CSG Medicaid 201: AZ 1115 Waiver Presentation
What is a Section 1115 waiver?
The federal Social Security Act (SSA) outlines requirements that each state's Medicaid and Children's Health Insurance Program (CHIP) must comply with. The SSA also provides tools, such as the Section 1115 waiver, which can grant states exemptions from some of the federal requirements and allow for some uniqueness and flexibility in each state's respective systems. States who receive 1115 waivers are also generally subject to corresponding Special Terms and Conditions (STCs) that must be fulfilled to maintain compliance with an approved waiver.
Section 1115 waivers allow for states to engage in experimental, pilot, or demonstration projects to evaluate state-specific policy approaches to better serve their Medicaid populations. These waivers are integral to giving states the opportunity to discover what works best for them and the flexibility to design and improve their programs. Generally, section 1115 demonstrations are approved for an initial five-year period and may be extended for up to an additional five years.
Waivers are submitted by states individually and CMS has approval authority. CMS performs a review to determine whether the waiver's objectives are in alignment with Medicaid. Additionally, because demonstrations must be budget neutral, CMS evaluates if the associated expenditures are consistent with federal policies and contemplates the availability of other funding sources.
CMS uses the following criteria to determine whether each state‘s proposed waiver meets Medicaid/CHIP objectives and will:
1. Increase and strengthen coverage of low-income individuals;
2. Increase access to, stabilize, and strengthen available providers and provider networks that serve Medicaid and low-income populations;
3. Improve health outcomes for Medicaid and other low-income populations; or
4. Increase the efficiency and quality of care for Medicaid and other low-income populations through the transformation of service delivery networks.
States use a variety of sources to finance the matching funds required for their Medicaid expenditures, including general funds, intergovernmental, certified public expenditures, and permissible taxes and provider donations or state-funded health programs.
Since their inception in the 1960's, waivers have varried considerably across states.
Section 1115 waivers allow for states to engage in experimental, pilot, or demonstration projects to evaluate state-specific policy approaches to better serve their Medicaid populations. These waivers are integral to giving states the opportunity to discover what works best for them and the flexibility to design and improve their programs. Generally, section 1115 demonstrations are approved for an initial five-year period and may be extended for up to an additional five years.
Waivers are submitted by states individually and CMS has approval authority. CMS performs a review to determine whether the waiver's objectives are in alignment with Medicaid. Additionally, because demonstrations must be budget neutral, CMS evaluates if the associated expenditures are consistent with federal policies and contemplates the availability of other funding sources.
CMS uses the following criteria to determine whether each state‘s proposed waiver meets Medicaid/CHIP objectives and will:
1. Increase and strengthen coverage of low-income individuals;
2. Increase access to, stabilize, and strengthen available providers and provider networks that serve Medicaid and low-income populations;
3. Improve health outcomes for Medicaid and other low-income populations; or
4. Increase the efficiency and quality of care for Medicaid and other low-income populations through the transformation of service delivery networks.
States use a variety of sources to finance the matching funds required for their Medicaid expenditures, including general funds, intergovernmental, certified public expenditures, and permissible taxes and provider donations or state-funded health programs.
Since their inception in the 1960's, waivers have varried considerably across states.
History of what makes the AZ waiver unique?
Arizona has the distinction of being the last state to enter into Medicaid, but the first state to create a “mandatory” Managed Care model, meaning that with the exception of the American Indian population, who under federal law cannot be mandated into managed care, all Medicaid enrollees must be enrolled in an MCO, including dual eligible and long term care members.
Prior to the inception of this model in 1982, healthcare for low income Arizonans was provided through the counties. However, as the state grew, so too did the healthcare needs of this population. The counties were no longer able to manage this program. In 1982, as a resolution to this growing crisis, Arizona sought and received approval to create a Mandatory Managed Care Medicaid program, known as the Arizona Health Care Cost Containment System (AHCCCS).
