States move forward with their own health care priorities

The new administration encourages states to go their own way

At the national level, debate over health care reform continues—but many states are already exploring immediate opportunities under existing law to achieve some health care reforms they have long sought.

Recent communications from the new administration indicate that, regardless of the ultimate outcome of national health reform, states are likely to have wide latitude in moving forward with their own Medicaid expansion health reform priorities. All they need to do is ask.

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Reshaping Medicaid

This raises the question: What are some states likely to ask for with regard to Medicaid waivers and Affordable Care Act (ACA) reforms? The Deloitte team has reviewed previous requests and proposals from states. The following is a snapshot of some of the requests we’ve seen that highlight the emerging trends in Medicaid reform and expansion proposals:

• Establishing work requirements for ‘able bodied’ adults as a condition of enrollment. A number of states have proposed attaching work requirements to Medicaid eligibility for ‘able-bodied’ adults. Such requirements could include completing a set number of hours of work, job searching, or job training.
• Increasing premiums and out-of-pocket costs. Currently, Medicaid expansion states can require certain beneficiaries to pay Medicaid premiums and may charge nominal out-of-pocket costs to some enrollees. Some states want to increase the amount they can charge and require a broader range of beneficiaries to pay these premiums and out-of-pocket costs.
• Dis-enrolling or locking-out individuals who breach conditions of enrollment. Indiana was the first state to receive approval from the Center for Medicare and Medicaid Services (CMS) to temporarily lock-out some individuals from Medicaid for failing to pay Medicaid premiums, and several other states have followed suit by seeking waivers with longer lock-out periods.
• Expanding residential behavioral health coverage. Under federal law, federal Medicaid funds can’t be used to pay “institutions of medical disease” (IMDs) with more than 16 beds for beneficiaries aged 21 to 64. Several states have called for lifting the so-called “IMD exclusion,” some arguing that lifting this Medicaid provision is necessary to address the opioid epidemic.

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The push for state insurance market stabilization

States have also expressed the desire to stabilize their individual insurance markets and control rising premiums. Some of the more notable proposals include:

• Lifting the requirement that marketplace plans must offer the 10 categories of essential health benefits (EHBs)
• Establishing high-risk pools
• Creating reinsurance programs for health plans operating on the exchange

The establishment of high-risk pools and reinsurance programs aren’t at odds with federal law. As a result, they do not require a waiver. However, with Section 1332 State Innovation waivers, states can reallocate their share of federal ACA dollars to help fund these programs. In contrast, changes to the EHBs would require a 1332 waiver, or could occur through administrative action at the federal level. For example, the administration can redefine an “EHB” and narrow the specific services covered.

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The takeaway: More variation, changing state-federal partnerships

One of the most salient trends in state Medicaid expansion is that the “patchwork quilt” of health care programs across the country is about to get even patchier, with greater state-by-state variation as individual states pursue their own priorities. However, even as they go their own way, states will continue to rely on federal agencies such as HHS and CMS for financial and technical support. It is the strength of these state-federal partnerships that will likely determine the success of state health reform efforts, now and in the future.

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About the Center for Government Insights

Our Center for Government Insights produces groundbreaking research to help government solve its most complex problems. Through publications, forums, and immersive workshops, we engage with public officials on a journey of positive transformation, crystallizing insights to help them understand trends, overcome constraints, and expand the limits of what is possible.

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