The President’s budget request for federal fiscal year (FFY) 2021 proposes a 10 percent reduction in the Department of Health and Human Services’ (HHS) budget. A signature piece of the budget features the President’s Health Reform Vision, which includes $844 billion in cuts over 10 years to implement the Administration’s efforts to provide “better care at lower costs.”
While the proposed budget is subject to Congressional review and expected to change, it is important for states to consider how the Administration’s priorities could affect public health programs. The following highlights some of the key budget proposals that impact state health programs.
- Increases oversight of the 340B Program. The proposal gives explicit oversight authority to the Health Resources and Services Administration (HRSA) with the goal of creating enforceable standards for participation and ensuring 340B benefits low-income and uninsured patients. Part of the increased funding for oversight ($34 million) will come from a new user fee on covered entities based on 340B sales.
- Bipartisan drug pricing proposals. The budget includes an allowance of $135 billion in savings for bipartisan Congressional drug pricing proposals. The Administration specifically supports efforts to improve the Medicare Part D benefit by establishing an out-of-pocket maximum and lowering out-of-pocket costs for seniors, as well as reforms to US Food and Drug Administration (FDA) approval and regulatory measures to bring lower-cost generics and biosimilars to market.
Health Insurance Markets
- Encourages expansion of coverage in the small-group market through Multiple Employer Welfare Arrangements (MEWAs). Provides additional funding to the Employee Benefits Security Administration to encourage adoption of policies to boost insurance coverage for small businesses. Specifically, the budget suggests promotion of MEWAs – an arrangement made when multiple employers coordinate to offer benefits to their employees – for example, association health plans are a type of MEWA. State regulation of MEWAs varies, though largely they are exempt from many requirements imposed on other health plans, including consumer protections codified under the Affordable Care Act (ACA). This investment follows prior action taken by this Administration to promote association health plans.
- Reductions in overall program funding. Proposes to cut $920 billion over 10 years from Medicaid.
Eligibility and Enrollment
- Requires work and community engagement initiatives. To receive Medicaid benefits, the budget proposes requiring all able-bodied, working-age, Medicaid-eligible individuals to find employment, participate in job training, or volunteer. It estimates this will generate $152.4 billion in savings over 10 years.
- Gives states the ability to change certain program elements and eligibility determination processes. Proposes to allow states to implement certain changes to Medicaid benefits and cost sharing, including making non-emergency medical transportation optional and allowing states to use state plan authority rather than a waiver to increase copayments for nonemergency use of emergency departments. Proposes to permit states to apply asset tests for individuals who are financially eligible for the program through the Modified Adjusted Gross Income (MAGI) standard. States would also be permitted to conduct eligibility redeterminations for MAGI-eligible individuals more frequently, to align with the soon-to-be released proposed rule on Medicaid eligibility determination processes.
- Requires documentation of immigration status prior to receipt of Medicaid. Proposes that before they receive Medicaid coverage, individuals must provide evidence of citizenship or satisfactory immigration status. While states will still be allowed to provide coverage during a reasonable opportunity period, they will not be able to receive federal match for these individuals during this time. This is estimated to save $2.6 billion over 10 years.
- Reduces maximum allowable home equity for Medicaid eligibility. Eliminates states’ ability to set a higher home equity limit for individuals seeking long-term care coverage through Medicaid, which is estimated to save $34.3 billion over 10 years.
Payments and Financing
- Changes the ACA’s financing for the expansion population. Indicates that it will end the “…financial bias that currently favors able-bodied working adults over the truly vulnerable.” While no specific details were provided about how precisely this would be accomplished, language in the budget brief references allowing states with expansion populations to elect a block grant or per capita cap to finance their coverage. No details were provided as to whether the existing federal match rate for expansion adults would be reduced, to what base rate that reduction would be, or when this change would be enacted by Congress.
- Reduces the federal match rate for Medicaid-eligible workers. Reduces the federal match rate for Medicaid-eligible workers from 75 percent to 50 percent by FFY 2024.
- Prohibits Medicaid payments to public providers in excess of costs. Proposes to limit Medicaid reimbursement for health care providers operated by a governmental entity to no more than the actual cost of providing services to Medicaid beneficiaries.
- Increases transparency of Medicaid financing and supplemental payments. Supports the finalization of a recently proposed rule that would require more data on states’ financing of Medicaid supplemental payments.
- Gives the Centers for Medicare & Medicaid Services (CMS) increased ability to recoup Medicaid improper payments and recover Medicaid and Children’s Health Insurance Program (CHIP) overpayments. Permits CMS to issue disallowances for payments made due to noncompliance with provider screening and enrollment requirements and collect overpayments made to states for ineligible or misclassified Medicaid beneficiaries.
- Continues Medicaid Disproportionate Share Hospital (DSH) reductions. Current law reduces Medicaid DSH allotments between FFY 2020 and FFY 2025. The budget proposes to continue DSH allotment reductions through FFY 2030 and estimates this will save $32.4 billion over 10 years.
- Modifies Institutions for Mental Diseases (IMD) payment exclusions. Allows states that meet certain criteria and requirements to receive federal Medicaid reimbursement for covered services provided to adults with serious mental illness living in IMDs, which is estimated to cost $5.4 billion over 10 years. Also, if a group foster home is considered a qualified residential treatment program (QRTP) and qualifies as an IMD, these QRTPs would be exempted from the IMD payment exclusion.
Other Proposed Medicaid Changes
- Eliminates Money Follows the Person (MFP) evaluation and reduces financing for the program, which provides funding to states to help transition people to home and community-based settings from institutions.
- Creates new MFP state plan option. Provides states the ability to establish an MFP program with an enhanced federal match for the first five years of services if they spend less than 50 percent of their long-term service and supports funding on home- and community-based services in the previous year.
- Extends Medicaid managed care waivers. Permits states to grandfather managed care authorities in waivers and demonstration programs if a waiver has been renewed once before and there are no substantive changes.
Proposals Affecting Individuals Dually Eligible for Medicare and Medicaid
- Coordinates review of Dual Eligible Special Needs Plans marketing materials. Allows for joint state and CMS review of marketing materials for Dual Eligible Special Needs Plans.
- Revisits Part D special enrollment period for dually eligible individuals. Clarifies the special enrollment period (SEP) for Medicare Part D to allow CMS to apply the same annual election process for all eligible individuals, but maintains the ability for dually eligible beneficiaries to opt into integrated care programs or to change plans following auto-assignment.
Children’s Health Insurance Program
- Creates a shortfall fund to replace Child Enrollment Contingency Fund. Calls for creation of a shortfall fund containing unused annual appropriations that could be distributed to states that need additional CHIP funding. This fund serves to replace the Child Enrollment Contingency Fund as of FFY 2022; the Performance Bonus fund would also be eliminated that year.
