Using 1115 Waivers to Fulfill the Affordable Care Act’s Promise

in Analysis, Federal Legislation
July 30th, 2015

In the last few months Montana has taken substantial steps toward joining Iowa, Arkansas, Michigan, and Indiana as states that are to fulfilling the promise of Affordable Care Act by expanding their Medicaid programs through special waivers. The Affordable Care Act (ACA) was designed to drastically reduce the number of uninsured people in the United States by providing access to affordable health insurance to all Americans. Despite struggles with implantation, and continuing legal threats, the ACA has been largely successful at expanding access to health insurance to middle class Americans. However, it has fallen woefully short of providing the same access to low-income Americans.

The ACA was designed to have Medicaid provide insurance for low income Americans. Medicaid is a public

The Ether Dome Massachusetts General Hospital, 1846

The Ether Dome
Massachusetts General Hospital, 1846

insurance program that is partnership between the states and the federal government.  Each state runs a unique Medicaid program within the parameters set by the federal government and with substantial financial support from the federal government. The ACA required states to expand Medicaid to all Americans whose family incomes fell below 133% of the poverty level. The federal government would pay for the first three years of the expansion and then 90% of the costs for all of the following years. States that refused to expand would have faced potentially serious financial repercussions for their current Medicaid programs. In 2012, Supreme Court ruled that the possible repercussions for states choosing not to expand Medicaid were too sever and therefore “coercive” and ruled unconstitutional.

The Court’s decision made the Medicaid expansion optional for states. Political opposition to the ACA, and President Obama, in both state legislatures and in governors’ offices has caused over a dozen states to choose not to expand Medicaid. Based on a belief that states would expand Medicaid programs the ACA only provides subsidies for purchasing health insurance to individuals above the poverty level. Now there are an estimated 4 million people living below the poverty line without access to Medicaid or health insurance subsidies. Meanwhile people with higher incomes are given government assistance in the form of insurance subsidies.

In response to this coverage gap, or to try to take advantage of the overwhelmingly good deal the Medicaid expansion represents for states, many states whose leaders were/are politically hostile to “Obamacare” have found an alternative method to expanding Medicaid. Working with the Centers for Medicaid and Medicare Services (CMS). Indiana, Arkansas, Iowa, and Michigan states have utilized an §1115 waiver to negotiate expansions that a structurally different than those envisioned by the ACA. Montana is the latest state to try to join them.

Named after Section 1115 of the Social Security Act §1115 waivers have been part of the Medicaid program for decades. They serve as a means for states to experiment with new demonstration projects, which are supposed to be evaluated to determine their effectiveness. Waivers allow states to negotiate with CMS to design a feature of their Medicaid program that does not have to conform to all of the rules established by the federal government. Prior to the ACA states had used §1115 waivers to change benefits packages, utilize non-emergency cost sharing, and expand managed care in Medicaid. The §1115 waivers are not a carte blanch to ignore all of the rules that govern Medicaid programs. CMS has set out formal rules governing the waiver process and cannot waive core requirements of the program and they are required to be budget neutral.

Each of the states that have expanded their Medicaid programs through and §1115 waiver have negotiated a slightly different arrangement with CMS. Arkansas is enrolling Medicaid expansion enrollees in qualified health plans on its state health insurance marketplace and utilizing the federal Medicaid funding to pay for those enrollees insurance premiums. Iowa used two §1115 waivers to set up a similar premium support model for beneficiaries over 100% of the poverty level and enroll those under 100% of the poverty level in Medicaid managed care.  The plan covers 190,000 previously uninsured Iowans.

States seeking to expand through a § 1115 face more obstacles than just negotiating with CMS.  Like a traditional Medicaid expansion and §1115 waive still requires legislative approval, and the legislative process is fraught with political pitfalls.  Just ask the Governors of Utah and Tennessee. The Utah House of Representative and Utah Senate failed to reach a deal this session after they rejected the Governor’s original proposal.  A special Tennessee Senate panel rejected  a proposal the Governor had spent months negotiating with CMS.  Fortunately, for low-income citizens of Montana their plan already has preliminary legislative approval.

While the jury remains out on the effectiveness of the §1115 waiver expansions compared to the traditional Medicaid expansion one thing is certain low-income people have better access to health insurance in states that have implemented §1115 expansions than those in states that have no expansion. Hopefully, Montana can avoid the conflicts that have stalled Utah and Tennessee’s’ proposals, and hopefully both of those states keep trying to find comprises that results in expansions. The ACA unintentionally created a coverage gap that affects the most vulnerable citizens. But states have the tools to close the gap. All states should pursue a Medicaid expansion of some sort because beyond being sound policy, Americans should not have their insurance status determined by their zip code.


1436458956Timothy Murphy anticipates graduating from Boston University School of Law with a Health Law concentration in May 2016.