While most states expanding Medicaid (24 of 28) chose to do so by implementing a State Plan Amendment (SPA), several states pursued alternative models to expansion through 1115 waivers104. The states that have chosen to expand and their method of expansion are shown in Figure 26.
102 Kaiser Commission on Medicaid and the Uninsured, The Cost of not Expanding Medicaid, (July, 2013). 103 Kaiser Commission on Medicaid and the Uninsured, The Cost of not Expanding Medicaid, (July, 2013).
104 Kaiser Commission on Medicaid and the Uninsured, The ACA and Recent Section 1115 Medicaid Demonstration
Figure 26. Map of states that have expanded Medicaid as of December 1, 2014.105
The four states with approved 1115 waivers are Arkansas, Iowa, Michigan and Pennsylvania. In addition, CMS is currently reviewing Indiana’s waiver, while Utah and Tennessee are working toward alternative proposals. CMS approved Arkansas and Iowa utilizing premium assistance programs. These programs use Medicaid funds to purchase coverage in Marketplace Qualified Health Plans (QHPs) for all or some of the newly eligible beneficiaries (up to 138 percent FPL). Following Arkansas’ and Iowa’s approval, other states began developing similar approaches. Common themes among the alternatives include:
Reliance on the private insurance market
Exemptions from current Medicaid rules on cost-sharing, benefits, timelimits and work requirements
An emphasis on healthy behaviors and personal responsibility — in all states mandating premiums, the premiums will be eliminated or reduced for compliance with health behaviors106
Limits or contingencies on the expansion, including ending the expansion program if the federal government reduces its enhanced matching rate107
105 Source for State Map: http://www.medicaid.gov/medicaid-chip-program-information/program-
information/downloads/medicaid-expansion-state-map.pdf; downloaded 11/25/2014.
106 Kaiser Commission on Medicaid and the Uninsured, The ACA and Recent Section 1115 Medicaid Demonstration
“Under the premium assistance approach, states use Medicaid funds to purchase coverage for some or all newly eligible beneficiaries in Marketplace Qualified Health Plans (QHPs). States can implement premium assistance programs without a waiver, subject to certain rules. Arkansas and Iowa received waivers to allow them to mandatorily enroll beneficiaries in premium assistance. In Arkansas all newly eligible adults, including childless adults between 0-138% FPL and parents between 17-138% FPL, are enrolled in premium assistance. In Iowa, only newly eligible adults with incomes above 100% up to 138% FPL are enrolled in premium assistance.”108
When using an 1115 waiver to expand Medicaid, additional options can be chosen as long as the options are deemed acceptable by CMS. CMS will want to ensure that waivers are used to “promote the objectives” of the Medicaid program and are budget neutral for the federal government. In the waivers, these states indicate they are using premium assistance to test how private coverage works for Medicaid beneficiaries and whether enrolling beneficiaries in Marketplace coverage will increase provider access and reduce churning between Medicaid and Marketplace coverage due to income fluctuations. How premium assistance affects continuity of care, the impact on access to benefits, how well wrap-around coverage will work, how states will exempt people who are medically frail from their demonstrations, what the impact of premiums and cost sharing will be, and whether the demonstrations will be cost effective are key issues to monitor and are included in the evaluation requirements of these waivers. The various options selected by the four states with currently approved waivers are shown in Table 10.
Table 10. Alternative breaks out provisions from these alternative models.
State Premium Assistance Model Member Premiums (101%-138% FPL) Non-Emergency Medical Transportation (NEMT) Voluntary work search program for Eligibility
Arkansas Yes No In all years No
Iowa Yes Yes ($10/month) Cut in Year 1 No Michigan No Yes (2% of Income) In all Years Yes Pennsylvania No Yes (2% of Income) Cut in Year 1 No
In the three states charging premiums to recipients, Iowa, Michigan, and Pennsylvania, “premiums will not be imposed immediately. Iowa waives premiums in the first year of its demonstration. Under Michigan’s waiver, premiums were not to be imposed for at least six months after implementation of its expansion, and Pennsylvania’s waiver calls for premiums beginning in year 2. All three states would also allow individuals to have premiums waived or
107 Center for Health Care Strategies, Inc., Alternative Medicaid Expansion Models: Exploring State Options, (February,
2014).