- Aligns Medicaid and CHIP policies on suspending and reinstating coverage for enrollees under age 21 who are incarcerated and released from custody. The Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act contains a policy requiring states to suspend coverage for youth under age 21 enrolled in Medicaid who are incarcerated instead of terminating coverage. The budget proposes extending this requirement to CHIP programs with the goal of providing access to health coverage upon release.
- Increase in Maternal and Child Health Services (MCH) Block Grant funding to offset reduction in other HRSA-funded programs to support children. Proposes a $60 million increase over FFY 2020 levels for the Title V MCH Block Grant, however this increase is combined with $97 million in reductions in other HRSA-funded programs for children, including: Sickle Cell Disease Treatment Demonstration, Autism and Other Developmental Disabilities, Heritable Disorders in Newborns and Children, and Emergency Medical Services for Children. This assumes states will fund the types of activities these programs previously funded through their MCH Block Grant programs.
- Continue funding and disseminating research into neonatal abstinence syndrome. Proposes $2.25 million to continue the Centers for Disease Control and Prevention’s (CDC) work to investigate neonatal abstinence syndrome and share findings to improve care and outcomes for children and families.
- Maintains Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program. Maintains MIECHV program at current levels.
- Level funding proposed for Children’s Mental Health Services grants. The budget proposes $150 million to the Substance Abuse and Mental Health Services Administration (SAMHSA) – consistent with FFY2019 funding – for Children’s Mental Health Services for state, tribes, and communities through competitive grant awards that promote collaboration between juvenile justice, child welfare, and education systems. Up to 10 percent of these funds are proposed for a new demonstration initiative that will target those at risk for developing serious mental illnesses.
The overall budget proposes $116 million for the President’s Improving Maternal Health in America Initiative. The initiative focuses on health outcomes for all women of reproductive age by improving prevention and treatment, healthy pregnancies and births by prioritizing quality improvement, health futures by optimizing post-partum health, and improved data and bolster research to inform interventions.
- Promotes state innovations to improve maternal health outcomes. Expands the State Maternal Health Innovation Grant Programby $30 million, the Alliance for Innovation on Maternal Health (AIM) by $10 million, and the Rural Maternity and Obstetrics Management Strategies (RMOMS) program by $10 million. There is a $50 million increase ($80 million total for FY 2021) to HRSA to improve the overall quality of maternal health services.
- Advances state efforts to combat maternal mortality and morbidity. The proposed budget invests $24 million in the CDC to expand maternal mortality review committees to all 50 states and DC.
- Allows states to provide postpartum coverage for pregnant women with substance use disorders (SUDs). Proposes to make it easier for states to offer pregnant women diagnosed with SUD full Medicaid benefits for one year postpartum, which would cost $205 million over 10 years.
- Maintains funding for family planning and health related services. Provides $286 million for the Title X family planning program but prohibits certain entities that provide abortion services from using the funding.
Prevention and Public Health
Substance use disorder and the opioid epidemic
- Increases grant funds to states for SUD prevention, treatment, and recovery:Adds $85 million over the FY20 budget for State Opioid Response (SOR) grants, bringing the total to $1.6 billion, and includes language to emphasize opportunities to expand activities to address methamphetamine and other stimulants. This increase, however, is coupled with decreases or total elimination of other SUD-related grants, which may lead to states re-aligning their existing activities into this grant.
- Reduces substance use prevention funding to states:Strategic Prevention Framework (SPF) grants to states have been reduced by over $109 million, eliminating all by SPF prescription drug funds, which were maintained at $10 million. This appears to assume that state prevention activities can be picked up in the increased SOR grant funds.
- Eliminates Medication-Assisted Treatment for Prescription Drug and Opioid Addiction (MAT-PDOA) grantsas part of the Targeted Capacity for Expansion (TEC) program that is designed to fill gaps in treatment capacity for communities. This $89 million reduction appears to assume that these treatment activities can be picked up in the increased SOR funding. Other funding within the program for peer-to-peer grants and special projects will be maintained at $11.2 million.
- Eliminates $30 million in federal funding for Screening, Brief Intervention, and Referral to Treatment (SBIRT)program grants, shifting payment for these services to states and third-party payers.
- Maintains funding for the Recovery Community Services Programs (RCSP)that will continue and enhance efforts to develop recovery networks and collaboration with peer organizations.
- Maintains level funding to states through the Substance Abuse Prevention and Treatment Block Grantat a total of $1.9 billion.
- Maintains level funding of $8.7 million for Opioid Treatment Programs (OTP) that provide methadone– funding also supports training and technical assistance for providers.
- Continues grants to nonprofitComprehensive Opioid Recovery Centers: Maintains $2 million in grants to nonprofit SUD treatment organizations as part of a four-year project that provides a continuum of treatment services.
- Supports State and Tribal Youth Implementation grants: Maintains nearly $30 million to fund 11 new grants and continue 35 existing grants that support states and tribes to address gaps in SUD treatment for youth and caregivers.
- Maintains level funding for justice-involved populations with SUD: Provides $89 million for 54 new and 92 existing drug courts and also supports 11 new and five existing Offender Reentry Program grants.
- Maintains Building Communities of Recovery programswith $8 million for 20 new and eight continuing grants that support recovery services.
- Maintains level funding to prevent and reverse overdoses:
- Provides a continued $41 million in funding to the First Responder Training program through $41.0 million in grants to states, localities, and tribes for purchasing and training of overdose-reversal drugs.
- Provides a continued $12 million through grants to states to purchase and distribute naloxone kits and provide overdose reversal training.
- Funding for Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) Act activities
- $5 million to fund hospitals and emergency departments for alternative pain management treatments intended to decrease opioid prescribing;
- $4 million to train emerging prescribers via 117 grants to medical schools and teaching hospitals to develop curricula to educate students on MAT and providing SUD treatment;
- $4 million to implement post-overdose bridges to SUD treatment; and
- $4.5 million project to 15 select states, to provide an enhanced FMAP (80 percent) for five of those states for some SUD services.
- Supports a tool that warns about emerging issues:Adds $10 million for the Drug Abuse Warning Network (DAWN), a surveillance system that can warn about emerging SUD and behavioral health crises.
- Increase of $18 million, for a total of $25 million, for the Assertive Community Treatment for Individuals with Serious Mental Illness program to help 33 communities establish, maintain, or expand efforts to engage patients with serious mental illness through emergency and inpatient settings.
