Congress must act to advance innovation in Medicaid

Health Affairs Forefront, April 19, 2024

Copyright © 2024 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

Even as state and territory Medicaid programs and their many partners are suitably centered on the process of unwinding pandemic-related continuous eligibility requirements in Medicaid, the Medicaid program continues to be both the bedrock means of providing comprehensive health services to low-income people as well as the central seat of innovation in our health care system around people’s co-occurring health-related social needs. This latter strand of work is no longer aspirational or limited to a small set of vanguard states. Medicaid leaders have spent years building literacy and an evidence base around the opportunity to use Medicaid research and demonstration waivers to improve members’ lives and outcomes, as well as to achieve program savings. Building on this, 54 programs in large and small, red and blue, capitated managed care and managed fee-for-service states and territories have lined up to do this essential work. And state legislators, providers, and advocates are now well cued to opportunities under federal law to use Medicaid as the chassis for these initiatives. But two relative sleeper issues—which are arguably just as significant in their implications for Medicaid members, state/territory programs, and state policy makers as unwinding—are getting in the way.

The first of these is the serious and intractable bottleneck in federal capacity to timely review and approve the large and growing volume of 1115 research and demonstration waiver applications and renewals that are the central means of advancing reform and innovation in Medicaid. The tough reality is that the Center for Medicaid and CHIP Services (CMCS), which has taken many steps to streamline its administrative processes, simply does not have the staff resources to move forward all of the waivers in its pipeline, to say nothing of the many submissions that will likely yield this spring from legislative sessions all across the country.

The second issue is that while Medicaid programs across the country appreciate the significant new portfolio of Medicaid-premised initiatives that is currently emerging from the Center for Medicare and Medicaid Innovation (the Innovation Center), there is no current source of funds, other than federal 90–10 matching funds for information technology (IT) systems expenses, for the up-front costs of launching reform projects.

To remedy this, Congress should:

• designate operational funding for the CMCS sufficient to resolve the unnecessary and unproductive stall in advancing the crucial work of improving access and enabling care delivery and value-based payment; and
• as it has done historically via targeted initiatives and demonstrations, appropriate funds to explicitly support the necessary investments in readiness for innovation, including, but not limited to, systemic data sharing and analytics, workforce development, and member and provider education and engagement.

This year is a bridging year in which Medicaid programs are migrating from the intense, rapid cycle work of serving members in a pandemic to the next stage of scale, scope, and operations. State and territory Medicaid leadership staff and many partners and stakeholders have been focusing on the enormous task of reviewing and renewing the eligibility of each and every person served by the program. This is a necessary priority because of its impacts on coverage for members and implications for migration from Medicaid to other sources of coverage (the Children’s Health Insurance Program [CHIP], Medicare, the Marketplace, employer-sponsored insurance) but also because of the function of rightsizing the program to serve currently eligible people—an effort that will have important impacts on the ultimate “new normal” census in Medicaid as well as state spending on the program.

A striking, underreported strand of work for a critical mass of states and territories is carrying forward reforms related to access, care delivery, and value-based payment. The principal means of enabling that work has been the 1115 research and demonstration waiver, which successive federal administrations have championed as a vehicle for flexibilities in eligibility and enrollment, targeted coverage of new benefits, and investment in health-related social needs (HRSN). No matter what central delivery mechanism, theory of social change, or area of policy focus a state espouses—there is something for every program across the country.

Broad embrace of this authority pathway is evident in the number of waivers that are being proposed by state policy makers across the country and in the huge increase in waiver applications and renewals received by the CMCS. As of this writing, 86 proposals are in the current pipeline, and the CMCS has indicated (in internal communications) that from 2020 to 2022, there has been a 69 percent increase in application requests from Medicaid programs. Many programs are also amending their existing demonstrations to include additional features, which brings more complexity to the review process.

Over and above proposals self-generated by states and territories, Congress has also directed the Centers for Medicare and Medicaid Services (CMS) to use waiver opportunities to advance a number of its policy goals. A non-exclusive, recent example of this is that the SUPPORT Act of 2018 included direction to CMS to issue a letter outlining opportunities for Medicaid agencies to use demonstration waivers to support transitions from incarceration.

The 1115 proposals that are pending with the CMCS reflect new initiatives as well as renewals, and cover a range of topics and strategies, such as:

• extending Medicaid eligibility through such means as covering people for up to 90 days prior to their release from carceral settings and/or covering identified populations on a continuous eligibility basis;
• implementing benefit expansions that have been billboarded by CMS, such as waiver of the Institutions for Mental Disease payment exclusion for substance use disorder coverage and/or the behavioral health and community benefit expansion; and
• addressing health-related social needs through transition- and tenancy-sustaining services, food as medicine initiatives, and braiding of different strands of federal funding, in support of improving the health, job readiness and retention, and economic security of Medicaid members.

