OCTOBER 2019 Medi-Cal Explained FACT SHEET Medicaid Waivers Medicaid Waiver Authorities in California There are three types of waivers that are commonly used in Medicaid — research waivers and demon- Jennifer Ryan, Executive Vice President, Harbage stration waivers (authorized under Section 1115 of Consulting; and Julie Stone, Consultant the SSA) and program waivers (authorized under Section 1915[b] and Section 1915[c] of the same Overview statute). Historically, waivers have been used pri- marily to modify three core tenets of the Medicaid Medicaid was established in 1965, as part of the program: federal Social Security Act (SSA), to provide health coverage for people with low incomes. Medicaid 1.Statewideness: The same benefits must be rules regarding who gets coverage and which ben- provided to enrollees throughout the state. efits are included are determined by SSA require- 2. Comparability: Enrollees are entitled to an ments and implemented by the federal Centers for equal amount, duration, and scope of services. Medicare & Medicaid Services (CMS). 3. Freedom of choice of provider: Enrollees are free to obtain services from any qualified The law also permits CMS to waive certain provider. aspects of the law to enable states to test dif- ferent approaches to program eligibility, benefits, Section 1115 demonstration waivers permit states delivery systems, and financing. This is known as to use federal Medicaid funds in ways that are a waiver. Every state uses waivers for elements of not otherwise allowed under federal rules, as their Medicaid programs, with some states oper- long as the US Secretary of Health and Human ating multiple waivers simultaneously. The wide- Services determines that the initiative is an “exper- spread use of waivers has contributed greatly to imental, pilot, or demonstration project” that Medicaid program variation across states. is “likely to assist in promoting the objectives of the program.”1 Section 1115 waivers are generally Medi-Cal, California’s Medicaid program, provides approved for a five-year period. In recent years, health coverage for Californians with low incomes, including children and their parents, pregnant women, seniors, persons with disabilities, and The California Health Care Foundation is ded- nonelderly adults. Enrollees receive a full range icated to advancing meaningful, measurable of physical and mental health care, substance use improvements in the way the health care delivery disorder treatment, pharmacy, and long-term ser- system provides care to the vices and supports. Medi-Cal is operated by the people of California, particularly California Department of Health Care Services those with low incomes and (DHCS) in partnership with the state’s 58 counties. those whose needs are not well served by the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford. For more information, visit www.chcf.org. California Health Care Foundation www.chcf.org | 1 OCTOBER 2019 Section 1115 waivers have been used to test new HCBS waivers simultaneously, because they are approaches, including Delivery System Reform permitted to limit the number of people served Incentive Payment programs, coverage of residen- through the waiver and/or to target specific popu- tial substance use disorder treatment, and efforts lations and services. There are currently more than to address the social determinants of health. Forty- 290 HCBS waivers in operation nationally.5 nine Section 1115 waivers have been approved for operation in 40 states across the country.2 Waivers in California Section 1915(b) “Freedom of Choice” waivers Medi-Cal 2020: California’s Section 1115 are generally used to require enrollment in man- Waiver aged care delivery systems for certain populations. Since 2005, significant elements of California’s Section 1915(b) waivers are being used more Medi-Cal program have been operated under a frequently, at CMS’s encouragement, since the Section 1115 waiver, beginning with the Medi-Cal publication of the final Medicaid managed care Hospital Uninsured Care 1115 waiver. This waiver regulations in 2016.3 Many states originally used fundamentally altered the state’s hospital payment Section 1115 waiver authority to move enrollees structure and provided significant new federal into managed care, but the new regulations matching funds for coverage of low-income unin- acknowledge that managed care is now the pre- sured people. The success of the 2005 waiver in dominant delivery system in Medicaid, and CMS shoring up the state’s public hospital system, as has indicated that Section 1115 waivers are no well as county and state budgets, led California to longer needed for managed care. The agency has request and receive approval for the nation’s first provided informal guidance that states should use Delivery System Reform Incentive Payment (DSRIP) the more straightforward Section 1915(b) authority program in the subsequent waiver. instead. There are currently 78 Section 1915(b) waivers in operation in 35 states.4 Approved as part of California’s Bridge to Reform waiver in 2010, the DSRIP program continued the Section 1915(c) Home and Community-Based flow of enhanced federal funding into the public Services (HCBS) waivers are designed