New flexibility for states to improve Medicaid and implement innovative practices

New rules will make Medicaid more flexible and efficient, helping states provide better care and lower costs

The U.S. Department of Health and Human Services (HHS) today announced four initiatives to give states more flexibility to adopt innovative new practices and provide better, more coordinated care for people with Medicaid and Medicare while helping reduce costs for states and families. The initiatives support the Obama administration’s work to make Medicaid more flexible and efficient and to address long-term cost growth. Several of the announcements also help implement provisions of the Affordable Care Act. Today HHS announced:

* Fifteen states will receive federal funding to develop better ways to coordinate care for people with Medicare and Medicaid coverage, also known as dual eligibles, who often have complex and costly health care needs.
* All states will receive increased flexibility to provide home and community-based services for more people living with disabilities.
* All states are eligible to receive more money to develop simpler and more efficient information technology (IT) systems to modernize Medicaid enrollment.
* A proposal by the state of New Jersey for flexibility to expand health coverage for nearly 70,000 low-income residents has been approved.

“Medicaid programs provide health coverage for millions of low-income Americans who otherwise would lack access to health care,” said HHS Secretary Kathleen Sebelius. “With these new resources and flexibilities, states will have new options to make their Medicaid programs work better for the people they serve, while helping lower their costs.”

Coordinated Care for People with Medicare and Medicaid

Under a new initiative funded by the Affordable Care Act, 15 states will receive up to $1 million each to develop new ways to meet the often complex and costly medical needs of the approximately nine million Americans who are eligible for both the Medicare and Medicaid programs, known as “dual eligibles.” The goal of the program is to eliminate duplication of services for these patients, expand access to needed care and improve the lives of dual eligibles, while lowering costs. The new Federal Coordinated Health Care Office, or the Duels Office, at the Centers for Medicare & Medicaid Services (CMS), was created by the Affordable Care Act to improve care for dual eligibles and will work with the states to implement the top strategies to coordinate primary, acute, behavioral and long-term supports and services for dual eligibles, improving quality and lowering costs.

The 15 states that will receive these funds are California, Colorado, Connecticut, Massachusetts, Michigan, Minnesota, New York, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, Vermont, Washington and Wisconsin.

“Beneficiaries who are in both Medicare and Medicaid can face different benefit plans, different rules for how to get those benefits and potential conflicts in care plans among providers who do not coordinate with each other,” said Donald M. Berwick, M.D., administrator of CMS. “This can be disastrous for those beneficiaries who are most vulnerable and in need of help.”

Helping People with Disabilities Live in their Communities

CMS proposed new rules today giving states new flexibility for their programs to help people with disabilities choose to live in their communities rather than in institutions. The proposed rules reduce administrative barriers for states seeking to help multiple populations, which may include seniors and/or people with different types of disabilities. They will also allow individuals to participate in the design of their own array of services and supports, including such things as personal care and respite services for caregivers.

“These long awaited rules will help people living with disabilities realize the promise of the ADA to live in the least restrictive environments possible for them—like their own homes,” said Henry Claypool, director of the Office on Disability at HHS. “With these new tools as well as incentives included in the Affordable Care Act, states, working closely with advocacy groups, beneficiaries, and other stakeholders, can more easily develop effective plans to improve options for people with disabilities. We hope states will take advantage of this new flexibility.”

The proposed rule, CMS-2296-P, can be found at www.ofr.gov/inspection.aspx.

Developing and Upgrading Medicaid IT Enrollment Systems

New rules issued today will provide 90-percent of the cost for states to develop and upgrade their IT systems to help people enroll in Medicaid or the Children’s Health Insurance Program (CHIP) – and 75-percent of ongoing operational costs. This increase over the previous federal matching rate of 50-percent will help states prepare for the Medicaid improvements and expansion that will come in 2014 from the Affordable Care Act, when many more Americans will be eligible for these programs, and to coordinate enrollment with the Exchanges. The rules establish performance standards for the improved eligibility systems to promote greater efficiency and a more consumer-friendly enrollment process.

The final regulation, CMS-2346-F, can be found at www.ofr.gov/inspection.aspx.

Expanding Health Coverage in New Jersey

HHS Secretary Kathleen Sebelius today approved a Section 1115 demonstration for New Jersey that will expand health coverage to nearly 70,000 uninsured, low-income people through the Work First New Jersey program. In addition, the state will increase care coordination to improve health outcomes for participants in the program.

“This demonstration is yet another example of the many flexibilities states have to adapt their Medicaid programs to better serve their residents,” said Secretary Sebelius. “I want to commend New Jersey for expanding coverage to people in need.”

For more information about these announcements, visit www.cms.gov/apps/media/fact_sheets.asp.

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The Affordable Care Act: Supporting Innovation, Empowering States

On February 28, President Obama reiterated his belief that States should have the power and flexibility to innovate and find the health care solutions that work best for them and announced his support for accelerating State Innovation Waivers and allowing states to apply for them starting in 2014.

Beginning in 2017, the law allows States the flexibility to receive a State Innovation Waiver so they may pursue their own innovative strategies to ensure their residents have access to high quality, affordable health insurance. These strategies – which must provide affordable insurance coverage to at least as many residents as the Affordable Care Act and must not increase the federal deficit – could include allowing large employers to purchase coverage through State Exchanges or increasing the number of benefit levels to provide more choices for individuals and small businesses.

