 83.09%, depending on a state’s Medicaid FMAP (is 30% higher than Medicaid FMAP) • Enhanced FMAP is 65% in MA • Called different names depending on the state • With Medicaid, called MassHealth in Massachusetts

What is SCHIP? (2) • Authorized by Congress for 10 years with $40 billion (FFY 1998 – FFY 2007) • SCHIP is a block grant program, not an entitlement program • CMS distributes annual federal SCHIP allotment to each state • Allotment amounts are based on the number of uninsured children in each state and other factors • Allotments generally are available for 3 years and any unspent SCHIP allotments are pooled and redistributed to states that have used up their SCHIP allotment or have a “shortfall” • In recent years, states have been able to retain some of their unspent SCHIP allotment after 3 years and the remainder is redistributed

What is SCHIP? (3) • Can cover children through Medicaid expansion, separate state child health program or combination of both • Different requirements for coverage and cost-sharing depending on how state structures program, but generally more state flexibility than Medicaid • Debate in 2007 to reauthorize SCHIP resulted in stalemate • Major issues: expansion of program to higher income levels and funding for the expansion • Continuing resolutions extended SCHIP through March 2009 with sufficient funding for all states • Congress will need to revisit full SCHIP reauthorization

The Medicaid and SCHIP State Plan • Federal authority to operate Medicaid or SCHIP comes from the Medicaid or SCHIP “State plan” • State-specific written document (over 800 pages in MA) • Represents the state’s description of how it operates its Medicaid or SCHIP program in compliance with Title XIX or Title XXI rules, regarding: • Program administration • Eligibility criteria • Services covered • Delivery system • Provider reimbursement • Submitted to CMS by the state and approved by CMS • Approved State plan is necessary for state to receive federal reimbursement for program expenditures

State Plan Amendments • The State plan is a “living” document that constantly changes as state or federal Medicaid policies change • Represents State plan provisions or pages approved by CMS since the inception of the state’s program • State must submit a State plan amendment (SPA) to CMS if it wants to propose a change to its State plan provisions • SPA is prepared by the state and typically includes: • Cover letter to CMS explaining requested change • Transmittal Form (called Form CMS-179) that includes a federal fiscal impact statement • Proposed revisions to a particular State plan page, pages or section • SPA must be submitted any time a change is needed, but the requested change cannot be effective earlier than the 1st day of the calendar quarter in which the SPA was submitted • Certain changes require public notice; in these cases, the SPA cannot be effective prior to publication of the public notice

State Plan Amendments (2) • Regulatory and sub-regulatory timeframes and processes guide the SPA submission, review, negotiation and approval or disapproval process • SPA is considered approved unless, within 90 days of receipt of the SPA, CMS disapproves the SPA or sends the state a request for additional information (RAI) • If CMS sends the state an RAI, the 90-day period for CMS action (approval or disapproval) begins when CMS receives the requested information • Per CMS practice, a state can withdraw its RAI response to “stop the clock” on CMS review to give the state and CMS more time to negotiate outstanding issues; the CMS review clock will start again once the state re-submits the RAI response • An approved SPA supersedes prior state plan language on that subject • Per CMS policy, FFP is not available until CMS approves the SPA; once approved, FFP is available retroactive to the effective date of the SPA

State Plan Amendments (3)Example in MA • MassHealth updates its hospital provider rates and rate calculation methodologies effective October 1, 2007 (the start of the hospital rate year) • State staff prepare a SPA and submit it to CMS on December 29, 2007 (no later than December 31), requesting an effective date of October 1, 2007 for the new rates and methodologies • CMS receives the SPA and has until March 28, 2008 to disapprove the SPA or request additional information (if silent, the SPA is deemed approved) • CMS sends the state an RAI on March 27, 2008 • State has 90 days to send CMS a written response to the RAI…so must submit the response by June 23, 2008 • CMS reviews the response and can ask additional questions (which re-starts the review clock) or can approve/disapprove SPA • CMS has another 90 days from receipt of the RAI response to act • Once approved, FFP for the new hospital rates using the new rate methodologies is effective October 1, 2007 Note: An approved SPA provides only federal authority and reimbursement for the change; state may need to make changes to state regulation, rates, etc., to implement the change

Medicaid and SCHIP Waivers • Social Security Act provides authority for states to seek permission from CMS to “waive” certain provisions of Title XIX (Medicaid) or Title XXI (SCHIP) to operate their programs in a way that differs from what the traditional Title XIX and Title XXI rules allow • States can seek waivers from specific provisions of Title XIX or Title XXI to test specific ideas or approaches or can seek broad waivers from multiple provisions to implement comprehensive reform to the program • States can only receive federal reimbursement for services provided using the new approach if CMS approves the Waiver proposal • Three Waivers to highlight: • Section 1115 of the SSA: Research and Demonstration Waiver • Section 1915(b) of the SSA: Freedom of Choice Waiver • Section 1915(c) of the SSA: Home and Community-Based Services Waiver