- $25 million for Assisted Outpatient Treatment to expand SAMHSA’s existing grant program. The program has achieved favorable outcomes in reductions in hospitalization, emergency department visits, and substance use, and increases in mental health functioning.
- $35 million increase, including a new 5 percent set-aside, in all states and territories to build crisis systems for individuals in mental health crisis. States will continue to spend at least 10 percent of the funds on early interventions for those experiencing a first episode of psychosis.
- $225 million ($25 million increase) for certified community behavioral healthcenters –clinics certified by SAMHSA and funded through a prospective payment model, similar to federally qualified health centers (FQHC).
- Provides direct support for rural communities to address SUD needs:Maintains level funding for the Rural Communities Opioid Response Program (RCORP), providing a total of $110 million in grant funds to communities to address prevention, treatment, and recovery while building infrastructure and capacity. Adds new pilot programs to address the unique and emerging needs of rural communities responding to the opioid and SUD crises.
- Supports infectious disease prevention and surveillance in high-risk regions:Increases existing funding by $48 million for activities that reduce the transmission of infectious disease and the incidence of potentially fatal cardiac and skin infections as a consequence of the opioid epidemic.
- Maintains $475 million and builds on existing support for data capacity in states and other jurisdictions: Through Opioid Abuse and Overdose Prevention funding, CDC will continue to support states in tracking both fatal and non-fatal drug overdoses and prescribing patterns.
- Shifts Drug-Free Communities funding to CDC: Moves $100 million from the Office of National Drug Control Policy (ONDCP) that was previously administered by SAMHSA as prevention grants, into the CDC budget.
- Proposes a $350 million block grant program for states to address chronic disease priorities, including tobacco control and prevention, nutrition and physical activity, heart disease and stroke, diabetes, and arthritis.
Chronic disease prevention and management
- Supports training for behavioral health workforce:Maintains $139 million within Behavioral Health Workforce Development (BHWD) Programs that train professionals in under-served communities (including at health centers) and supports an addiction medicine fellowship.
- Expanded support for the Ending the HIV Epidemic initiative:
- $137 million (an increase of $87 million) for HIV prevention services in FQHCs, including pre-exposure prophylaxis (PrEP), outreach efforts, and care coordination in approximately 500 community health centers.
- Additional $95 million allocated for the Ryan White HIV/AIDS program.
- Cuts CDC’s total discretionary budget authority by $1.289 billion, compared to 2020 funding levels.Program-level cuts would be $175 million. Other changes include:
- A cut of $427 million for chronic disease prevention and health;
- An increase of $40 million for influenza monitoring and prevention; and
- The creation of the America’s Health Block Grant as a means of reforming state-based chronic disease programs.
- Proposes a new user fee on e-cigarettes. The budgetcontains $812 million in user fees to support FDA’s anti-tobacco programs, which includes a new $100 million fee to be collected from e-cigarette manufacturers. It also proposes to move the FDA’s Center for Tobacco Products to a newly created agency within HHS.
Programs Addressing Social Determinants of Health
Some components of the HHS and Department of Housing and Urban Development (HUD) budgets could affect states’ abilities to address health through housing and other social determinants of health initiatives.
- Cuts HUD funding by $8.6 billion — a 15.2 percent decrease from the 2020 enacted budget.
- Proposes changes to federal investment in rental assistance.The budget request would increase rental assistance to $41.3 billion, which would maintain services for all currently enrolled HUD-assisted households. Uniform work requirements would be placed on “work-able” households.
- Adds funds to the Rental Assistance Demonstration program, which supports transitioning public housing to housing voucher and project-based rental assistance units.
- Increases funding for lead-safe healthy homesby $69 million to $240 million.
- Supports reductions to existing programs:
- Cuts $80 million from Housing Opportunities for People with AIDS, and
- Would eliminate the Community Development Block Grant.
- Proposes policy and financial changes for safety net programs.The budget cuts $15.3 billion from the Supplemental Nutrition Assistance Program (SNAP) and cuts approximately $1.1 billion from the Temporary Assistance for Needy Families (TANF) block grant. Would apply consistent work requirements for federally funded public assistance programs, including SNAP, Medicaid, and TANF.
Long-term services and support
- Cuts family caregiver services by $35 million, which provides grants to states and territories to fund various supports that help family caregivers care for older adults in their homes.
- Cuts state councils on developmental disabilities by $22 million, which are charged with identifying the most pressing needs of people with developmental disabilities.
- Reduces National Institute on Disability, Independent Living, and Rehabilitation Research by $21.6 million.
- Cuts state health insurance assistance programs by $16 million, which are state programs that receive federal funding to provide free, local health coverage counseling to people with Medicare.
Health Care Infrastructure and IT
- Supports rural health care infrastructure. Authorizes up to $2.5 billion for loans to assist communities with developing or improving public services in rural areas, including rural health clinics. Allows critical access hospitals to voluntarily convert to rural stand-alone emergency hospitals, which would enable those facilities to draw in Medicare payments at emergency department rates without the additional burden of maintaining in-patient beds.
- Promotes price transparency and health IT interoperability. Finances several agencies to enable implementation of policies related to the President’s Executive Order to encourage price transparency. This includes $51 million to the Office of the National Coordinator for Health Information Technology for efforts to advance interoperability, electronic information sharing, and to align patient health and cost information.
- Enforces conscience protection laws. Makes permanent the Weldon Amendment, which prohibits government agencies — including state agencies that receive federal money — from discriminating against entities or individuals who refuse to provide or refer for abortions. Expands the authority of the Office of Civil Rights enforce the Weldon Amendment.
Other proposals addressed in the Administration’s budget include:
- Access to better care at lower costs;
- Personalized care;
- Protection for pre-existing conditions;
- Policies to encourage choice and affordability of coverage; and
- Policies to address surprise medical bills.
In their 2020 state of the state speeches, governors identified new health policy initiatives on a wide range of issues. As of mid-February, 42 governors had delivered speeches or outlined key budget priorities, and all addressed health issues – most commonly strategies to tackle health care costs and behavioral health issues. Below are highlights of the key health themes that governors raised.
Introduction by Trish Riley, NASHP Executive Director
For decades, the proposal to convert the Medicaid program from an open-ended entitlement to capped funding as a “block grant” has been a fiercely argued policy, legal and ideological debate. Opponents contend that capped financing violates the foundation of Medicaid as an entitlement and would severely impair states’ abilities to address needs because there is no provision to adjust for medical and prescription drug cost increases nor to accommodate natural disasters or economic downturns that cause more people to need Medicaid’s protections.
Proponents argue that a block grant, much like the Children’s Health Insurance Program, provides more flexibility to states to design their programs and constrain cost growth. Here, the Trump Administration takes a new tact, using the Section 1115 waiver authority, to test the viability of a block grant concept on a subset of Medicaid enrollees.