to provide hospital system and began the discussion around community-based options for people who would moving toward value-based purchasing and efforts otherwise require care in a nursing facility, hospital, to improve the quality and integration of care. The or other institution. States often operate multiple Waiver Types Compared: 1915(b) and 1115 1915(b) Waiver 1115 Waiver What Can Be Statewideness, comparability, and freedom of Statewideness, comparability, and freedom of Waived choice, including mandatory managed care choice (everything in 1915[b]); federal matching enrollment, choice limited to a single managed funds for populations, services, cost sharing, and care plan costs not otherwise matchable under the Medicaid state plan Budget Cost-effectiveness and efficiency (actual Budget neutrality (federal expenditures cannot be Requirements expenditures cannot exceed projected greater with the waiver than without the waiver) expenditures for approval period) Approvals and Two years initially (five years if dual eligibles are Five years initially, with three- or five-year renewals Renewals included) Federal Review Ninety-day clock; if CMS requests additional No required time period information, the clock stops and restarts when the state responds California Health Care Foundation www.chcf.org | 2 OCTOBER 2019 Medi-Cal enrollees with complex health needs.6 Budget Neutrality There are 25 pilots in operation across the state While not set in statute or regulation, a longstanding that are building infrastructure, integrating ser- component of Section 1115 waivers is that they must vice delivery across agencies and providers, be “budget neutral” to the federal government. and delivering a range of wraparound services This means that federal spending under the waiver to enrollees that include care coordination, dis- cannot exceed the level of funding that would have ease management, access to housing supports, been provided to the state without the waiver. respite care, and sobering centers. States have historically been able to use savings ●● ThePublic Hospital Redesign and Incentives generated by one initiative to pay for other initia- in Medi-Cal (PRIME) program is the continua- tives. For example, many states initially used 1115 waiver authority to expand eligibility to additional tion of the DSRIP program in California. PRIME populations using the savings that was generated provides incentive funding for California’s 17 through managed care. The capitation rates devised designated public hospitals and 35 district and for these relatively healthy populations (families and municipal public hospitals to undertake quality children) were assumed to be lower than the cost of improvement and performance measurement providing care through the fee-for-service system. efforts. The hospitals are paid according to The savings that were generated as a result were their performance on a series of metrics related used to finance other program expansions. For two to clinical projects designed to improve care decades, California relied heavily on these savings to delivery. finance the many coverage and financing initiatives it ●● The Drug Medi-Cal Organized Delivery executed under Section 1115 waivers. System (DMC-ODS) provides federal Medicaid However, in 2018, CMS released new guidance indi- matching funds to expand substance use cating that budget neutrality savings from more than disorder treatment benefits to include a full five years ago can no longer be applied in financing 1115 waiver renewals. CMS requires the budget for complement of evidence-based services that the waiver be established based on more recent accord with American Society of Addiction cost data and has nearly eliminated the ability for Medicine (ASAM) levels of care. The services states to carry forward savings accumulated during are delivered through county-based behavioral previous waiver periods. health managed care organizations. To date, In light of this new policy, California’s Department of 30 counties are participating in the waiver pro- Health Care Services is rethinking its approach to the gram, providing access to treatment and pre- structure and financing of the Medi-Cal program. vention services for 93% of the state’s Medi-Cal population. Source: Timothy B. Hill (acting director, CMS) to state Medicaid directors, “Budget Neutrality Policies for ●● Dental Transformation Initiative (DTI) pro- Section 1115(a) Medicaid Demonstration Projects,” vides incentive payments to dental providers to SMD 18-009, August 22, 2018. increase preventive services for children, treat more early childhood caries, and increase con- tinuity of dental care for children. 