This public-private, managed care partnership ensures that members receive high-quality care while at the same time maximizing efficiency and containing costs. Arizona continues to lead the nation in operating a cost effective managed care model. Arizona’s Medicaid program has the second lowest per-enrollee cost among expansion states and is well below the national average. In fact, from 2010 to 2014, Arizona had the lowest expenditure growth rate in the entire nation at only 1.9 percent per year, compared with an average growth rate of 3.1 percent nationally.
In 1988, Arizona was one of the first states in the nation to implement Home and Community Based Services (HCBS) for long term care members. This program was implemented through Arizona’s 1115 Waiver. Over the past 32 years, the ALTCS Demonstration has achieved remarkable success in increasing member placement in HCBS, resulting in significant program savings while also meeting the needs of members. Today, over 85 percent of members live in HCBS.
In 2014, Arizona’s waiver established the integrated RBHA (Regional Behavioral Health Authority) , the first model nationwide to bring physical health, behavioral health, and social support services together in one plan for persons with serious mental illness (SMI). Early study conducted by NORC at the University of Chicago demonstrated that members with SMI enrolled in Mercy Maricopa Integrated Care (MMIC), who were also receiving supportive housing services, experienced a 20 percent reduction in psychiatric hospitalizations, with a 24 percent decrease in total cost of care, with savings driven by reductions in behavioral health costs.
Prior to the inception of this model in 1982, healthcare for low income Arizonans was provided through the counties. However, as the state grew, so too did the healthcare needs of this population. The counties were no longer able to manage this program. In 1982, as a resolution to this growing crisis, Arizona sought and received approval to create a Mandatory Managed Care Medicaid program, known as the Arizona Health Care Cost Containment System (AHCCCS).
This public-private, managed care partnership ensures that members receive high-quality care while at the same time maximizing efficiency and containing costs. Arizona continues to lead the nation in operating a cost effective managed care model. Arizona’s Medicaid program has the second lowest per-enrollee cost among expansion states and is well below the national average. In fact, from 2010 to 2014, Arizona had the lowest expenditure growth rate in the entire nation at only 1.9 percent per year, compared with an average growth rate of 3.1 percent nationally.
In 1988, Arizona was one of the first states in the nation to implement Home and Community Based Services (HCBS) for long term care members. This program was implemented through Arizona’s 1115 Waiver. Over the past 32 years, the ALTCS Demonstration has achieved remarkable success in increasing member placement in HCBS, resulting in significant program savings while also meeting the needs of members. Today, over 85 percent of members live in HCBS.
In 2014, Arizona’s waiver established the integrated RBHA (Regional Behavioral Health Authority) , the first model nationwide to bring physical health, behavioral health, and social support services together in one plan for persons with serious mental illness (SMI). Early study conducted by NORC at the University of Chicago demonstrated that members with SMI enrolled in Mercy Maricopa Integrated Care (MMIC), who were also receiving supportive housing services, experienced a 20 percent reduction in psychiatric hospitalizations, with a 24 percent decrease in total cost of care, with savings driven by reductions in behavioral health costs.
What is a Managed Care Organization?
Traditionally, Medicaid has been administered on a “fee-for-service” basis, meaning that states will employ or contract directly with providers for the care of Medicaid enrollees. This is how Medicaid was originally structured under the Social Security Act. States operating under this model draw down federal matching dollars for the care of the members and then, combined with state funds, use the dollars to pay providers directly for services.
States may also choose to manage their program through a Medicaid Managed Care model. Under this model, states are permitted to enter into contracts with private and non-profit Managed Care Organizations (MCOs) who in turn use their market leverage to negotiate rates and contract with a network of providers adequate to meet the needs of their members. This model of healthcare delivery has historically proven to be cost-effective in rewarding quality over quantity and better managing the care of members. States may draw down federal funding for this model, but must be able to continually demonstrate adequate access to care and compliance with all other federal rules and statutory requirements.
States may also choose to manage their program through a Medicaid Managed Care model. Under this model, states are permitted to enter into contracts with private and non-profit Managed Care Organizations (MCOs) who in turn use their market leverage to negotiate rates and contract with a network of providers adequate to meet the needs of their members. This model of healthcare delivery has historically proven to be cost-effective in rewarding quality over quantity and better managing the care of members. States may draw down federal funding for this model, but must be able to continually demonstrate adequate access to care and compliance with all other federal rules and statutory requirements.