Under the bipartisan “Empowering States to Innovate Act” introduced by Senators Ron Wyden, Scott Brown, and Mary Landrieu, State Innovation Waivers would be available three years earlier than under current law, so long as States meet certain criteria, including certifying that their proposals would cover at least as many of their residents as the policies in the Affordable Care Act would have covered.

The proposal offers States more flexibility while ensuring that all Americans, no matter where they live have access to affordable, accessible health insurance. Additionally, the proposal includes built-in protections to ensure that these waivers do not increase the Federal budget deficit.

The Affordable Care Act already creates a critical role for States. It provides them with the flexibility and resources necessary to innovate and implement reform in the manner that works best for them. The law has already made nearly $2.8 billion available to states and every State has taken steps – and, in some cases, bold actions – to implement the law and improve health insurance accountability and affordability for their citizens. States can design their own Exchanges, shape their Medicaid programs, and take the lead in enforcing patient protections and reviewing rates increases of private insurers.

Empowering States to Innovate

Under the Affordable Care Act, State Innovation Waivers allow States to propose and test alternative ways to meet the shared goals of making health insurance affordable and accessible to all Americans, including those living with pre-existing conditions. Specifically, State Innovation Waivers are designed to allow States to implement policies that differ from the new law so long as they:

• Provide coverage that is at least as comprehensive as the coverage offered through Exchanges – a new competitive, private health insurance marketplace.

• Make coverage at least as affordable as it would have been through the Exchanges.

• Provide coverage to at least as many residents as the Affordable Care Act would have provided.

• Do not increase the Federal deficit.

State Innovation Waivers are provided for up to five years, with the option of renewal. If a State’s innovation fails to meet the criteria outlined above, the policies outlined in the Affordable Care Act would take effect.

Potential State-Based Innovations

The Affordable Care Act offers considerable flexibility to States without waivers. It also recognizes that new, creative effective ideas may emerge. While States have the freedom to develop their own proposals that may qualify for a State Innovation Waiver, some proposals that could qualify include:

* A streamlined system that links tax credits for small businesses with tax credits for low-income families.
* Alternatives to the individual responsibility provision – such as automatically enrolling individuals in health plans – that achieve similar outcomes.
* Alternative health plan options to increase competition and provide consumers with additional choices.
* An increase in the number of benefit levels to provide more choices for individuals and small businesses.
* Immediately allowing large businesses interested in doing so to purchase health insurance through the new private marketplace, the State-based health insurance Exchange.

The law also allows States to submit a single application that includes Medicaid waiver requests which could, for example, seek to give people eligible for Medicaid the choice of enrolling in Exchange plans.

Maintaining Important Consumer Protections

The Affordable Care Act ends the worst insurance company abuses and gives Americans more freedom and control over their health care choices. Already, under the law, most insurance companies:

• Cannot impose lifetime limits on the dollar amount they will spend on health benefits.

• Must offer young adults without access to job-based coverage the option of remaining on their
parent’s plan until their 26th birthday.

• Must cover recommended preventive services without cost sharing.

• Must allow patients to choose their own doctor in their network.

• Cannot drop your coverage solely due to your getting sick.

• Must spend at least 80 percent of premium dollars on health care, rather than executive salaries
and administrative costs.

Starting in 2014, insurance companies cannot charge more, carve-out benefits, or deny coverage because of a pre-existing condition. States that receive a State Innovation Waiver would be required to maintain these important consumer protections that prevent insurance companies from denying, capping or limiting care.

Waiver Evaluation

Under the Affordable Care Act, the Secretaries of Health and Human Services and Treasury are responsible for evaluating State Innovation Waiver applications and ensuring proposals will meet the shared goals of making health insurance affordable and accessible to all Americans, including those with pre-existing conditions. Under the proposed legislation, the Secretaries would continue to play this role and be empowered to grant waivers beginning in 2014. Once complete, State Innovation Waiver applications must be reviewed within 180 days of being received. The Departments of Health and Human Services and Treasury will issue proposed regulations outlining the process for applying for a State Innovation Waiver this spring. The Departments will accept public comment, including comments from States, on this proposed regulation.

President’s Plan to Cut Red Tape, Give States Flexibility

President Obama will also take an additional important step to help States, improve outcomes, and lower costs for the American taxpayer. This week, the President will issue a memorandum directing Executive Departments and Agencies to work with State, Tribal, and local governments to reduce unnecessary regulatory and administrative burdens in order to focus resources on achieving better outcomes at lower cost. In this memorandum, the President is:

* Instructing the Director of OMB to lead a collaborative process of Federal agencies, State, Tribal, and local governments to coordinate and streamline procedures that cut across agency, program and geographic bounds.

* Requiring agencies to work closely with States, Tribes, and local governments to identify administrative, regulatory, and legislative barriers in Federally-funded programs that currently prevent them from efficiently using tax dollars to achieve the best results for their constituents.

The White House • 1600 Pennsylvania Avenue, NW • Washington DC 20500 • 202-456-1111

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