108 Kaiser Commission on Medicaid and the Uninsured, The ACA and Recent Section 1115 Medicaid Demonstration
reduced based on compliance with healthy behavior incentives. In Iowa, healthy behavior incentives in year 1 include completing a health risk assessment and obtaining a wellness examination. In addition, beneficiaries in Iowa have a 90 day grace period to pay past-due premiums in full before termination of Medicaid coverage, and the state must waive premiums for beneficiaries who self-attest to financial hardship in paying the premiums. The Michigan waiver terms and conditions specify that individuals may not lose coverage for failure to pay premiums (or other copayments). In Pennsylvania, there is a 90-day grace period before disenrollment for failure to pay premiums, and beneficiaries may re-enroll without a waiting period.”109, 110
The post-ACA health care landscape makes the establishment of large-scale premium assistance programs a more affordable and realistic option for states for several reasons. First, state Medicaid programs have access to a significant influx of new funding: the federal government will pay 100 percent of the cost of expanding Medicaid between 2014 and 2016, and slowly reducing down to 90 percent thereafter. Second, the newly operational health insurance Marketplaces provide the infrastructure necessary to cover large numbers of beneficiaries in non-employer-based plans. The creation of Marketplaces are especially significant for states like Arkansas that lack a strong Medicaid managed care presence, as these states previously had no public or private plans available to cover Medicaid beneficiaries in a cohesive, organized fashion. Finally, Marketplace plans may cost less than many pre-ACA private options thanks to greater consumer purchasing power, more plan competition, and narrower networks.111
Each state must take into account all considerations, before deciding to pursue a premium assistance program approval from CMS. The anticipated benefits and downsides of expansion through premium assistance include:
Reduced Churn – Research suggests that of the estimated 96 million Americans eligible to
receive Medicaid or Marketplace subsidies during a given year, up to 29 million are likely to “churn” between coverage options, and seven million are likely to experience coverage shifts between Medicaid and Marketplace policies. Theoretically, if Medicaid- eligible individuals are enrolled in Marketplace QHPs instead of traditional Medicaid and their incomes rise above the Medicaid eligibility ceiling, they can stay in private coverage rather switch insurance plans and/or providers, resulting in better continuity of care. The states expanding through QHPs stated they will monitor this issue through their waiver.
109 Kaiser Commission on Medicaid and the Uninsured, The ACA and Recent Section 1115 Medicaid Demonstration
Waivers, (November, 2014).
110 The Pennsylvania expansion is currently scheduled to go into effect on January 1, 2015, but the newly elected
governor may opt to implement a straight-forward expansion via a state plan change instead of the waiver.
111 Kaiser Commission on Medicaid and the Uninsured, The ACA and Recent Section 1115 Medicaid Demonstration
Better Access to Providers – Individuals enrolled in private commercial plans may have better access to health care than traditional Medicaid beneficiaries, as more providers accept commercial insurance than Medicaid.
Higher Overall Cost – Medicaid is almost always cheaper than private plans, so any
proposal to cover individuals via private coverage instead of Medicaid should have a higher immediate price tag. In 2012, the Congressional Budget Office estimated that by 2022, the average person who enrolled in a marketplace plan instead of Medicaid would cost the federal government about $3,000 more ($9,000 vs. $6,000). Milliman estimated premium assistance programs to cost 20 percent to 40 percent more than traditional Medicaid programs, though the amount depends on a state’s provider reimbursement rates.112
Premium assistance is not the only model states are pursuing to expand Medicaid. Michigan, for example, will enroll its expansion population in public plans, but plans to require beneficiaries to deposit money into health accounts to actively participate in paying for their care, similar to a model used by Indiana. It is also working to create incentives for healthier behaviors among beneficiaries.