State 1115 Proposals to Reduce Medicaid Eligibility: Assessing Their Scope and Projected Impact
In a marked contrast to the Clinton, Bush, and Obama administrations, which encouraged states to use Section 1115 demonstrations to expand Medicaid coverage for low-income adults, the Trump administration has signaled its desire to move in the opposite direction by using 1115 — which allows the U.S. Department of Health and Human Services (HHS) and states to test innovations in Medicaid and other public welfare programs without formal legislative action — to shrink eligibility and enrollment, in expansion and nonexpansion states alike. Guidance released today by the Centers for Medicare and Medicaid Services could speed up the approval of such demonstrations.
The administration likely will integrate 1115 Medicaid eligibility reduction demonstrations as part of its anticipated initiative to reduce the scope of means-tested public assistance. Some demonstrations could take direct aim at eligibility by adding conditions of coverage such as work, monthly premium obligations even for the poorest beneficiaries, time limits on how long beneficiaries can be enrolled (much like cash welfare), or the exclusion of people with addiction conditions. The administration also could allow states to replace Medicaid’s core safety net feature — enrollment when health care is needed — with a single annual open enrollment period with few exceptions, the way that commercial insurance operates.
As of December 2017, 10 states — Arizona, Arkansas, Indiana, Kansas, Kentucky, Maine, Mississippi, New Hampshire, Utah, and Wisconsin — have applications pending that provide insight into this new generation of Medicaid enrollment reduction demonstrations. (An 11th state, Massachusetts, has proposed to somewhat restructure the 1115 demonstration that undergirds its 2006 health reform law, which makes its proposal quite unique.)
The key elements of the 10 states that seek to use 1115 to reduce enrollment are summarized in the table below. As part of the 1115 approval process, states are expected to provide impact estimates; to date only five have done so as part of their proposal submission, and their impact estimates are displayed in the column graphs.
What Is Retroactive Eligibility Rollback?
The Centers for Medicare and Medicaid Services recently approved Iowa’s proposal to eliminate retroactive eligibility, which allows coverage to begin up to three months prior to the month of application. A longstanding program feature, retroactive eligibility plays a crucial role for people facing sudden catastrophic illness or injury and for Medicare beneficiaries with enormous nursing home costs. Iowa’s waiver, which applies not just to people newly eligible through Medicaid expansion under the ACA but to most traditional beneficiaries as well, is expected to cause 3,300 people in Iowa to lose eligibility while reducing Medicaid spending by nearly $37 million. Especially affected will be safety-net hospitals; a recent Commonwealth study estimates that retroactive eligibility accounts for 5 percent of safety-net hospital revenue. Waivers of retroactive eligibility are not unprecedented, but they have generally excluded high-need populations like seniors and have, unlike Iowa, been granted in conjunction with coverage improvements.
As the table shows, both expansion and nonexpansion states have submitted proposals. Certain types of enrollment reduction strategies figure prominently in these proposals: work requirements, lock-out sanctions for failure to comply with information requirements, time limits, and curbs on retroactive eligibility (see box) and presumptive (i.e., temporary) eligibility. Of the five states that have submitted formal impact estimates, the projected impact is considerable; Kentucky estimates that as many as 15 percent of Medicaid beneficiaries (both traditional and expansion populations) could be affected. Despite introducing work requirements and time limits, Kansas states that its proposal will have no enrollment impact.
These proposals raise significant questions, such as whether a proposal that lacks impact estimates or that claims to have no impact satisfies 1115 requirements. Federal regulations governing 1115 demonstrations would seem to say no. Another, perhaps deeper, question is whether proposals that purport to impose criteria that will result either in the loss of health insurance or the future denial of benefits even fall within the scope of authority 1115 confers on the HHS Secretary. The purpose of 1115 is to enable the Secretary to undertake demonstrations that promote the objectives of programs that are the subject of the demonstration. In the case of Medicaid, its objective, as stated in law, is to furnish medical assistance to people who need it. In any demonstration, it is likely that potential gains are weighed against risks. In these pending demonstrations, however, the scale appears lopsided, with only downsides for the poor. How, exactly, do proposals to deny or end health insurance advance Medicaid’s basic program objective? While achieving greater efficiencies are laudable and necessary aims of any program, especially one as large as Medicaid, simply culling the rolls of needy residents should not be confused with efficiency; indeed, such a result runs counter to the program’s most basic purpose of providing care to those who need it.