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March 2003
The U.S. Department of Health and Human Services invited states to participate in the Health Insurance Flexibility and Accountability demonstration initiative beginning August 4, 2001. The purpose of the initiative is to expand health insurance coverage to the uninsured within currently available Medicaid and State Children's Health Insurance Program (SCHIP) resources. The initiative is targeted to people below 200 percent of poverty and offers states new flexibility in Medicaid and SCHIP. The waiver encourages statewide reforms to coordinate private and public health insurance coverage and provides for less restrictive rules regarding cost sharing and benefits design. The Centers for Medicare and Medicaid Services (CMS) will accept state applications to reform Medicaid, SCHIP, or a combination of both programs that are consistent with the HIFA initiative goals. This initiative is an 1115 waiver of Medicaid and SCHIP, which allows states to waive certain requirements of the laws to experiment with new ideas for improving the programs. Unlike waiver applications in the past that may have involved daunting documentation and administrative time, HIFA is guaranteeing a simple application process and an expedited review for those states that meet the criteria.
Background
Three separate eligibility groups in the Medicaid and SCHIP programs are identified for the purposes of the HIFA demonstration3/4 mandatory, optional and expansion populations.
- Mandatory populations
consist of groups of people whose coverage is required by the state's Medicaid plan. Examples of people in this eligibility group include a child under age 6 or a pregnant woman with family income up to 133 percent of federal poverty guidelines.
- Optional populations
refer to people who can be covered under Medicaid or SCHIP without an 1115 waiver, regardless of whether the state already covers them or not. Examples of people in this group include a five-year-old child in a family with an income above 133 percent of federal poverty guidelines, a person with disabilities whose income is above federal Supplemental Security Income (SSI) levels or a pregnant woman with a family income above 133 percent of federal poverty guidelines.
- Expansion populations
include groups of people that are not eligible for Medicaid or SCHIP without an 1115 waiver. A non-disabled adult without children is an example of someone in this eligibility group.
(See the attached tables for additional information on mandatory and optional populations)
The HIFA waiver targets populations with incomes below 200 percent of federal poverty guidelines, but has no upper income threshold. Income is defined in the HIFA guidance as "gross income". However, the approved Arizona waiver uses "net income" for eligibility determination so this appears to be a flexible issue. Many states have already expanded their public programs to certain populations with family incomes at 200 percent of federal poverty guidelines or more. For example, SCHIP covers many children in families with incomes up to 200 percent of poverty. For those states, a HIFA waiver application must demonstrate that their existing programs already provide coverage to the targeted population and that covering people over 200 percent of poverty will not encourage people to drop private health insurance coverage.
Benefits
The waiver gives states new flexibility to alter their usual Medicaid benefit package for the optional and expansion populations. However, states will not be allowed to change benefit packages for the mandatory populations. For optional populations, the state is required to choose one of the approved SCHIP benefit packages identified in Title XXI or use the SCHIP option for "actuarially equivalent" or "secretary-approved" benefit packages. The benefits package, at a minimum, must include basic services such as inpatient and outpatient hospital services, physicians' ssurgical and medical services, laboratory and x-ray services, well-baby and well-child care, and age appropriate immunizations. States can alter the benefit package by putting upper limits on utilization or eliminating certain optional services, such as prescription drug services, chiropractic services, prosthetic devices, hospice or home health care services for individuals who do not need nursing home care.
The greatest flexibility is offered at the expansion population level where the benefit package is required to include only basic primary care services, such as health services provided by a primary care doctor, an OB/GYN, a pediatrician or an internal medicine physician.
States have a great deal of benefit flexibility for adults in premium assistance programs. CMS does not require documentation of benefits for this population. However, states must document that children covered under a premium assistance program are receiving benefits that compare to a benchmark established for optional populations as described above.
Currently, the majority of Medicaid spending (65 percent) is for optional eligibility groups and optional benefits. Only 35 percent of Medicaid spending is for mandatory services for mandatory groups.
(See the attached tables for additional information on optional benefits.)
Cost Sharing
With existing Medicaid and SCHIP regulations, states may require cost sharing for some Medicaid beneficiaries. Cost sharing may include enrollment fees, premiums, deductibles, coinsurance, copayments or similar charges. States may not require cost sharing for mandatory populations of children and pregnant women. However, states may require the elderly, people with disabilities and non-pregnant adults (eligible through section 1931) to pay up to $2.00 per month deductible, a co-payment range of $.50 to $3.00 for certain services (some services are exempt) and co-insurance of up to 5 percent of the state's payment rate. States can charge premiums for certain people with disabilities who are working and for the medically needy population. Many states currently require some cost sharing in their SCHIP and statewide Medicaid 1115 demonstration programs and, to a more limited degree, in their Medicaid programs.
