While Congress continues to consider repeal and replacement of the Affordable Care Act (ACA) as well as fundamental changes to the structure and funding of the Medicaid program, states and the Administration may achieve major changes to Medicaid through the use of Section 1115 Medicaid waivers. Section 1115 Medicaid demonstration waivers provide states with an avenue to test new approaches that further the objectives of the Medicaid program in ways that differ from what states can do under current law.  On March 14, 2017, the Centers for Medicare and Medicaid Services (CMS) sent a letter to state governors that signaled a willingness to use Section 1115 authority to “support innovative approaches to increase employment and community engagement” and “align Medicaid and private insurance policies for non-disabled adults.”  In April, 2017, Maine and Wisconsin released for public comment at the state level proposed waivers that include many of these provisions.

Unlike previous waivers that encompass the ACA’s Medicaid expansion, Wisconsin and Maine are seeking waiver authority to make significant changes to Medicaid that would affect non-expansion Medicaid populations. The proposals seek to impose welfare-like restrictions and make other changes to eligibility and enrollment, premiums and cost-sharing, and benefits to traditional populations that are not allowed under current law.  Maine’s changes would affect traditional Medicaid adults, such as low-income parents (up to 105% of the federal poverty level, FPL, $20,420/year for a family of 3 in 2017), former foster care youth, those receiving Transitional Medical Assistance, and people with breast/cervical cancer or HIV up to 250% FPL ($30,050/year for an individual in 2017).  Wisconsin’s changes would affect childless adults up to 100% FPL ($12,060/year for an individual in 2017), who are covered under an existing waiver at the state’s regular federal matching rate, rather than through the ACA’s Medicaid expansion.

Wisconsin and Maine’s proposals include provisions that have not been approved in any state (such as work requirements, drug testing, and time limits). Previously, CMS had not approved state waiver requests to require that Medicaid beneficiaries work as a condition of eligibility, on the basis that such a provision would not further the program’s purposes of promoting health coverage and access. Maine and Wisconsin’s waiver proposals also include other provisions that have not been approved to date including drug screening and testing (WI), premiums higher than 2% of income for some beneficiaries (ME), and eligibility time limits (both states).

A number of provisions have never been approved for traditional, non-expansion populations (such as lock-outs for failure to pay premiums).  Some policies, such as authority to impose premiums (as well as premium reductions for beneficiaries who participate in healthy behavior programs), eliminate non-emergency medical transportation, and eliminate retroactive eligibility, have been approved in some Section 1115 Medicaid expansion waiver states. Indiana also has Section 1916 (f) waiver authority to test graduated copayments of $25 for non-emergency use of the emergency room with a control group. However, no Section 1115 waivers approved to date for any Medicaid population include premiums as a condition of eligibility or coverage lock-outs for non-payment for those under 100% FPL.

Several provisions included in Maine and Wisconsin’s proposals are being tested and evaluated in other states’ waivers, with preliminary data and evidence of negative consequences for beneficiaries and administrative costs and complexities for states, health plans, and providers.  Available data about healthy behavior programs in Iowa, Michigan, and Indiana suggest that complicated provisions require extensive administrative resources and beneficiary education to implement.   Additionally, Indiana’s health accounts, coverage lock-out for premium non-payment, and requirement that individuals pay a premium before coverage starts result in some eligible individuals not accessing or losing coverage.  A substantial body of research cites access to care barriers created by premiums and cost-sharing.  Some conservative policymakers contend that work requirements are ineffective in the health care context, while others contend that such requirements may be ineffective over the long-term in the TANF program on which the proposals are modeled.  An assessment of state drug testing programs in TANF found high administrative costs with few drug users identified.

Both states’ waiver proposals estimate less coverage and higher costs as a result of the waivers.  Under its waiver proposal, Wisconsin projects that enrollment will decrease from 150,050 beneficiaries in CY 2016 to 146,407 in CY 2018, while costs will increase from $825 million in CY 2016 to over $1 billion in CY 2018. Wisconsin notes that its baseline costs will be adjusted to account for program elements such as the financial impact of collecting premiums and higher emergency department copays and time-limited eligibility, which may include costs related to job training.  Maine anticipates that its proposed waiver would cover 56,000 fewer eligible member months but with an increase in per member per month costs from $790 to $815, comparing the “without waiver” estimates to the “with waiver estimates” in the fifth year of the waiver. Maine estimates that the number of covered beneficiaries would decline regardless of waiver implementation but that the decline “may slightly increase over the short-term” due to the waiver provisions. Maine also estimates that costs will increase because the “able-bodied” adults expected to lose eligibility under the waiver have lower costs compared to other coverage groups.  Under long-standing policy, CMS has required Section 1115 waivers to be budget neutral to the federal government, meaning that federal costs under the waiver should not exceed what they would have been absent the waiver.

Review of these waiver proposals could be on a fast timeline.  Wisconsin seeks to amend an existing waiver (with some proposed changes required by state law), while Maine is requesting a new waiver. Wisconsin’s proposal is open for state-level public comment through May 19, 2017, while Maine’s proposal is open for state-level public comment through May 25, 2017. Wisconsin expects to submit its amendment request to CMS on May 26, 2017 (Maine did not provide an estimated submission date). If approved by CMS, Maine estimates it would be ready for implementation six months after receiving approval, while Wisconsin would implement no sooner than one year later. Key proposed waiver provisions in each state are compared in Table 1 below, with more detail about each state’s proposal provided in the Appendix.

Population(s) Affected Traditional adults (parents up to 105% FPL, former foster care youth, those receiving Transitional Medical Assistance, those with breast/cervical cancer, and those in the HIV waiver) Adults without dependent children from 0-100% FPLi
Eligibility and Enrollment
Condition Coverage Start on Premium Payment X
Waive Retroactive Eligibility X
Asset Test for Poverty-Related Eligibility Pathways X
Eliminate Hospital Presumptive Eligibility X
Work Requirement X X
Drug Screening and Testing X
Time Limit on Coverage X X
Premiums and Cost-Sharing
Premiums with Lock-Out for Non-Payment X

(Some premiums > 2% income; those with HIV excluded from premium requirements)

Healthy Behavior Incentives X
Co-payments Above Statutory Limits X X
Missed Appointment Charges X
Waive Required Benefits (non-emergency medical transportation) X

NOTES: i In 2014, Wisconsin implemented a new Section 1115 waiver covering childless adults ages 19 to 64 with income up to 100% FPL ($12,060 for an individual in 2017); those above 100% FPL are covered in the Marketplace. (Wisconsin is the only state opting to cover childless adults without accessing ACA enhanced matching funds.)

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Proposed Medicaid Section 1115 Waivers in Maine and Wisconsin