Guidance from HHS and Treasury sets a high bar for 1332 waiver approvals; Kentuckians support Medicaid expansion and their State Marketplace despite plans to change course; and South Dakota's executive budget includes funds for Medicaid expansion.

FEDERAL AND STATE HEALTH REFORM NEWS:

HHS and Treasury Release Guidance on Evaluating 1332 Waiver Applications

The Department of Health and Human Services (HHS) and the Treasury Department released joint guidance describing standards for reviewing State Innovation Waiver applications. The waivers—also called 1332 waivers—permit states to waive certain ACA requirements related to Marketplaces, federal subsidies, qualified health plans, and the individual and employer mandates, contingent on meeting certain statutory "guardrails." New details about the statutory guardrails appear to limit the types of 1332 waivers that can be approved. Significantly, the guidance requires states to consider the waiver alone when calculating its impact on the federal deficit, limiting states' abilities to incorporate potential Medicaid savings into calculations. Additionally, states are required to consider the impact on the state as a whole and on subgroups (such as the poor and elderly) to ensure each subgroup is not negatively impacted for comprehensiveness, affordability and coverage. Finally, the guidance notes that HHS and the Treasury will not be able to customize Federally-facilitated Marketplace and IRS practices and procedures for specific state waivers.

Focus Increasing on Higher Individual Shared Responsibility Payments in 2016

In an effort to encourage enrollment during the final week to sign up for coverage beginning January 1, attention on the penalty for not having health insurance has increased, first with a blog post from CMS. The post reminds individuals that the 2016 penalty is $695 per person or 2.5% of household income, whichever is higher, an increase from $325 per person or 2% of household income in 2015. It also reiterates that there will be no special enrollment period during tax filing time for individuals subject to the penalty. A Kaiser Family Foundation report released last week estimates that the average household penalty in 2016 will increase 47% to $969. The report's authors also estimate that of the 11 million uninsured eligible for Marketplace coverage, approximately one-third could purchase a bronze plan for less than the cost of paying the penalty.

Idaho: Administration Developing Proposal to Provide Basic Primary Care to Individuals in Coverage Gap

Governor C. L. "Butch" Otter's (R) administration is developing a State-funded proposal that would cover basic primary care for the approximately 78,000 Idaho residents who earn too much to qualify for Medicaid but not enough to qualify for federal tax subsidies to help them purchase health insurance through the State's Marketplace, according to local media. The preliminary plan, which is being fine-tuned for potential consideration during the 2016 legislative session, would not cover emergency room visits, acute care, hospitalizations, or prescription drugs. Given the State's opposition to Medicaid expansion, supporters of the proposal say it is a means of providing timely, cost-effective primary care to the indigent population in order to avoid more costly acute care. The State is exploring possible funding options, such as higher tobacco taxes, for the plan, which is projected to cost approximately $30 million annually.

Kentucky: Poll Suggests Residents Support Maintaining Medicaid Expansion and State-Based Marketplace

Over 70% of Kentuckians support maintaining Medicaid expansion in its current form rather than modifying it to cover fewer people, according to a new poll conducted by the Kaiser Family Foundation. The same poll also found that a majority of Kentuckians (52%) would prefer to keep Kynect, the State's health insurance Marketplace, rather than moving to the Federally-facilitated Marketplace (FFM). One-quarter of respondents would prefer to switch to the FFM, while most of the remainder were uncertain. Governor Matt Bevin (R) has not released his plan for Medicaid expansion, but has often stated that he intends to scale back the program. In his inauguration speech on Tuesday, he also reiterated his commitment to dismantling Kynect.

MEDICAID EXPANSION UPDATES:

Kansas: Study Highlights Budget Neutrality of Medicaid Expansion

A Manatt study commissioned by the Kansas Grant makers in Health concluded that if Kansas were to expand Medicaid, it may generate sufficient savings and revenue gains to cover the costs of expansion between 2016 and 2020. The State had earlier concluded that expansion would cost an average of $53 million from 2016 through 2020. The study found that the State would likely generate substantial savings and revenue as a result of expansion in excess of costs by: reducing State general fund expenditures for services that Medicaid would cover, accessing enhanced federal matching funds for populations eligible for Medicaid pre-expansion, and realizing increased revenue from the State's HMO privilege fee. Three expansion bills have been introduced in the legislature, though none have made it to a vote.

Louisiana: Governor-Elect Requests Medicaid Expansion Plan from Newly-Established Healthcare Transition Committee

Governor-elect John Bel Edwards (D) tasked his newly-formed healthcare transition committee with developing a Medicaid expansion plan, as well as evaluating the State's charity hospital and Medicaid managed care systems. The 44-member committee includes stakeholders and advocates across the healthcare spectrum and will be chaired by Ronnie Goux, President of the Louisiana Nursing Home Association, and Gary Wiltz, CEO of Teche Action Clinic. The committee's Medicaid expansion plan will come in addition to the analysis of Medicaid expansion options the Department of Health and Hospitals is developing at the behest of the State Senate Finance Committee.

South Dakota: Governor Supports Medicaid Expansion in Budget Address

In his fiscal year 2017 budget address, Governor Dennis Daugaard (R) expressed his continued support for Medicaid expansion, as long as State general funds are sufficient to cover State costs. Governor Daugaard referred to a plan he unveiled earlier this year that shifts costs that the State currently incurs on Medicaid services through the Indian Health Services (IHS) to the federal government. The Governor estimates annual State savings of $67 million in IHS-related Medicaid costs, which is enough to cover the $57 million estimated cost of Medicaid expansion in 2021, when the federal match rate for expansion drops to 90%. While the Governor noted that expansion is "not a done deal," his 2017 budget proposal includes $373 million in additional federal funding and 55 full-time State employees to assist with enrolling over 50,000 individuals into the program.