1115 Waivers • Section 1115 provides the Secretary of the federal HHS with broad authority to authorize experimental, pilot or demonstration projects designed to test policy innovations likely to promote the objectives of Title XIX • States can apply for 1115 Waivers to: • Expand eligibility to populations not authorized by Title XIX or Title XXI (called “expansion populations”) • Cover a service not authorized by Title XIX or Title XXI • Expand the use of managed care programs • Test new approaches in small geographic regions (versus statewide)

1115 Waivers (2) • Federal rules provide some guidance around timeframes and processes for Waivers, but much is left to the discretion of the Secretary • Original waiver requests generally approved for 5 years • Initial extension requests approved for three years • Second extension requests approved for three years • Subsequent extension requests: duration can be negotiated with CMS • CMS requires the state to conduct or oversee a comprehensive evaluation of the 1115 Waiver program • Over 20 states operate 1115 Waiver programs • More recently, many more states using 1115 Waivers for comprehensive health care reform and universal coverage initiatives

1115 Waivers (3) • 1115 Waivers must be “budget neutral” to the federal government • State must demonstrate, through detailed calculation and negotiations with CMS, that federal Medicaid expenditures with the Waiver program will not exceed what the federal Medicaid expenditures would have been in the absence of the Waiver program • Budget neutrality test is measured cumulatively over the duration of the Waiver • If a state is at risk of exceeding the budget neutrality limit, it may have to take corrective action to control Waiver spending • Approved Waiver provisions, including budget neutrality calculation, are documented in “Special terms and conditions” or STCs (comparable to the State plan) • Like State plans, Waivers must be amended to make changes to eligibility, enrollment processes, benefits, cost-sharing, delivery systems, budget neutrality, etc • Unlike State plan amendments, the Waiver amendment process is guided by the Waiver’s STCs, not regulation

1115 Waivers (4)Example in MA • MassHealth Waiver • Originally approved: SFYs 1998-2002 • First extension: SFYs 2003-2005 • Second extension: SFYs 2006-2008 • Extension request pending with CMS: SFYs 2009-2011 • Primary Objectives of MassHealth Waiver • Expand coverage to populations not authorized under Title XIX • Streamline eligibility determination process to ensure efficiency and accuracy • Eliminated asset test and face-to-face interviews, shortened application • Maximize employer-sponsored insurance • Provide premium assistance toward private or employer-sponsored health insurance coverage where cost-effective • Improve quality through managed care • Mandatory managed care for some populations; voluntary managed for others (some exempt from managed care) • Choice of Medicaid Managed Care Organizations or state-run Primary Care Clinician (PCC) Plan

1115 Waiver AmendmentsExample in MA • MassHealth Waiver amended numerous times since 1997, e.g.,: • To expand coverage to individuals with HIV/AIDs and to adolescents aging out of foster care • To implement enrollment caps on several expansion populations • Major Waiver amendment in 2006 to incorporate provisions of MA’s comprehensive health care reform coverage initiative • Health care reform law passed in April 2006 providing universal coverage to all state residents through MassHealth expansion and other mechanisms • MA submitted a Waiver amendment in May 2006 to incorporate HCR provisions • Expand MassHealth Insurance Partnership program from 200% to 300% FPL • Raise MassHealth Essential and Family Assistance enrollment caps • Create Commonwealth Care program (premium assistance for low-income state residents below 300% FPL) • Simultaneous SCHIP State plan amendment to expand coverage to low-income children from 200% to 300% FPL

1915(b) and 1915(c) Waivers • 1915(b) Waivers: Enable states to implement managed care delivery systems or limit an individual’s choice of provider • MassHealth had a 1915(b) Waiver prior to its 1115 Waiver, but it was subsumed into the 1115 Waiver in 1997 • Balanced Budget Act of 1997 minimized the need for 1915(b) Waivers by authorizing mandatory managed care for certain populations without the need for a Waiver • 1915(c) Waivers: Enable states to offer long-term care support services in non-institutional settings (home and community-based settings) to certain populations eligible for Medicaid under the State plan • Cost neutrality test similar to 1115 Waiver budget neutrality test • MA has 4: Frail Elder, Traumatic Brain Injury, Mental Retardation (MR)/Developmentally Disabled (DD), and certain children with Autism • Some states have combined the authority of these two waivers to integrate managed care and long-term care to create a streamlined continuum of care

Recap and Outlook for Future • Using optional State plan and Waiver authority, states have significant flexibility to design their programs to best meet their needs • Can define eligibility, covered services, delivery systems, cost-sharing, etc… • A state must submit a State plan amendment or Waiver amendment to CMS to make subsequent changes to these features of the program – federal rules and policies guide these processes However… • Federal budget deficit has contributed to a tightening of federal Medicaid and SCHIP rules or policies, particularly around: • Permissible source of funding for the “non-federal” or state share of program expenditures • Medicaid services that are eligible for FFP (e.g., targeted case management, outpatient hospital services, school-based services, rehabilitation services) • Populations that are eligible for SCHIP • How will a new federal Administration view these programs in 2009?

Medicaid and SCHIP State Plan & Waiver Authority