The proposal does not address rising health care costs but does contain a “special circumstances adjustment” that could address unforeseen circumstances that are out of a state’s control. The guidance could encourage those states that have not expanded Medicaid eligibility to childless adults eligible under the ACA to do so. It could also allow states that have expanded eligibility to roll back current levels of coverage.
Because Section 1115 waivers are designed to test innovation in the Medicaid program, the Administration proposes a means to test the efficacy of a block grant, limiting its reach to a subset of Medicaid enrollees. NASHP’s Anita Cardwell walks us through what CMS’ new rules are proposing and notes that legal challenges are inevitable. Should the Administration succeed in approving these waivers, rigorous, independent evaluation will be critical for policymakers to assess its impact.
New guidance from the Centers for Medicare & Medicaid Services (CMS) would allow states to receive part of their federal Medicaid funding through a capped financing model. Through CMS’ Healthy Adult Opportunity (HAO) option, states would be able to seek approval through a Section 1115 waiver to accept a set amount of federal Medicaid funding for certain eligible adults.
While the option is limited to a specific portion of the Medicaid-eligible population, this is a significant change from Medicaid’s current structure in which the program operates as an open-ended entitlement and states receive federal matching payments based on their Medicaid program spending without a predetermined funding limit. The following describes some of the key elements of the HAO model.
The HAO model targets adults under age 65 who are not eligible for Medicaid due to:
- Disability or need for long-term care services and supports,
- Eligibility under a state plan designation.
States could use the model to cover adults who would be eligible through the Affordable Care Act’s (ACA) Medicaid expansion, but states will also be permitted to use the initiative to cover other groups of individuals. For example, states could use the HAO demonstration to provide coverage for:
- Individuals with severe mental illness;
- Those needing substance use disorder treatment; or
- Individuals with HIV/AIDS.
States will also be allowed to set the income eligibility standard under the demonstration, and the guidance permits states to require an asset test for individuals seeking coverage under the HAO model. However, for states to receive the enhanced federal match available for the ACA Medicaid expansion population, states will need to have an income standard of at least 133 percent of the federal poverty level, will not be able to apply an asset test, and will not have the ability to cap enrollment. But the guidance does not explicitly indicate that enrollment cannot be capped if a state agrees to accept a lower match rate.
States that pursue this new option will receive a capped amount of federal Medicaid funding for the populations covered under the HAO model. States’ spending would be matched by the federal government, but only up to a certain limit, and states would assume the risk for any expenditures for the demonstration population that exceed the defined amount. CMS is providing states with two financing options to select — an aggregate cap model or a per capita cap model.
States that cover new populations that they lack data for, such as the expansion population, will initially need to use the per capita cap model. CMS will calculate a per enrollee base amount for each eligibility group that is included in the demonstration using previous year expenditures, or if those are not available then it will be based on national and regional expenditures. CMS will trend the base amount for each group forward to the demonstration year, multiply each of these amounts by the number of enrollees for that year to account for changes in enrollment, and then total them to establish an overall per capita cap.
Under the aggregate cap model, CMS will determine a base year amount using prior expenditures based on the populations and services included in the demonstration, and will trend this amount forward to each demonstration year, but without consideration of enrollment changes. If a state would like to pursue the aggregate cap option for a population that has not been covered previously, they must first operate their HAO demonstration under the per capita cap model for at least two years. The guidance requires states using the aggregate cap model to annually spend at least 80 percent of their aggregate cap amount on health services.
Unlike the per capita cap model, states that use the aggregate cap approach that are able to keep costs below their annual cap and meet certain reporting and performance criteria may be eligible to reinvest a part of the savings into their Medicaid programs. These reinvestments must be determined to be likely to promote Medicaid program objectives and could include providing Medicaid services for groups not covered by the state plan, paying for services that are not in the state plan – such as pre-vocational services, initiatives to improve care quality and access, and allowable benefits and services designed to address certain social determinants of health.
In some cases, states could use the shared savings to support existing state-funded programs, such as a statewide tobacco cessation program. CMS also notes that states can use any annual savings to offset expenditures that exceed the cap for the subsequent three demonstration years. Also, while the guidance indicates that CMS will make changes to the base amount or annual caps to “adjust for state flexibilities that could significantly affect enrollment to ensure that states do not achieve savings from disenrolling individuals,” it does not provide further details about how this type of adjustment would be implemented.
Rather than the traditional Medicaid benefit package, states that opt to pursue the HAO initiative will be able to structure a benefit package that aligns with private market coverage, although they will need to include at a minimum the benefits in the Essential Health Benefit (EHB) package. This means that states will not be required to provide services such as non-emergency medical transportation (NEMT) and coverage of early and periodic screening, diagnostic and treatment services (EPSDT) for individuals ages 19 to 20 included in an HAO demonstration. However, states could opt to provide these services, along with others, in addition to EHBs.
Prescription Drugs and Medicaid Drug Rebate Program
To address prescription drug costs, the HAO option will permit states to have a closed drug formulary that aligns with formularies provided through exchange coverage in the commercial health insurance market. The guidance stipulates that states provide coverage of certain drugs for individuals with HIV or behavioral health conditions.
However, although states would be allowed to omit coverage of certain prescription drugs, states would still be able to receive rebates through the Medicaid Drug Rebate Program. States could also make arrangements with manufacturers for supplemental rebates by including the manufacturers’ drugs on the state formulary.
Other Key Elements of the HAO Model
In its guidance, CMS indicates that it is “offering flexibilities currently available to states in a comprehensive suite of pre-packaged waiver authorities.” CMS notes that although its intent is to provide states with a “menu” of program design options, each demonstration will be approved on a case-by-case basis. States will be able to implement program elements to the populations covered by the demonstration, such as:
- Charging higher premiums and cost-sharing requirements not allowed under traditional Medicaid for most individuals in the HAO model (individuals’ aggregate out-of-pocket costs could not be more than 5 percent of income, measured on a monthly or quarterly basis), and suspending enrollment for nonpayment;
- Including conditions on eligibility, such as work requirements;
- Choosing to waive retroactive coverage and hospital presumptive eligibility requirements; and
- Conducting eligibility renewals before the standard 12-month renewal period to align with the open enrollment period of exchanges.
States operating under an HAO demonstration will also be allowed to implement certain changes without additional federal approval, unless the change has the potential to “substantially” impact enrollment. These could include programmatic changes to benefits, premiums, and copayments, or certain administrative modifications, such as changes in provider payment rates.