FEDERAL AND STATE MARKETPLACE NEWS:

State-Based Marketplaces Self-Sustainable, According to CMS Official

The Acting Administrator for CMS, Andy Slavitt, testified before the United States House Committee on Energy and Commerce that all State-based Marketplaces (SBMs) have sufficient funding sources to be self-sustaining, reports Bloomberg News. As of 2015, SBMs could no longer rely on establishment funding, also known as 1311 grants, for continued operation and were required by law to be self-sustainable. Slavitt defended CMS's processes for distributing the grant funding, testifying that CMS conducted close reviews of SBM expenditures and that the agency has denied the use of federal funds 69 times this year and recouped more than $200 million from SBMs for using establishment funding inappropriately on operating expenses.

CMS Announces Automated Payment Process for Federally-Facilitated Marketplace Insurers

Beginning in January 2016, CMS will implement an automated payment system that will enable Federally-facilitated Marketplace (FFM) issuers to receive advanced payments that were previously remitted through a manual process. While the manual process required FFM issuers to self-report enrollment and payment amounts, the new system will use data from the FFM to determine the appropriate payment amounts. Insurers will undergo a readiness evaluation before beginning to receive the automated payments and those deemed not ready will have 25% of their payments withheld through June and 50% of payments withheld beginning in July.

Maine: Co-op Freezing Enrollment Beginning January 1, 2016

Community Health Options (CHO), the only profitable ACA co-op, announced that it will freeze enrollment in individual plans starting January 1, 2016. Current CHO enrollees will still be able to renew coverage for 2016, and CHO, which has over 80% of the State's Marketplace enrollment, will continue to accept new enrollments through December 26. CHO has not frozen enrollment in its small group plans, which will remain on the Marketplace. According to the Bureau of Insurance, the co-op experienced substantial losses in the third quarter due to higher than expected enrollment and claims.

MORE STATE MEDICAID & CHIP ACTIVITY:

Connecticut: Legislature Reduces Funding Cuts to Hospitals in Special Session Budget Deal

Hospital budget cuts were reduced from $64 million to $30 million under a new budget deal passed during a legislative special session called to address a projected State budget deficit for the current fiscal year. The restoration of funds accounts for roughly half of the Medicaid funding cut in September by Governor Dannel Malloy (D) as part of emergency budget balancing measures, and follows a media campaign by the Connecticut Hospital Association to restore those cuts. The $30 million reduction will be applied in the State's current and next fiscal years.

Iowa: 'Safe Harbor' Period Extended to April 1 in State's Transition to Managed Care

Governor Terry Branstad (R) announced that the "safe harbor" period for Medicaid providers to receive full reimbursement under Iowa's managed care delivery system will be extended to April 1, 2016. Under the extension, providers will continue to receive 100% reimbursement at current Medicaid rates for Medicaid-covered services regardless of whether they have signed up with a managed care organization under the State's new managed care delivery system, set to take effect January 1, 2016 pending CMS approval. Branstad said the safe harbor extension would give providers and beneficiaries additional time to transition to the new system.

Oklahoma: Medicaid Budget Proposes Cuts to Provider Reimbursement Rates

The Oklahoma Health Care Authority (OHCA) presented a no-growth 2017 budget request to a Senate appropriations committee that includes a 3% reduction in provider reimbursement rates in response to the State's overall budget shortfall, estimated to be between $600 million and $1 billion. OHCA estimates the lower rates will save the agency $20 million. Some services are excluded from rate reduction, including those financed through other State agencies' funds, those provided under a waiver, and those where a service reduction "could severely limit access or not cover costs." The new budget also cuts the medically fragile waiver program rate by 3%, cuts some Medicare nursing home coinsurance payments from 75% to 20%, creates a telemedicine billing code, and sets an approved rate for telemedicine services. If approved by the Senate, the new rates would go into effect January 1.

Pennsylvania: Lawmakers Vote to Renew and Transition CHIP from Insurance Department

The Legislature voted to extend the Children's Health Insurance Program (CHIP) for two years, and to transition it from the Insurance Department to the Department of Human Services. Supporters of the bill reasoned that because CHIP and Medicaid eligibility determinations will now be housed in the same agency, the programs will be better able to serve children when their families' income fluctuates and necessitates a move between CHIP and Medicaid coverage. The change will not impact eligibility, benefits, coverage, or provider networks for children currently in the program. Governor Tom Wolf (D) has indicated that he will sign the bill.

STATE STAFFING UPDATES:

Kansas: Governor Names Interim Secretary for Department of Aging and Disabilities

Governor Sam Brownback (R) named Tim Keck as the Interim Secretary of the Department for Aging and Disability Services, which oversees the State's behavioral, home, and community-based services programs for older adults and individuals with disabilities. Keck has served as Deputy Chief Counsel of the Kansas Department of Health and Environment since 2011.

Utah: Medicaid Director Stepping Down

The Department of Health announced that State Medicaid Director Michael Hales is stepping down to pursue opportunities in the private sector. Mr. Hales has served in the position for ten years, overseeing significant initiatives such as the implementation of the Medicaid Preferred Drug List and Medicaid's conversion to accountable care organizations. Nate Checketts, the current Medicaid Deputy Director, will assume the position on December 31 until the Department of Health completes a search for a replacement.