HIFA allows states to define a cost-sharing program for optional and expansion populations with little restriction. However, cost sharing for all children may not exceed 5 percent of the family's income, which is the same guideline for SCHIP. In cases where an entire family is covered, this guideline applies to the money spent on medical services for the individual child, such as copayments for a visit to the child's pediatrician.
(See the attached tables for additional information on cost sharing.)
Private Health Insurance "Buy-Ins"
Medicaid and SCHIP allow states to subsidize employer-sponsored health insurance for people eligible for the programs. In theory, this allows the state to lower the cost of insuring a person by the amount that the employer pays for the insurance. In practice, there are only a handful of states with experience in premium assistance programs either through the Medicaid Health Insurance Premium Payment program or through SCHIP. Current Medicaid and SCHIP rules require cost-effectiveness tests, (documentation to show that the "buy-in" program is not costing the state and the federal government more money than would be spent if the person was enrolled in the public program) and close scrutiny of the employer's benefit package. Many states felt that the administrative work involved in a "buy in" program was not worth the potential savings.
Little research exists on premium assistance programs and there is little data to show that the money saved by sharing the cost with the employer exceeds the amount of money spent on administering and evaluating the program. However, there is evidence to suggest that premium assistance programs may improve outreach and enrollment to those people who are concerned with the stigma associated with public programs.
The HIFA demonstration initiative places strong emphasis on coverage through private health insurance and allows states more flexibility with benefit packages and cost sharing requirements with premium assistance programs than the rules for Medicaid and SCHIP. Under Hthe HIFA, the Administration guidance encourages states to submit proposals that that include premium assistance programs for individuals whose employer offers insurance or for individuals able to pay a portion of a private individual health insurance policy. HIFA does not require a cost effectiveness test for premium assistance programs but requires states to monitor aggregate costs for those enrolled in theses programs to ensure that they are not significantly higher than costs would be if under a direct coverage program.
The HIFA guidance very clearly outlines that Medicaid and SCHIP expenditures are not intended to replace employer contributions to their employee's health coverage or an individual's contribution to an individual policy. Therefore, HIFA requires states to present a plan for preventing substitution of private coverage with public coverage but does not provide exact guidance for this plan, as was the case with SCHIP. The regulation for SCHIP requires a six-month waiting period without insurance prior to enrolling in a premium assistance program.
Budget Neutrality
HIFA demonstrations must be "budget neutral", which means that the costs to the federal government over the life of the demonstration may be no more than would have been spent in the absence of the demonstration. The HIFA guidance includes guidelines for negotiating budget neutrality agreements with states. States will need to save money with HIFA reforms (or as a result of HIFA reforms) or use unspent federal SCHIP money to finance any insurance coverage expansions. States may find these savings by:
- Creating less expensive benefit packages for their optional and expansion populations that more closely resemble the private market.
- Implementing a premium assistance program, which potentially could generate revenue from the employer share of the premium (although the research is not conclusive on this).
- Experiencing potential savings on indigent care funding to hospitals (disproportionate share payments) since more people will have access to primary care through the health insurance expansion.
- Spending down the state's SCHIP allotment, if the state has unspent federal dollars because of lower costs or lower enrollment for the program.
Waiver Approval
CMS is expediting the waiver approval process to 90 days if the state submits a proposal that meets all the requirements. HIFA projects may be approved initially for a period of five years beginning with the date of implementation. After the initial approval, states need to request an extension every three years.
Reporting and Evaluation
Upon submission, state proposals must include the following five components:
- Current rates of the state's uninsured and a projection of future rates.
- An estimate of people covered by health insurance, categorized by source. For example, Medicaid and SCHIP coverage, employer coverage, COBRA and private insurance.
- The state's comprehensive strategy to decrease the number of uninsured, and their goals for coverage.
- A plan to track changes in the uninsured rates and trends within the coverage sources mentioned above.
- Evaluation criteria the state plans to use in determining its HIFA demonstration's effectiveness. Performance should be measured with issues such as access to care, quality of care and outcomes.
HIFA demonstration initiatives will be evaluated by state progress reports and independent evaluations. States must submit progress reports within six months of each demonstration year. The reports should address the state's uninsured rates, the effectiveness of its approach, any effects on employer coverage, other contributing factors, and progress on their identified performance measures. An independent contractor will be procured by the Centers for Medicare and Medicaid Services to perform an independent evaluation. This evaluation will assess the different outcomes of the approaches used by different states. The evaluator will also determine the overall effectiveness of the HIFA demonstration in decreasing the rate of uninsured people.
Helpful Site to Visit
Centers for Medicare and Medicaid Services HIFA site: http://cms.gov/hifa/default.asp |