2010 waiver included a number of other key com- ●● TheGlobal Payment Program (GPP) estab- ponents, such as early adoption of the Medicaid lished a statewide pool of funding by combining expansion to low-income adults without children. a portion of California’s federal disproportionate Many of these 2010 waiver components were share hospital allotment with uncompensated care funding. This funding supports public extended in 2015 with the approval of the Medi-Cal health care system efforts to provide health 2020 waiver. This waiver launched on January 1, care for California’s uninsured population and 2016, and includes many distinct initiatives: to promote the delivery of more cost-effective ●● The Whole Person Care (WPC) Pilots are and higher-value care to the uninsured. county-based initiatives that coordinate primary care, behavioral health, and social services for California Health Care Foundation www.chcf.org | 3 OCTOBER 2019 California’s Section 1915(b) Specialty Mental with HIV/AIDS, and medically fragile and tech- Health Services Waiver nology dependent enrollees: Section 1915(b) of the Social Security Act per- ●● The Multipurpose Senior Services Program mits states to establish mandatory managed care operates in 46 counties and provides enhanced programs or to otherwise limit enrollees’ choice care coordination and purchased services (such of providers. States can also use Section 1915(b) as home modifications). authority to waive statewideness and compara- ●● The Assisted Living waiver operates in 15 bility requirements. These waivers are generally counties. Services are delivered in residential approved for two years with two-year renewal care facilities and public subsidized housing. periods. Section 1915(b) has four subsections that ●● The Home and Community-Based Alternatives specify these permissions for states: waiver serves enrollees living at home and in congregate living settings, providing enhanced 1. Require Medicaid participants to enroll in man- care coordination and additional HCBS services. aged care. ●● Californians with developmental disabilities 2. Designate a “central broker” to assist Medicaid waiver program operates statewide in regional enrollees in choosing a plan. centers, serving enrollees living in community 3. Use savings generated by using more cost- settings and in their homes. effective care to provide additional services. ●● TheHIV/AIDS waiver operates in 30 counties 4. Limit enrollee choice of providers (except in and delivers enhanced care coordination and emergency situations, for those needing long- additional HCBS services in homes. term care, and for family planning services). ●● In-Home Operations (part of the In-Home California’s Medi-Cal Specialty Mental Health Supportive Services program) provides per- Services Section 1915(b)(4) waiver requires sonal care services in homes and congregate enrollees who meet medical necessity criteria living settings. for specialty mental health services to receive ●● Self Determination for Individuals with Devel- those services through their county mental health opmental Disabilities gives participants the plan. California’s current Specialty Mental Health opportunity to manage their community-based Services waiver is approved through June 30, 2020. service mix within an individual budget. DHCS requested a six-month extension of the waiver so its expiration date aligns with the expi- Conclusion ration of the 1115 waiver on December 31, 2020. Waivers have long been a foundation for innova- tion in Medicaid, providing states the freedom to California’s Home and Community-Based extend coverage and benefits beyond mandatory Services Waivers levels and to tailor the rules around who qualifies, Section 1915(c) authorizes states to serve people what services are covered, and how the delivery who would otherwise qualify for institutional care system is designed to meet their needs and priori- in community-based settings. States offer a broad ties. With the expiration of the state’s Medi-Cal 2020 range of HCBS waivers for enrollees with long-term waiver approaching, state officials are undertaking service and support needs, such as meals, non- a renewed approach to delivery system transfor- medical transportation, and home modifications. mation in Medi-Cal, with emphasis on providing Room and board are not included. This waiver intensive care coordination for enrollees with the authority permits states to cap enrollment and most complex care needs, addressing the social retain waiting lists, as long as the programs pass a determinants of health, and advancing integration cost-effectiveness test. of physical, behavioral, and oral health care. This California operates seven Section 1915(c) waivers effort, the California Advancing and Innovating serving seniors, persons with disabilities, people Medi-Cal (CalAIM) initiative, promises to test the boundaries of federal and state Medicaid authority. California Health Care Foundation www.chcf.org | 4 OCTOBER 2019 Endnotes 1. ection 1115 of the Social Security Act. S 2. Medicaid Waiver Tracker: Approved and Pending Section “ 1115 Waivers by State,” KFF, October 9, 2019, www.kff.org. 3. Medicaid and CHIP Managed Care Final Rule,” Centers “ for Medicare & Medicaid Services (CMS), n.d., www. medicaid.gov. 4. State Medicaid Waiver List,” CMS, www.medicaid.gov. “ 5. Waiver List,” CMS. “ 6. ucy Pagel, Carol Backstrom, and Hilary Haycock, Whole L Person Care: A Mid-Point Check-In, California Health Care Foundation, March 2019, www.chcf.org. Medi-Cal Explained is an ongoing series on Medi-Cal for those who are new to the pro- gram, as well as those who need a refresher. To see other publications in this series, visit www.chcf.org/MC-explained. California Health Care Foundation www.chcf.org | 5