How Managed Care works in Arizona?
AHCCCS prepays its health plans for the services that are provided to its membership. This prepayment is known as “capitation”. The AHCCCS capitation rates are set and certified by AHCCCS actuaries who employ a formula, largely based on historical utilization, population trends and policy changes to forecast how much it will cost to care for AHCCCS members in the upcoming year.
AHCCCS MCOs are at-risk in their contracts with the State, meaning that if they exceed the amount that they are appropriated through the capitation payments, they, rather than the State, are responsible for absorbing the additional costs. Thus, they are incentivized to promote health and wellness, ensure members have access to preventative services, and be innovative in identifying ways to improve outcomes, while also lowering costs.
The MCOs are also required to assign all members to a primary care physician within their immediate geographic area, who act as a medical home to the member and keep them out of more acute, high cost care settings, such as an emergency room. All children are also assigned a Dental Home, where necessary oral healthcare screenings and services can be delivered. As a condition of its federal funding, AHCCCS closely monitors network adequacy for all Primary Care Physician (PCP), oral health, behavioral health, and specialty and long-term care providers to ensure that members are able to access effective, efficient, quality care when and where they need it. AHCCCS tracks health plan performance through quality metrics and other performance measures MCOs are contractually required to meet.
AHCCCS MCOs are at-risk in their contracts with the State, meaning that if they exceed the amount that they are appropriated through the capitation payments, they, rather than the State, are responsible for absorbing the additional costs. Thus, they are incentivized to promote health and wellness, ensure members have access to preventative services, and be innovative in identifying ways to improve outcomes, while also lowering costs.
The MCOs are also required to assign all members to a primary care physician within their immediate geographic area, who act as a medical home to the member and keep them out of more acute, high cost care settings, such as an emergency room. All children are also assigned a Dental Home, where necessary oral healthcare screenings and services can be delivered. As a condition of its federal funding, AHCCCS closely monitors network adequacy for all Primary Care Physician (PCP), oral health, behavioral health, and specialty and long-term care providers to ensure that members are able to access effective, efficient, quality care when and where they need it. AHCCCS tracks health plan performance through quality metrics and other performance measures MCOs are contractually required to meet.
Are there components of our waiver other states have imitated?
A federal evaluation in 1987, concluded that the AHCCCS managed care program provided health care services with equal or superior access, quality, and member satisfaction, as well as lower costs, as compared to the more common fee-for-service model. Importantly, this evaluation supported innovative development in other states modeled on Arizona’s success. Numerous other evaluations have reported similar findings. As a result, many states have imitated Arizona’s managed care model.
Where is Arizona now with our 1115 Waiver(s)?
ACA expanded enrollment eligibility to childless adults who make 100-133% of FP, Arizona used 1115 waiver to achieve this population expansion and augment monthly premiums for this additional participation.
These waivers have contributed to AHCCCS's success as a unique managed care model and today AHCCCS is one of the most cost-effective Medicaid programs in the nation.
Arizona has multiple, approved and pending waivers related to work requirements, eligibility and enrollment restrictions, copays, healthy behavior and behavioral health (pending).
For example, in 2016 CMS approved Arizona's request to use home and community-based services for members with long term care needs. This is one of many modernization efforts that makes AHCCCS so successful and unique.
In 2019, CMS approved Arizona's request to add a community engagement requirement, "AHCCCS Works". This approval made Arizona the 8th state to operate a program to incentivize certain adults to participate in beneficial job training, community service and employment activities. After much tribal consultation, this approval also made Arizona the first state to exempt members of federally recognized tribes from this requirement
The Choice Accountability Responsibility Engagement (CARE) account functions like a flexible savings account. Medicaid beneficiaries may be required to pay monthly contributions up to 2 percent of household income and copayment-like charges on a limited set of services, subject to Medicaid’s aggregate cap of 5 percent of household income. In January 2017, CMS approved an amendment to establish the Targeted Investments Program, which provides incentive payments to providers for increasing physical and behavioral health integration and coordination for enrollees with behavioral health needs.