States that already have an approved 1115 waiver to cover populations that would be eligible for coverage through the HAO model would be permitted to transition those waivers into HAO demonstrations – for example, a state with an existing waiver to provide coverage to the Medicaid expansion population group.
Delivery Systems, Payment Models, and Managed Care
States seeking to participate in the HAO demonstration will be encouraged to implement payment and delivery system reforms to “improve the effectiveness of coverage, improve health outcomes and reduce the cost of care.” To align with Medicare and commercial payers, CMS suggests that states consider incorporating arrangements and strategies like ones established through the Center for Medicare & Medicaid Innovation (CMMI) that have demonstrated promising outcomes.
States will generally be allowed to use any mix of fee-for-service and managed care delivery systems, and as long as certain guidelines are met states will have the ability to modify these arrangements during the demonstration. If states are serving the HAO demonstration population through managed care, they will generally have to comply with specified statutory requirements related to beneficiary protections and decision making, access to services, and assessing program administration and delivery system quality. But states will be allowed to suggest their own strategies for ensuring network adequacy, access to care, and availability of services, and will also not have to request prior federal approval of managed care rates.
Monitoring and Evaluation
States participating in the HAO demonstration will be required to have a written strategy to evaluate care access and quality, and the health outcomes of enrollees, using measures from the CMS Adult Core Set. CMS is also expecting HAO demonstration states to report on certain performance measures related to enrollment, retention, access to care, and financial management on a quarterly basis. Also, participating states are expected to have an independent assessor provide suggestions for changes that could be made during the demonstration period.
Legal challenges are expected because, as noted by many analysts and highlighted in a recent letter from some House Democrats, there are questions about whether CMS has the ability to use the 1115 authority to change Medicaid’s financing in this way. The HAO demonstration model may also be challenged on the grounds that it does not promote the overall objectives of the Medicaid program.
States considering the model will need to carefully weigh the potential implications, because choosing to accept limits on federal Medicaid funding — even for only a portion of the program’s eligible individuals — introduces financial risk for states. For example, state Medicaid program spending regularly fluctuates as economic shifts occur, new treatments become available, or states experience public health emergencies or natural disasters. While the guidance does contain a “special circumstances adjustment” that would allow states to propose updates to address these types of situations, this would require states to undertake additional negotiations with CMS.
The HAO model could be appealing to the 14 states that have not implemented Medicaid expansion because it would provide them with greater flexibility to manage their Medicaid program benefits and impose certain enrollee requirements. If these states do pursue the HAO initiative to expand Medicaid, while more individuals would gain health coverage and it would meet EHB standards, the coverage provided would be less robust than that provided to traditional Medicaid expansion enrollees and individuals would likely face other enrollment restrictions. One of the 14 non-expansion states that has expressed interest in this approach is Oklahoma, whose governor announced his intention to pursue the concept to expand Medicaid with the inclusion of work requirements and premiums. However, his proposal could be in conflict with Oklahoma voters’ views, if they pass an initiative on the ballot this year to implement traditional Medicaid expansion. Another state, Tennessee, already has a proposal pending with CMS that requests to implement a “modified block grant” model that would allow for federal funding increases if enrollment rises, along with requests for certain program flexibilities. However, Tennessee’s plan differs from the recent guidance as it does not propose to implement the ACA’s Medicaid expansion, and instead would apply the block grant funding model to enrollees who are low-income parents, children, and individuals with disabilities.
The governor of Alaska – a state that has already implemented expansion – has indicated interest in seeking a block grant financing model and commissioned a study on the issue, so there may be interest in the HAO demonstration among policymakers there.
NASHP will continue to track and report on state activity related to the HAO model in the coming months.
This spring, Georgia passed the Patients First Act authorizing the state to seek federal approval for a Section 1115 waiver to implement an alternative Medicaid expansion model and an Affordable Care Act (ACA) Section 1332 waiver to pursue a range of options affecting individual market coverage. Last week, the state released draft versions of both waivers, outlined below.
Most of the components of the state’s 1115 waiver proposal are similar to Medicaid expansion models that have been approved in other states. However, the changes Georgia proposes through its 1332 waiver are more notable for their potential implications and the questions they raise about the parameters and administration of the state’s individual market. This is also the first example of a state seeking a broader 1332 waiver based on guidance released by the Centers for Medicare & Medicaid Services last year, which changed the interpretation of the 1332 waiver’s “guardrails.”
Proposed 1332 Waiver
Georgia is seeking to use Section 1332 waiver authority to implement significant changes to coverage available through its individual market. The proposal includes two phases — the first part of the plan would implement a reinsurance program, and the second portion involves transitioning from a federally-facilitated marketplace (FFM) to a more state-controlled, decentralized model — though it would not be the same as an ACA state-based marketplace.
- Reinsurance program: Similar to many other states, Georgia is proposing to create a statewide reinsurance program beginning in plan year 2021 with the goal of stabilizing the individual market, reducing premiums, and ensuring an adequate selection of insurance carriers. The program would reimburse carriers at tiered rates according to geographic regions in order to provide larger reimbursements to areas with higher premiums.
- Georgia Access Model: Beginning in plan year 2022, the state would implement a number of changes through the proposed Georgia Access Model, including:
- State individual market operational changes: As part of the state’s plan to no longer use the FFM, the state’s Office for Health Strategy and Coordination along with other state agencies would be responsible for determining consumers’ eligibility for coverage, certifying plans offered on the individual market, licensing web brokers, and distributing tax credit dollars and addressing any related appeals.
- State-run subsidy program: The state would develop and administer its own subsidy program, using both federal advance premium tax credits (APTCs) as well as state funds, to help individuals who earn 100 to 400 percent of the federal poverty level (FPL) purchase individual market coverage. The state is also requesting permission to cap consumer enrollment if state costs reach a certain threshold, and if this occurs individuals seeking coverage would be placed on a waiting list.
- Enrollment through web brokers and carriers: The state is proposing to allow consumers to directly enroll in individual market coverage through web brokers and carriers rather than through a centralized state agency model. This would involve giving the web brokers and carriers the responsibility for developing the functions needed to help consumers enroll in coverage, such as plan comparison tools and shopping portals.
- Allowing consumers to purchase alternative coverage options: Although consumers using the Georgia Access Model will still be able to use subsidies to purchase qualified health plans (QHPs), state-certified “non-QHPs” will also be available as a subsidized coverage option. These non-QHPs will not be required to meet QHP standards, including Essential Health Benefit requirements, and consequently would likely be less expensive — although they will be required to maintain pre-existing condition protections. They will also be required to be a major medical health plan and in the individual market’s single risk pool, but they will not be allowed to be medically underwritten.