Frustratingly, however, the volume of submissions has created a significant bottleneck at the CMCS. While the CMCS has done a lot of very important work to streamline the review processes, create templates for submission, partner with the National Association of Medicaid Directors to convene state/territory cohorts based on the topical focus of proposals, and, in some cases, analogize to previous approvals, the reality is that it simply does not have sufficient funding for the staff resources it needs, in an environment of flat funding for federal agencies, to timely review those waiver submissions. From FY 2019 to FY 2023, congressional appropriations for all of CMS’s program management obligations, inclusive of Medicare, Medicaid, CHIP, and many other programs, held steady at approximately $3.7 billion (note 1*). By report of CMCS, the mean approval time in 2023 for waiver applications is 15.5 months. This is untenable for Medicaid programs for four reasons:

1) Long review times delay state and territory leaders from improving outcomes for members and achieving state and federal savings. While some 1115 proposals undoubtedly will take time to yield improvement in quality metrics and savings, others that are focused on specific HRSN can reasonably be expected to produce improved results in the near term. Two dramatic examples of how long approval timelines for applications submitted by states such as Illinois, Massachusetts, West Virginia, and Utah could directly affect Medicaid enrollees in the near term include proposals that seek to cover:

• Supportive housing services—care management, behavioral health supports, and tenancy-sustaining counseling—that help people with complex, co-occurring medical and behavioral health conditions avoid homelessness and its exacerbating impact on poor health and well-being. There are significant costs and adverse health impacts associated with cycling from unstable housing or homelessness through hospitalization and often short-term placement in skilled nursing facilities, only to be discharged to similarly insecure shelter situations in the community. Supportive housing services help improve housing stability for members and reduce the costs associated with this unwelcome cycle.
• In-reach of Medicaid-covered care management, behavioral health, and substance use disorder services, including medication-assisted treatment, to people in justice settings before they are released to the community. These are important means of immediately intercepting death by overdose right after release—a much-too-frequent failure that occurs when an individual is released without appropriate substance use disorder supports.

2) States need to move forward on these proposals within their budget cycles, which are typically biennial, and maintain momentum with policy makers who typically serve two-year terms. A review period in excess of these cycles can upend previously enacted state-enabling legislation to pursue a waiver as competing budget priorities may emerge and/or new legislators require orientation to and de novo review of the rationales for pursuing the waiver.

3) States need to be able to act on their plans prior to transition of federal administrations. It is highly disruptive to states when a long-pending 1115 proposal must be revisited following transition of administrations, which often result in significant changes in policy predilections and administrative procedures.

4) It impedes one of the central features of the Medicaid program: state authority to tailor their approaches based on local needs. Medicaid is an applied financial and programmatic partnership between CMS and states/territories. Federal law establishes an important floor of protections for members—eligibility categories, mandatory services, procedural rights for members—that are standard across all states. That same enabling law, however, reserves to states substantial autonomy about whether and how to cover optional eligibility categories and benefits. The 1115 waivers are the central vehicle for negotiating the nuts and bolts of state-specific approaches.

Over and above the impediments in the 1115 approval process, states do not have sufficient funding at hand—especially at a time when state tax revenues are down, federal pandemic financial assistance has sunset, and states have many other health and human services and other needs that require state general funds—to underwrite the real, expected up-front costs of innovation. While it is both significant and greatly valued that federal Medicaid funds typically cover 90 percent of IT systems costs, there are other essential requisites to launching 1115 projects that are too often starved of funds. Just one important example of these is funding for the data matching and analytics that supports Medicaid programs in effectively targeting 1115 services to those for whom they will be most helpful, as well as establishing rationales around anticipated cross-sector budget savings (for example, savings on Medicaid spending on acute hospitalizations and nursing home care than can result from covering transition- and tenancy-sustaining services for people who have serious behavioral health conditions and who are unstably housed).

Another example is the outreach and engagement work with both members and providers that will ensure that development of a demonstration waiver is a co-created process that meaningfully takes into account the lived experience and preferences of both those who will receive the services and those who will provide them. Following the sunset of both past Innovation Center initiatives that provided targeted funding, as well as the Financial Alignment Demonstration that focused on individuals who are dually eligible for Medicare and Medicaid, there are limited opportunities for states to use federal investments to cover these costs.

We have many of the factors at hand that will support Medicaid programs in scaling HRSN interventions across the country: an emerging evidence base from the states that led implementation of care coordination and housing initiatives and a critical mass of interested states, supportive members, advocates, and state policy makers. Building on all of the administrative steps detailed above that the CMCS has already taken to improve the process, what is now needed to rapidly move this work forward is targeted operational funding for sufficient federal staff to support a smooth, timely approval and renewal pathway for 1115 waivers and capital to help ensure that those waivers launch in an effective manner. Congress is in a position to resolve both of those barriers.

*Note 1

Specifically, the funding amount for each FY 2019–23 Centers for Medicare and Medicaid Services program management appropriation is $3,669,744,000. See Pub. L. No. 115-245, Pub. L. No. 116-94, Pub. L. No. 116-260, Pub. L. No. 117-103, Pub. L. No. 117-328.