These waivers have contributed to AHCCCS's success as a unique managed care model and today AHCCCS is one of the most cost-effective Medicaid programs in the nation.
Arizona has multiple, approved and pending waivers related to work requirements, eligibility and enrollment restrictions, copays, healthy behavior and behavioral health (pending).
For example, in 2016 CMS approved Arizona's request to use home and community-based services for members with long term care needs. This is one of many modernization efforts that makes AHCCCS so successful and unique.
In 2019, CMS approved Arizona's request to add a community engagement requirement, "AHCCCS Works". This approval made Arizona the 8th state to operate a program to incentivize certain adults to participate in beneficial job training, community service and employment activities. After much tribal consultation, this approval also made Arizona the first state to exempt members of federally recognized tribes from this requirement
- Program approved to begin January 1, 2020.
- Adults 19-49 must participate in community engagement activities 80 hours per month.
- Other exemptions for pregnant women, substance use disorder patients, etc.
The Choice Accountability Responsibility Engagement (CARE) account functions like a flexible savings account. Medicaid beneficiaries may be required to pay monthly contributions up to 2 percent of household income and copayment-like charges on a limited set of services, subject to Medicaid’s aggregate cap of 5 percent of household income. In January 2017, CMS approved an amendment to establish the Targeted Investments Program, which provides incentive payments to providers for increasing physical and behavioral health integration and coordination for enrollees with behavioral health needs.
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Points to consider when developing you waiver.
Your State's waiver must address how your proposed waiver will:
1. Increase and strengthen coverage of low-income individuals;
2. Increase access to, stabilize, and strengthen available providers and provider networks that serve Medicaid and low-income populations;
3. Improve health outcomes for Medicaid and other low-income populations; or
4. Increase the efficiency and quality of care for Medicaid and other low-income populations through the transformation of service delivery networks
Consider the following when developing your proposal:
Access ≠ Quality ≠ Improved Outcomes ≠ Lower Costs
What this means is that access to a robust provider network doesn't always mean a patient will receive quality care. Quality care doesn't always mean the outcomes will improve, and improved outcomes don't always mean lower costs.
However, we do know that healthy robust networks breeds provider competition and networks that prioritize patient choice will result in increased network quality. This increase in quality will improve outcomes generally perhaps not always individually but as a global indicatory outcomes will improve. When overall outcomes at lower acuity levels improve a reduction in need for higher acuity or more complex or urgent treatment will result in overall cot savings for both the patient and the network program.
Lastly consider how your program will change patient behavior and what approach works best for each case.
Encourage or Discourage
Enable or Hinder
Engage or Disconnect
Exemplify or Conceal
1. Increase and strengthen coverage of low-income individuals;
2. Increase access to, stabilize, and strengthen available providers and provider networks that serve Medicaid and low-income populations;
3. Improve health outcomes for Medicaid and other low-income populations; or
4. Increase the efficiency and quality of care for Medicaid and other low-income populations through the transformation of service delivery networks
Consider the following when developing your proposal:
Access ≠ Quality ≠ Improved Outcomes ≠ Lower Costs
What this means is that access to a robust provider network doesn't always mean a patient will receive quality care. Quality care doesn't always mean the outcomes will improve, and improved outcomes don't always mean lower costs.
However, we do know that healthy robust networks breeds provider competition and networks that prioritize patient choice will result in increased network quality. This increase in quality will improve outcomes generally perhaps not always individually but as a global indicatory outcomes will improve. When overall outcomes at lower acuity levels improve a reduction in need for higher acuity or more complex or urgent treatment will result in overall cot savings for both the patient and the network program.
Lastly consider how your program will change patient behavior and what approach works best for each case.
Encourage or Discourage
Enable or Hinder
Engage or Disconnect
Exemplify or Conceal
What's next for Arizona?
AHCCCS in the process of developing and submitting our next waiver and we plan to continue the successful demonstrations such as managed care and home and community based services moving forward. We may revisit some of the requests that we have been denied in the past but now we are focused on continuing on what is working. We have asked for a variety of things and were turned down, particularly premiums and copays. Including the expansion of our CARE program.