Using Medicaid to Support Working Age Adults with Serious Mental Illnesses in the Community: A Handbook. CHAPTER 6: MEDICAID WAIVERS


By obtaining waivers of federal Medicaid law, a state may reconfigure the delivery of Medicaid services. States have employed Medicaid waivers to implement managed care service delivery models for mental health services. Such models have potential advantages for improving the delivery of mental health services but can also pose challenges. About 30 percent of the states deliver mental health services for working-age adults with serious mental illnesses through a managed care delivery system.

Federal Medicaid law contains numerous requirements with which a state must comply in order to obtain federal financial participation in the costs of providing services to beneficiaries. Some of these requirements dictate the use of fee-for-service payment methods and prevent a state from selectively contracting with preferred vendors to deliver services. However, the Social Security Act also gives the Secretary of Health and Human Services the authority to waive statutory requirements under certain conditions; such waivers include those necessary to permit a state to depart from the conventional Medicaid service delivery organizational and financing framework. There are two waiver authorities in Title XIX of the Act that permit the Secretary to waive specific provisions of federal Medicaid law. In addition, Title XI of the Act contains a broader authority that permits the waiver of a wider range of statutory provisions.

Several states have employed these waiver authorities to restructure Medicaid mental health services in order to implement managed care service delivery models and other system reforms. These states furnish mental health services under "freedom of choice" waivers granted under §1915(b) of the Act, or as part of broader demonstration programs operated under §1115 of the Act. In the case of individuals with serious mental illnesses, states have made limited use of the third waiver authority contained in §1915(c) of the Act. This authority permits a state to offer alternative community services to individuals who would otherwise qualify for services in a Medicaid-reimbursable institutional setting.

This chapter discusses the basic features of these waiver authorities. It also describes how states have employed these authorities in the delivery of Medicaid mental health services. To provide the context for understanding these waiver authorities, the chapter first provides a brief overview of how states have used managed care generally in their Medicaid programs, followed by a brief discussion of managed mental health services, and Medicaid waivers and managed care.

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