- Implementation timeline: The state is seeking comments on the proposal through Dec. 3, 2019, and plans to submit the waiver application to federal officials by Dec. 20, 2019, after which a federal comment period would be opened.
Proposed Pathways to Coverage – 1115 Waiver
Rather than implement the ACA’s full Medicaid expansion, Georgia is requesting to expand Medicaid only up to 100 percent of the FPL — at the enhanced ACA Medicaid expansion match rate, which has not yet been approved in any other state — along with the following conditions:
- Eligible individuals: Individuals ages 19 to 64 who are not currently eligible for Medicaid, which would include adults without dependent children with incomes up to 100 percent of the FPL, and parents, caretakers, or guardians with income between 35 to 100 percent of the FPL.
- Work requirement: To be eligible for coverage through the Georgia Pathways to Coverage program, individuals would be required to demonstrate they are working or engaged in other approved activities (e.g., community service, job training) for at least 80 hours per month.
- Employer-sponsored insurance (ESI) premium assistance program: If an eligible individual has access to ESI, the individual will be enrolled in that coverage instead of Medicaid and the state will pay the ESI premiums for the individual if it is more cost-effective for the state.
- Premiums: Some individuals will be required to pay premiums (tiered based on family income), and these premiums will be deposited in a Member Rewards Account.
- Individuals required to pay premiums: Individuals who are eligible for the Georgia to Pathways Coverage program who have incomes of 50 to 100 percent of the FPL, and individuals enrolled in transitional medical assistance.
- Exempt individuals: Individuals with incomes below 50 percent of the FPL; individuals in the ESI premium assistance program; and individuals who are enrolled in and two months after graduation from certain vocational education training programs of highly sought-after trades.
- Penalties for nonpayment: Enrollees required to pay premiums who fail to pay have a three-month period to retain eligibility before being disenrolled.
- Copayments: The same individuals who are subject to premiums will be required to make copayments for certain services that will be assessed retrospectively, but they are not to exceed 5 percent of an individual’s household income when combined with premium payments. Copayments are the same as in the existing state plan, with the addition of a copayment for non-emergency use of the emergency room.
- Member Rewards Accounts: Enrollees’ premium payments will be deposited in a Member Rewards Account, which will also be funded with state contributions. Funds in these accounts can be used for copayments or to pay for additional services that are not covered, such as vision or dental care. Individuals can earn points in their accounts by engaging in healthy behaviors.
- Benefit package and delivery system: The benefit package will mostly align with those provided through the state plan, with the exception of non-emergency medical transportation. Also, while the Early and Periodic Screening, Diagnostic and Treatment benefit for 19- and 20-year-old individuals is part of the state plan benefit package, the proposal requests to waive vision and dental services for these enrollees. For individuals for whom the state is covering the cost of ESI, wraparound benefits are not covered. The program will use a managed care delivery system exclusively.
- Eligibility effective date: The state is requesting to waive retroactive eligibility, and to have eligibility begin the month following the determination of eligibility and the payment of any premium required.
- Implementation timeline: The state is seeking comments on the proposal through Dec. 3, 2019, and is planning to submit the waiver to federal officials on or before June 30, 2020 for a federal comment period. However, if approved, implementation of the program would not begin before July 7, 2021.
Although the timing for implementation of the two waivers differs, the state comment period for both waivers closes on Dec. 3, 2019. For more information and to view the waiver documents, explore the state’s informational page. The National Academy for State Health Policy (NASHP) will be tracking Georgia’s plans as they evolve and will report on other states’ emerging proposals.
For more information about states’ implementation of the ACA’s Medicaid expansion, explore NASHP’s interactive map, Where States Stand on Medicaid Expansion, and for information about states’ marketplace models, view NASHP’s map, Where States Stand on Exchanges.
This year, many states have continued to pursue federal approval for a range of proposals affecting Medicaid coverage, such as seeking modifications to the Affordable Care Act’s (ACA) Medicaid expansion or adding Medicaid work requirements.
Currently, nine states have implemented expansion through Section 1115 waivers to impose conditions such as monthly premiums, lock-out provisions for non-payment, and work requirements on certain Medicaid enrollees. While some Medicaid waivers approved by the federal government that include work requirements have faced legal challenges, other states — including those that have not implemented Medicaid expansion — are continuing to seek federal approval to condition Medicaid eligibility on work, with nine additional proposals currently pending.
The following is an overview of some of the current state Medicaid coverage waiver activity and other state actions affecting health coverage, including Tennessee’s recent block grant proposal.
State Changes to Medicaid Expansion Passed by Ballot Initiatives
Earlier this year, Idaho’s governor signed into law a number of changes to the Medicaid expansion ballot measure approved by voters in November 2018. One component of the law required the state to seek a 1332 waiver to enroll individuals eligible for expanded Medicaid who had income between 100 to 138 percent of the federal poverty level (FPL) in subsidized exchange coverage, although these individuals could opt for Medicaid coverage instead. However, in late August the Centers for Medicare & Medicaid Services (CMS) rejected the state’s waiver request, citing that it did not meet the deficit neutrality guardrails required of 1332 waivers. State officials have indicated that they will resubmit the application with additional information, although CMS noted in its letter that even a revised application would likely still not demonstrate compliance with those guardrails. Another aspect of Idaho’s law modifying the voter-approved Medicaid expansion directs the state to seek a waiver to implement Medicaid work requirements for most expansion enrollees, and the state recently submitted this 1115 waiver request for federal approval. If the waivers are not approved by Jan. 1, 2020, the state law requires implementation of traditional Medicaid expansion.
Similar to Idaho, voters in Utah passed a measure last November to implement Medicaid expansion, and in February state legislators enacted a law that significantly alters the voter-approved expansion in a number of ways. The law requires the state to seek a series of waivers, outlined in the state’s implementation toolkit, through a potentially four-step process, depending on what CMS approves. In March, CMS approved the state’s first request — the Bridge Plan — to expand Medicaid to only those earning 100 percent of FPL at the state’s regular federal medical assistance percentage (FMAP) rate, include an enrollment cap if projected costs exceed state appropriations, require individuals with access to employer-sponsored insurance (ESI) to enroll in that coverage with Medicaid premium assistance, and add work requirements in 2020. In May, the state submitted the second waiver proposal for the enhanced FMAP that the ACA provides for the expansion population while keeping the expansion eligibility level at 100 percent FPL, but CMS indicated that it would not provide the enhanced FMAP for a partial expansion. This second proposal also maintains the enrollment cap, work requirements, and ESI premium assistance from the initial waiver, adds in 12-month continuous eligibility and lock-out provisions for non-compliance with certain activities, and notably requests to implement a per capita cap model for receiving federal Medicaid funds for the new eligibility group. Although CMS did not approve the enhanced FMAP for the partial Medicaid expansion, the governor issued a statement that the state would move forward with requesting approval of the other proposal components, and the state submitted the waiver request in late July. If CMS does not approve this per capita cap proposal, the state plans to request permission to implement a “fallback” plan — the third step in the state’s implementation plan — that expands Medicaid to the ACA’s 138 percent of FPL eligibility threshold and provides the state with the enhanced expansion FMAP, and includes work requirements, an enrollment cap, and lock-out provisions. The final option – if this third plan is not approved – is implementing traditional Medicaid expansion through a state plan amendment, as was passed by the voters.
