November 14, 2013
The State of Illinois plans to apply for a sweeping federal waiver to overhaul its Medicaid program, according to a draft concept paper issued on November 7, 2013.
The waiver proposal, called Path to Transformation, covers all of the State’s Medicaid spending and all of the populations that are currently eligible or may be eligible under the federal Affordable Care Act. It would allow Illinois to test new approaches that do not conform to federal program rules and to receive federal funding to implement innovations—provided that the State can identify offsetting federal savings.
The State plans to use the waiver to increase home and community-based services for the disabled, including Medicaid recipients with mental health and substance abuse problems. The waiver would also assist with the State’s planned expansion of Medicaid managed care and the continued development of managed care at Cook County’s public health system.
The 15-page draft concept paper does not include financial details of the proposal, which have not yet been completed. The State plans to submit an application to the federal Centers for Medicare and Medicaid Services (CMS) of the U.S. Department of Health and Human Services (HHS) by February 15, 2014, according to a timeline on the Illinois Health Care Reform website. In the meantime, the State is holding meetings for stakeholders, starting with a kick-off meeting on October 18 and a second meeting on November 14.
The waiver proposal builds on the Illinois State Health Care Innovation Plan, a six-month project funded by a grant from CMS. The grants are designed to encourage states to develop models that can deliver better healthcare and a healthier population at lower costs.
As explained in detail here, Medicaid is a joint federal-state program that finances healthcare services for certain categories of low-income people, including children, pregnant women, parents, the elderly and the disabled. Beginning in January 2014, the Affordable Care Act (ACA) gives states the option of providing Medicaid to the major population group that generally has not been covered: non-elderly, non-disabled adults without dependent children. In July 2013 Illinois enacted legislation authorizing participation in the Medicaid expansion.
State Medicaid spending is reimbursed by the federal government at a rate based on state per capita income; the federal matching rate in Illinois is 50%. In exchange for federal funding, states are required to follow certain federal standards about who is covered and what services are provided. Waivers provide more flexibility for states to shape their Medicaid programs.
The proposed Path to Transformation is a Section 1115 waiver. Section 1115 of the Social Security Act allows HHS to waive certain Medicaid requirements for experimental, pilot or demonstration projects that promote the objectives of the program. Such demonstration waivers are generally approved for an initial five-year period. In October 2012, the Cook County Health and Hospitals System won approval for a Section 1115 waiver that expires in December 2013 and permits early Medicaid coverage for those who otherwise would not have been eligible until January 2014 under the ACA.
Section 1115 waivers do not change the federal matching payment structure. Under administrative policy, these waivers are 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, meaning that states can receive advance federal funding for investments that are projected to generate savings in future years.
Most Section 1115 waivers use per capita spending caps based on the state’s historical cost of serving the categories of people covered under the waiver. Spending limits are based on a benchmark cost growth rate, which is the lesser of the state’s historical growth or projections of nationwide growth. A recent report by the Government Accountability Office raised questions about whether the waivers expose the federal government to additional costs.
The Illinois proposal would be based on a national rate of cost growth and would claim savings relating to planned and previously implemented managed care programs and to waiver-related changes. Based on these savings, the State would request federal reimbursement for programs that are currently funded only by the State. The current list of such Designated State Health Programs (DSHPs) includes substance abuse services at the Department of Human Services, targeted prevention and screening programs at the Department of Public Health and early intervention and treatment services at the State Board of Education for children with behavioral disorders.
The State would also seek federal matching funds for a funding pool called a Delivery System Reform Pool (DSRIP) to be used by the Cook County Health System and the University of Illinois Hospital and Health Sciences System. Allocation of the funds would be based on meeting milestones relating to integrated care delivery and improved patient outcomes. In other states, including California, the non-state share of funding for DSRIPs has come from local governments and public hospitals.
Illinois is also considering the creation of several other similar funding pools. One such funding pool could encourage providers of behavioral health services to create more supportive housing. Other pools could spur private hospitals and nursing homes to focus on moving patients from institutions to community-based care.
According to some participants at the kick-off meeting in October, Illinois officials pointed to Oregon’s 1115 waiver as a model. Oregon’s Medicaid demonstration, approved by CMS in July 2012, was designed to establish coordinated care organizations as the delivery system for Medicaid in that state. The waiver calls for federal investment of approximately $1.9 billion over five years through DSHPs. Oregon agreed to reduce per capita cost increases by two percentage points from the national trend by the end of the second year of the waiver.
Unlike waivers in Vermont and Rhode Island, Illinois’ proposal does not involve a global cap on federal Medicaid spending. Global caps place an overall limit on federal funds that will be spent on waiver services. In addition to a per capita spending cap, a global cap also sets a limit on projected enrollment.
The Illinois proposal would combine nine existing waivers that are used to provide home and community-based care. These are 1915(c) waivers, which permit a state to furnish an array of home and community-based services to help Medicaid recipients avoid institutionalization. Illinois’ 1915(c) waivers provide services based on an individual’s primary disability rather than a client’s needs and involve three separate State departments and numerous divisions within departments. By consolidating these nine programs, the State’s 1115 waiver plan is intended to improve care for people with multiple disabilities and medical conditions.