So What’s Wrong With Medicaid Waivers?

With the Bush Administration enticing states to convert their Medicaid programs to block grants through the use of mega-waivers (waivers under Section 1115 of the Social Security Act), many are asking what’s wrong with Medicaid waivers.  In fact, many point out, the disability community has advocated for and relied almost exclusively on the home and community based waiver program (Section 1915(c) of the Social Security Act) for the development of the home and community based service system over the last 2 decades.

 To get to the heart of the issue requires a closer look at what is being waived.  In home and community based waivers there are two distinct sets of waivers.  The first is the waiver of institutional requirements.  The second is the waiver of basic requirements that support the individual entitlement in Medicaid.  Below is a simplified way to look at the waivers to assist in understanding the potential dangers in unlimited waivers.

 Waiver of Institutional Requirements

 Home and Community Based Services (HCBS) waivers allow states to receive federal matching funds for services for which they otherwise could not receive matching payments, but only for people at risk of institutional care. HCBS waivers allow states to limit the provision of these “otherwise not matchable” services to certain areas of the state and to a specified number of qualified individuals.  These waivers do not allow the reduction of benefits or increases in cost-sharing to currently eligible populations.

Another way to view the HCBS waiver is as a waiver of institutional requirements.  This is what most advocates think of when they think of the waiver.  Basic Medicaid mandatory and optional services for long term services and supports in Medicaid are available in institutional settings, such as nursing homes or Intermediate Care Facilities for people with mental retardation or related conditions (ICFs/MR).  Home and community based waivers allow the state to serve people, who are otherwise eligible for the nursing home or ICF/MR, in their own homes or group homes without following all of the requirements for certification of the institutional facilities.  In this way, home and community based waiver services are able to avoid the facilities portion of institutional setting and character.  The waiver has also been used to close specific state institutions and provide services in the community, a major goal of disability advocates. However, there remain numerous concerns regarding adequacy of quality assurance mechanisms for home and community based waiver services as well as for institution based services.  CMS has only recently begun, largely in response to pressure from Senator Grassley and advocates, to work systemically on the quality issues. 

Waiver of Basic Medicaid Requirements

In the Medicaid program, there are certain basic requirements that states must follow.  There are five broad “categorical” coverage groups: children; pregnant women; adults in families with dependent children; people with disabilities; and the elderly.  Generally, people with disabilities receiving Supplemental Security Income (SSI) are considered “mandatory beneficiaries” and states can add people with disabilities above SSI income and resource levels as “optional” beneficiaries.

States are required to provide certain mandatory services, such as hospital, physician, nursing home services, laboratory services, and Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) services.  States can also choose to offer optional services, including prescription drugs, physical therapy and related services, diagnostic, screening, and preventive services, case management services, prosthetic devices, personal care services, rehabilitative services, dental and vision care, ICF/MR services, and hospice care.

At a minimum, states must offer mandatory services to the mandatory eligibility groups.  Generally, when states add optional services or populations to their Medicaid plans, they must make available to any eligible person any of the services the individual needs (except for people eligible as medically needy or under a waiver).  

Several Medicaid program requirements combine to give life to the individual’s entitlement: if the state offers a service that an eligible person needs then the person is entitled to receive that service.  Medicaid requires the state to ensure the following:

• Amount, duration, and scope – Each service category that a state covers must be “sufficient in amount, duration, and scope to reasonably achieve its purpose”.  This applies to both mandatory and optional services.
• Comparability – Medicaid benefits offered to one categorically eligible group must be comparable in amount, duration, and scope to those offered to other categorically eligible groups.  For mandatory services, states may not discriminate on the basis of diagnosis, type of illness, or condition.
• State-wideness – Services must be offered throughout the state.  States cannot vary the amount, duration, and scope of services based on the individual’s residence.
• Reasonable promptness – Some courts have ruled that the requirement to serve eligible people in a reasonably prompt manner requires services within 90 days or other specified time period.

The home and community based waiver program allows states to waive these basic Medicaid requirements.  It allows the state to waive the requirements to provide services statewide in a comparable manner.  These waivers undercut the individual entitlement to services and are the source of the waiting lists in many states for home and community based services. 

Thus, the home and community based services waivers present both good news and bad news to people with disabilities and their families.  Waiver of the institutional requirements (or allowance of “otherwise not matchable” services) take services in the desired direction for more consumer-focused, individualized services in the person’s own community.  On one hand, the limitations on state-wideness and comparability have contributed to limitations on the individual entitlement to services and the growing waiting lists for community services across the country.  On the other hand, it is possible that states would not have used the home and community based waivers so aggressively if they had not been able to waive the requirement of state-wideness.

What About Section 1115 Waivers?

Section 1115 demonstration waivers, including the Bush Administration’s new Health Insurance Flexibility and Accountability (HIFA) waivers, allow states to cover people who are not normally coverable under the Medicaid program.  Under current Administrative interpretations, Section 1115waivers also allow states to reduce benefits and increase cost sharing to currently eligible populations, without an expansion of coverage for any services for anyone.  Also, the 1115 waiver authority -- as currently interpreted -- allows the imposition of global caps on certain populations in order to "pay for" expansions.  Press accounts suggest that the Governors of certain states are now negotiating with the Secretary, with little or no public input, to use the waiver to convert their entire Medicaid programs into a block grant.  Many advocates believe that the Administration does not have the legal authority for the breadth of the waivers it is granting.  Some litigation is expected to challenge the Administration’s authority.

While states would like new ways to limit services and pick and choose which optional populations get certain services, people with disabilities and their families believe the current Medicaid program requirements, including the requirements of state-wideness and comparability, protect their access to vital health and long term services and supports.  Allowing broad waivers of basic Medicaid program requirements will undermine entitlement to services for people with disabilities and result in the loss of access to vital supports.

Coupling these broad waivers with caps on federal Medicaid spending creates Medicaid program block grants at the state level.  The Administration’s current waiver initiatives raise concerns about the coupling of waivers with global caps on the states’ Medicaid spending.  In the Fiscal Year 2004 budget, the Administration proposed giving states broad flexibility, similar to broad waiver authority, over the Medicaid program along with limits in federal spending on the state’s Medicaid program as a whole.  While the Administration did not propose the same initiative again in FY 2005, the budget indicates willingness to work with Congress to achieve such legislative changes.  In addition, the Administration is promoting use of the Section 1115 waivers to achieve such purposes without legislative change.  Global caps on Medicaid spending would mean that the states would bear all the risk of increased expenditures for such events as expansions in their eligible population, expansions in services, changes in the economic conditions in the state, and unforeseen public health crises.

Written by Marty Ford in collaboration with Jeff Crowley, Steve Eidelman, Paul Marchand, Liz Savage, and Andy Schneider

March 2004