Nebraska was the third state in 2018 to pass Medicaid expansion through a ballot initiative, and while state legislators there did not follow the same route as Idaho and Utah, expansion in Nebraska has not yet occurred because the state intends to seek modifications to the expansion. State officials submitted a state plan amendment for expansion this past April, indicating the state would seek a waiver to modify its existing managed care program to include the expansion population and provide different benefit packages based on whether enrollees complete certain wellness requirements. Expansion will occur no later than Oct. 1, 2020, and the plan eventually will also incorporate work requirements for eligible individuals wishing to remain in the “prime” coverage option, which offers more robust benefits such as dental and vision services.
Activity in Medicaid Expansion States
Montana originally implemented Medicaid expansion through a waiver because the state requires certain individuals to pay premiums. The expansion was scheduled to sunset in July of this year, but in April the legislature passed a bill, signed by the governor in May, to continue expansion that added work requirements for most enrollees. The state’s waiver amendment also seeks to maintain the original waiver’s implementation of 12-month continuous eligibility and modify the monthly premium structure to be based on the amount of time an individual is enrolled. The federal comment period for the waiver amendment recently closed.
In Virginia, Democratic Gov. Ralph Northam and Republican state legislators negotiated a compromise to expand Medicaid with work requirements in 2018. Coverage became effective in January of this year, but the work requirements were not implemented as the state needed to seek federal permission through a waiver. The state is now negotiating to receive federal funding for employment supports, as Northam’s administration has indicated that the state cannot afford to implement the work requirements without these federal dollars. Some Republican state legislators are characterizing the request for this federal funding as an effort to backtrack on the compromise struck last year between them and the governor.
While New Mexico originally implemented the ACA’s traditional Medicaid expansion, the state sought and received approval in December 2018 to add premium and copayment requirements and waive retroactive eligibility for certain expansion enrollees. However, under Gov. Lujan Grisham, the state is now requesting to amend the waiver and remove the copayments, premiums, and waiver of retroactive eligibility.
Activity in Non-Medicaid Expansion States
Like last year, voters in some nonexpansion states will have the chance to consider expansion in 2020. Groups in Oklahoma indicated that they have gathered enough signatures to put expansion before voters in 2020. Medicaid expansion proponents in other states — specifically Missouri and South Dakota — are also attempting to place the issue before voters in 2020. Additionally, in Mississippi’s upcoming gubernatorial election in November, voters will decide between a Republican who opposes expansion and a Democratic who supports it.
North Carolina’s Democratic Gov. Roy Cooper vetoed the state budget in June in part because it did not include Medicaid expansion. However, in mid-September state legislators in the House voted to override the governor’s veto. While the Senate still needs to hold a vote on the veto override, a bill to expand Medicaid with work requirements and premiums has been added back to the legislative calendar.
Georgia is currently drafting two waiver proposals as part of a law signed by the governor in March. The state is expected to submit an 1115 waiver proposal to expand Medicaid to only those earning 100 percent of FPL, as well as seek federal approval through a 1332 waiver to implement a reinsurance program.
Beyond continuing efforts to expand Medicaid or modify laws to do so, block grants have surfaced again. Tennessee has developed a draft proposal to shift federal funding for most of the state’s Medicaid program into a version of a block grant, which would be a significant change and is based on a state law passed earlier this year. Under the plan, the state would receive a capped amount of federal Medicaid funding for low-income parents, children, and individuals with disabilities. Unlike a traditional block grant — which the state acknowledges its plan differs from — the state is requesting additional funding if enrollment rises above a certain threshold, but the funding amount would not be reduced if enrollment declined. Additionally, the funding cap does not include state spending on individuals dually eligible for Medicaid and Medicare, disproportionate share hospital (DSH) payments, outpatient prescription drug expenses, or administrative costs, and any savings achieved from the financing model would be divided evenly between the state and the federal government (the state’s current federal match rate is 65 percent). The state is also requesting additional flexibilities, such as modifying the amount, duration, and scope of benefits without federal approval or public comment and implementing a closed formulary for prescription drugs. The waiver request also proposes to exempt the state from federal regulations for managed care plans. Some policy analysts have identified that federal law does not allow Medicaid’s financing model to be restructured through the 1115 waiver authority, and if CMS does approve the waiver it is expected to face legal challenges. Tennessee also submitted a separate waiver request in December 2018 seeking to implement Medicaid work requirements for low-income parents and caretakers, which is still awaiting federal approval.
Legal Challenges to Medicaid Work Requirements
Medicaid waivers containing work requirements approved by CMS have been halted by court rulings earlier this year in Arkansas, Kentucky, and New Hampshire, and a legal challenge was recently filed against Indiana’s approved work requirements. Earlier this month, a three-judge panel heard oral arguments on the federal government’s appeal of the Arkansas and Kentucky rulings, and the judges noted that the administration had not considered the coverage losses resulting from work requirements. The ruling by this federal appeals court will have significant implications for Medicaid work requirements overall, and while they did not provide specific information about timing for the decision, it is expected before the end of the year. The court challenges are already beginning to have some implications — on Oct. 17, 2019, Arizona informed CMS that it would postpone implementation of the state’s approved Medicaid work requirements due to the litigation in other states. Additionally, a recent study conducted by the Government Accountability Office (GAO) recommended that CMS should improve its oversight of the administrative costs associated with work requirement waivers, which GAO found can be significant, ranging from under $10 million to over $250 million.
In addition to the next round of court decisions on Medicaid work requirements, states are waiting to see if federal guidance on Medicaid block granting will be issued soon — which is currently under review at the Office of Management and Budget. Similar to how states are seeking to implement Medicaid work requirements despite legal challenges, if CMS provides guidance and approves Tennessee’s block grant proposal, other states may also pursue this financing model, even if the block grant is challenged in court. Also, whether CMS and states that have been hesitant to expand will be able to find a middle ground on Medicaid expansion remains a question, and how decisions play out in Idaho and Utah in particular, will be significant for future actions. Similar to this past year, in 2020 states are expected to continue to seek new ways to test the boundaries of Medicaid coverage waivers and manage their Medicaid programs.
