Understanding Medicaid Home and Community Services: A Primer, 2010 Edition. Medicaid Authorities


Medicaid authorities for MLTC have evolved considerably since the early programs of the 1980s and 1990s. ALTCS and the first generations of Minnesota’s Senior Health Options and Wisconsin’s Partnership Program all operated under §1115 waivers, which are intended to promote research and demonstration initiatives that test new ideas. Since then, additional statutory authorities have been enacted, and CMS has helped states to assess whether or not they need the §1115 authority to achieve their goals. The result has been a marked movement away from §1115 waivers.10

Medicaid authorities that states may consider alone or in combination are described below and their key features are summarized in Table 8-1 (on the next page). The authority or combination of authorities that a state selects depends primarily on the program features desired. Ideally, the choices made will enable the desired program features with the least administrative burden. The major program features are listed in the first column of Table 8-1 and are discussed below.

  • Managed care authority is used to pay a limited number of contractors to serve a population on a capitated basis. The contractor is responsible for a group of services, which it offers through a network of providers. States may select contractors through a competitive process, or may simply set the participation requirements and contract with any organization meeting the requirements.

  • Selective contracting allows the state to limit the number of participating providers. This feature differs from the normal practice in Medicaid, in which provider qualifications are set by the state and all providers who meet them may participate as Medicaid providers.

  • Mandatory enrollment into Medicaid managed long-term care requires a §1115 or a §1915(b) waiver. Mandatory enrollment is also possible under the§1932(a) and §1937 authorities, except for dually eligible persons. Because persons dually eligible are at risk for needing long-term care, exempting them from mandatory enrollment makes these authories impractical for mandatory MLTC. Regardless of the authority used, dually eligible persons may never be subject to mandatory enrollment for Medicare services.

  • HCBS beyond the State Plan, institutional level-of-care requirement, and waiver of comparability. Traditionally, states have provided a wide range of home and community services--including those not available under the Medicaid State Plan, such as environmental modifications--on a fee-for-service basis in a §1915(c) waiver program. States can offer a capitated MLTC program using a §1915(c) waiver in com-bination with a managed care authority. However, the program will be limited to individuals who meet the state’s institutional level-of-care criteria.

    With the passage of the Deficit Reduction Act of 2005 (DRA-2005)--as amended by the Patient Protection and Affordable Care Act of 2010 (hereafter called the Affordable Care Act)--states may now offer HCBS under their State Plan through the §1915(i) authority, freeing them from the requirement to use institutional level-of-care criteria--unless the state uses the 300 percent of SSI income eligibility criteria. (See Chapter 4 for more information about this authority.)

  • Limit geographically. Except for the §1915(i) authority, all of the authorities listed in Table 8-1 allow a state to limit a program geographically, referred to as waiving Medicaid’s “statewideness” requirement. States often do so to gradually phase-in a program or because a limited supply of MLTC contractors in rural areas makes it impractical to offer a program except in highly populated areas.

  • HCBS financial eligibility. In general, a state may not deviate from the financial eligibility criteria included in its State Plan, with the exception of institutional financial eligibility criteria, an option states may elect to use for institutional services and for §1915(c) waivers. Institutional financial eligibility criteria include (1) the special income rule, which allows states to expand financial eligibility to cover individuals in institutions (and §1915(c) waivers) who have incomes up to 300 percent of the Federal SSI benefit level; (2) the application of spousal impoverishment rules; (3) non-deeming of parental income for dependent children living at home; and (4) various exclusions from countable income (such as a home maintenance allowance) in the determination of financial eligibility for home and community services.

    This option to use 300 percent of the Federal SSI benefit to determine financial eligibility is also possible with a §1115 waiver, in a PACE program under §1934, and with the §1915(i) authority. However, if a state uses the special income rule in its §1915(i) program, then participants must meet institutional level-of-care criteria. It is not possible to use institu-tional financial eligibility criteria under a §1915(b) waiver or under the §1915(a) statutory authority alone.

  • Budget and cost requirements are important when selecting an authority for implementing an MLTC program, especially a §1115 waiver. The test for a §1115 waiver demonstration program is that it be budget neutral,which means that the total costs of the program can not exceed what they would have been under the state’s regular Medicaid program. Because the state needs to stay within a total expenditure cap, if enrollment is greater than projected, the state is at risk for any additional costs. A state may manage this risk by capping enrollment, but may not want to do so if the policy objective is to expand coverage.11

    Section 1915(b) waivers require cost effectiveness, which applies to the average per-person costs, which may not exceed the average per person costs of the comparable fee-for-service group. These costs must be calculated in an actuarially sound manner, based on actual expenditures in a base year. A state is at risk if average per person costs exceed fee-for-service costs, but not for unanticipated enrollment of additional persons.12

    Section 1915(c) waivers require cost neutrality, which means the average per person cost for waiver services may be no greater than the average cost of the institutional services that the waiver services are an alternative to, determined on a per capita basis or in the aggregate. The budget requirement for PACE sites under §1934 is similar to that for §1915(c). It requires that the cost of PACE services must be less than the upper payment limit--defined as the average amount that would have been spent on a comparable population in fee-for-service arangements.13 Finally, if proposing a benchmark plan under §1937, a state must demonstrate that the proposed plan is actuarially equivalent to the selected benchmark.

  • Renewal requirements. When determining which authority to use, states may want to consider the associated administrative burdens of each option. A clear advantage of using the §1932(a) and §1934 authorities is that once approved, they become a permanent feature of the state’s Medicaid program unless subsequently altered by the state. Section 1915(b) waivers are approved for 2-year periods and may be renewed for up to 2 years. Section 1915(c) waivers are approved initially for a 3-year period with a 5-year renewal period. Section 1115 demonstration programs are initially approved for a 5-year period and can be renewed for a 3-year period. Section 1915(i) benefits that include targeted populations can only be approved for a 5-year period, with the option to renew for additional 5-year periods.

    Under a new provision of the Affordable Care Act, theSecretary of HHS may allow waiver programs for individuals who are dually eligible to be approved for an initial period of up to 5 years and renewed for up to 5 years, at the State’s request.14 CMS will be issuing guidance on this provision in the near future.

The features a state wishes to include in its MLTC program should drive the state’s decision about what specific authorities to use. In general, a state wants to achieve the greatest number of desired features with the least administrative burden. A summary of each authority follows.

TABLE 8-1. Features of Medicaid Authorities That May Be Employed in Managed Long-Term Care Programs
Features Waivers Statutory Authority
  §1115     §1915(b)     §1915(c)     §1915(a)     §1915(i)  
Managed care X X   X   X PACE model only
Selective contracting allowed X X       X X
Mandatory enrollment X X       Yes, but not for dually eligible persons  
Offer HCBS beyond State Plan X   X   X   X
Institutional level-of-care requirement     X   Only if state uses the 300% of SSI income rule   X
Waive comparability X X X X X X X
Limit geographically X X X X   X X
Expand HCBS financial eligibility X   X   X   X
Budget and cost requirements Budget neutral Cost effective Cost neutral       Less than upper payment level
Includes Medicare             X
State Plan amendment required         X X X
Renewal requirement Usually every 5 years 2 years 5 years None _____1 None None
ACA = The Affordable Care Act; BBA = Balanced Budget Act.
  1. If a state’s §1915(i) program targets a specific population, the State Plan amendment will only be approved for 5 years, with the option for the state to renew for additional 5 year periods if CMS determines, prior to the beginning of the renewal period, that (1) the state met Federal and state requirements and (2) the state’s monitoring is in accordance with the Quality Improvement Strategy in the state’s approved State Plan Amendment.

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