January 23, 2014
The State of Illinois hopes to receive approximately $3.25 billion in new federal Medicaid funding under a proposal to be submitted to the federal government in March.
The estimated amount of new federal funding in the State’s comprehensive waiver proposal was discussed at a General Assembly hearing in Chicago on January 22. Consultants testified that the new funding would be based on State costs of $650 million a year that are not currently reimbursed by the federal government but that would be matched under the plan. Over the five-year life of the waiver, this would generate a total of $3.25 billion in new federal dollars.
The proposed amount of new federal funding could be revised by February 7, when a final version of the waiver application is scheduled to be posted for public comment, according to the testimony before two House committees that oversee human services. A draft version of the application was issued on January 7. The final application will be filed on March 10 with the federal Centers for Medicare and Medicaid Services (CMS) of the U.S. Department of Health and Human Services.
As previously discussed here and here on this blog, Governor Pat Quinn’s office plans to seek the Section 1115 waiver to help transform Illinois’ Medicaid system. The proposed overhaul would accelerate the movement to Medicaid managed care and develop more community-based alternatives to institutional care for the disabled and elderly. Illinois officials have specifically focused on providing supportive housing for people with mental health and substance abuse problems, which has not typically been covered by Medicaid.
Medicaid is a joint federal-state program in which state spending is reimbursed by the federal government; the federal matching rate in Illinois is 50%. The waiver plan would not involve additional State spending and is required to be “budget neutral” to the federal government.
Budget neutrality means that federal spending under the waiver does not exceed projected federal spending without the waiver. Neutrality is calculated over the life of the waiver. States can receive upfront federal funding for investments that are projected to generate savings in future years.
Illinois hopes to receive an estimated $650 million a year in additional federal matching funds based on State expenditures that are not currently reimbursed by the federal government but that contribute to the health of the Medicaid population. These expenditures are known as Costs Not Otherwise Matchable, or CNOMs.
If CMS agrees to reimburse these costs, then State revenues would be freed up for spending to transform the Medicaid program. This spending, in turn, would also be matched by the federal government.
At the Illinois matching rate of 50%, the State would receive reimbursement of $325 million a year for the $650 million of CNOMs. This would free up $325 million of State revenues that could be spent on Medicaid innovations. The $325 million in State spending would also be matched by the federal government. A cycle of State spending and federal reimbursement would generate $325 million in federal funds, for a total of $650 million in additional annual federal support. Over five years, this works out to $3.25 billion in additional federal funds.
Besides the plans involving CNOMs, the State will also seek new federal money based on funding from local governments and healthcare providers. One proposal, for example, involves a new tax on group homes for the developmentally disabled, known as Community Integrated Living Arrangements, or CILAs. The proceeds would generate federal matching funds that would be used to increase Medicaid reimbursement rates for CILAs.
Under the waiver, the State plans to invest an estimated $190 million more a year on services relating to mental health and substance abuse, consultants told lawmakers at the hearing. Roughly $105 million would be used to create integrated healthcare delivery systems focused on the value of care provided rather than the volume of services.
Another $60 million would be used to invest indirectly in stable housing for people with mental health and substance abuse problems. CMS recently rejected a proposal by New York State to finance rental subsidies through a Section 1115 waiver. However, Illinois hopes to win federal approval for bonus payments to programs that successfully use supportive housing for high-risk individuals.
After the waiver application is filed, negotiations with federal officials are expected to take six months to a year.