Maryland has a long history of enacting statewide health reforms and 2019 was no exception with the passage of several significant reforms, including the Maryland Easy Enrollment Health Insurance Program (MEEHP), which passed with bipartisan support and was signed by Gov. Larry Hogan in June. Maryland is also implementing a new value-based plan design for health insurance marketplace plans and is continuing the state’s reinsurance program. Collectively, these reforms are helping advance Maryland’s objectives to improve affordability and attain near universal coverage.
NASHP spoke with Michele Eberle, executive director of Maryland’s health insurance marketplace – Maryland Health Connection – to learn about the implementation of these programs, and how Maryland’s reforms are providing greater stability to its insurance market.
Maryland implemented a reinsurance program beginning in plan year 2019, why?
After the federal reinsurance program ended [after plan year 2016], premiums in the state’s individual market spiked. Maryland has only two insurance carriers in our individual market, and we worried there was a risk of either losing those carriers or pricing people out of coverage. We wanted to be aggressive in addressing the issue of affordability. We also recognized a unique opportunity in that Congress planned to delay implementation of the Health Insurance Tax [HIT – an annual fee assessed by the federal government on health insurers]. We argued that we would assess our insurers, in lieu of this fee to the federal government, and use the money to finance a reinsurance program. Our 2.75 percent assessment gave us nearly $365 million, combined with federal funding drawn from a 1332 waiver, we secured nearly $1 billion over a five-year period for a reinsurance program. [For more information read State Reinsurance Premiums Lower Premiums and Stabilize Markets.]
Our goal was to reduce premiums by 30 percent from what they would have been without the reinsurance program. And, for the first time in 20 years, we saw our premiums decrease in 2019 on average by 13 percent. The program has been so successful, the legislature this year agreed to maintain a 1 percent assessment on our insurers to finance the program even once the federal HIT is implemented [ plan year 2020].
What led Maryland to propose and enact the MEEHP?
This concept originally started as a traditional individual mandate [a requirement that all individuals purchase health insurance]. But there was mixed support for a mandate and operational challenges to implementing one in our state.
The policy is a testament to the work and commitment of our many stakeholders and legislature. Our goal is to achieve health care access for all, without people feeling that they are forced into a program. We also want to offer consumers affordable and value-based coverage. We developed MEEHP because it addresses these issues, which is a win-win for all.
How will the MEEHP work?
For the 2020 plan year, the marketplace will use data collected from state tax filings to complete a preliminary assessment of whether a person is eligible for Medicaid, CHIP, or a federal tax credit. The person will then be provided a list of resources to help them enroll in the coverage program for which they are eligible. In 2021, we plan to roll out an automatic enrollment feature (upon request) if the person qualifies for Medicaid or CHIP. If the person does not qualify for Medicaid or CHIP, they can enroll in marketplace coverage during a 35-day special enrollment period based on the date the marketplace received their information from the Office of the Comptroller )
At the marketplace, we are working very closely with the [state] Comptroller to implement this program, including transferring information between their department and our system. We now know the Comptroller’s office timelines and what they will need to have this ready for the upcoming tax season. Very early on, the marketplace and the Comptroller’s office began collaborating and that partnership is essential to ensuring we could meet fast-approaching deadlines.
Our current focus has primarily been on modifying our IT systems to operationalize the program. But we are also prioritizing working with stakeholders and other partners on how to message about the new program.
We are especially excited that this initiative gives us more robust information about Maryland’s uninsured population. It will help us target our outreach and inform our efforts to boost enrollment. We are trying to think of ways to make it easy for consumers to follow up and enroll in coverage.
How will Maryland’s new, value-based plans serve consumers?
As noted previously, the reinsurance program has led to a tremendous reduction in individual market premiums. However, while premiums have been going down, deductibles have been rising, leading to higher out-of-pocket health care spending by our consumers. We were concerned that consumers wouldn’t see the value of their coverage — if premiums and deductibles are too high, they will question whether it is worth purchasing coverage.
Under our value-based plan program, each carrier must offer at least one plan with a capped deductible for two metal levels in which it offers coverage ($1,000 for gold plans, $2,500 for silver). In addition, a bronze plan must cover at least three physician visits (primary care or specialists) prior to the deductible and the gold value plan must offer generic drugs before deductible.
We believe these requirements will help ensure that consumers can get value from their plans. Looking ahead, we will continue to refine our value-plan requirements. For example, we are looking at whether generic prescriptions should be covered pre-deductible, or with a separate deductible. We are also looking over how to improve coverage for diabetic populations.
What has been the key strategy to advancing these reforms so quickly in Maryland?
Maryland’s administration and legislature have a history of committing themselves to the improved health of Marylanders. For instance, even before passage of the Affordable Care Act, Maryland had enacted its own small group market reforms, including benefit requirements and a community rating standard. We are fortunate to have a lot of engagement from stakeholders and the administration on advancing further reforms.
Part of what drives innovation here is our global budget initiative, an all-payer model regulating hospital costs. The global budget underlies all our health systems and payers, so that anything that affects one part of our health care system reverberates throughout. The state does whatever it can to maintain this program, including actions to maintain our insurance markets, reduce our uninsured rate, and keep our uncompensated care costs down.
Which stakeholders have been especially helpful throughout your work?
Both of our health insurance carriers are always at the table and I appreciate the relationship we have built with them since establishment of the marketplace seven years ago. The marketplace and the carriers work together, proactively, to address concerns. We have a plan management stakeholder committee that includes all carriers and consumer advocates. They are one of the first groups we engage on any new initiative for the marketplace. We have discussions on how new policies will impact our insurers. I meet regularly with the CEOs of our health plans and discuss how we can work in partnership to affect overall health in our state. There were some challenges early on in our relationship, but the insurers have seen some benefits in working with us. For example, Kaiser Permanente’s market share has grown from 2 percent to 46 percent in our health insurance marketplace. Both of our insurers have seen significant growth overall.
We also have two groups that are focused specifically on consumer issues. What is important for us is to be as transparent and inclusive as possible. We know these issues effect populations statewide.
What advice would you offer to other states looking to enact similar reforms?
Establishing and building relationships with your stakeholders — consumer advocates, legislature, carrier community — is essential. It is important to approach reforms with a holistic view of what is going on with your markets and health systems. The insurance marketplace is one part of this wheel, but to really make changes on affordability and cost, we need everyone heading in the same direction. For example, I recognize the importance of our reinsurance program, but also acknowledge that other reforms will be necessary if we are going to have a long-term impact on health care costs.