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eligibility to their workforce or risk an excise tax penalty. Plan sponsors should review their plan documents in light of these recent developments to ensure that the plan language is current and compliant.
Reporting disclosure guide for employee benefit plansFPG Lynch
This Reporting and Disclosure Guide for Employee Benefit Plans has
been prepared by the U.S. Department of Labor’s Employee Benefits
Security Administration (EBSA) with assistance from the Pension
Benefit Guaranty Corporation (PBGC). It is intended to be used as a
quick reference tool for certain basic reporting and disclosure
requirements under the Employee Retirement Income Security Act of
1974 (ERISA).
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ACA Compliance Bulletin - Final Rule Expands Short-Term, Limited-Duration Ins...Kelley M. Bendele
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A pending IRS rule has some credit unions worried about the fate of their deferred compensation plans. For some eight years now, the IRS has been considered the tax status of non-qualified deferred compensation plans offered by federal credit unions (FCUs). At issue is whether FCUs are entities of the federal government. In its analysis, the IRS concluded that FCUs are not because they are not federal instrumentalities. More info at: www.nafcu.org/BFB
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1. The Changing Face of the
Medicaid Program
A Review of Recent Trends in
State Medicaid Waivers
Ross D. Margulies, JD, MPH
Attorney, Foley Hoag LLP
2. What is Section 1115?
• Reference to § 1115 of the Social Security Act which gives the
Secretary of HHS authority to approve demonstration
projects for various public assistance programs (including
Medicaid and CHIP)
• Projects approved under § 1115 are referred to as “waivers”
because the Secretary is legally waiving State compliance
with otherwise applicable law
• States are increasingly using 1115 waivers to shape, refine
and “change” their state Medicaid programs in the absence of
Congressional action
3. The Legal Standard (§ 1115(a))
“(a) In the case of any experimental, pilot, or demonstration
project which, in the judgment of the Secretary, is likely to assist
in promoting the objectives of title … XIX … in a State …
“(1) The Secretary may waive compliance with any of the
requirements of section … 1902 … to the extent and for the
period he finds necessary to enable such State … to carry out
such project; and
“(2)(A) costs of such project which would not otherwise be
included as expenditures under section … 1903 … shall, to
the extent and for the period prescribed by the Secretary, be
regarded as expenditures under the State plan approved
under such title…”
4. The Legal Standard (cont.)
In other words:
If a state wants to operate an experimental or
demonstration project in its Medicaid program; and
The Secretary of HHS determines the project is likely to
assist in promoting the objectives of Medicaid; then
The Secretary can waive compliance of any of the
requirements of section 1902; and
The Secretary can treat the costs that would not otherwise
qualify for Medicaid matching funds as allowable
expenditures eligible for matching.
5. A Brief History of Section 1115
• Section 1115 of the SSA was enacted by Congress in 1962 –
prior to the creation of the Medicaid program
– At that time, mainly used by states to test pilots for the then-
assistance program Aids to Families with Dependent Children
– At the time of enactment, the Secretary of Health, Education and
Welfare (HEW) summarized the purpose of the waiver, stating that
section 1115: “would make it easier for States to embark on
imaginative pilot or demonstration projects which could lead to
improved operations.”
• Use of 1115 waivers in the Medicaid program became
widespread during the Clinton Administration
– Example of Oregon waiver
6. Section 1115 Waiver Uses
• Waivers are typically used in the Medicaid program to
provide states an avenue to test and implement coverage
approaches that do not otherwise meet federal program rules
• States use 1115 waivers in the Medicaid context for:
– Delivery system reform
– State policy expansion designs
– (Prior to the ACA) to cover ineligible populations
– Managed long term care
– Behavioral Health and more limited issues
– Work requirements
– Eligibility and enrollment restrictions
– Benefit restrictions, copays, and premiums
7. Waivers are Popular
• As of February 21, 2018: 36 states had 44
approved waivers
• As of February 21, 2018: 23 states had 24
waivers pending approval at CMS
8. What can be waived?
• Notably the Secretary’s authority under section 1115 does
not extend to the entirely of Title XIX – but only to Section
1902
– Although section 1902 is arguably the most important section in Title
XIX
• Section 1902 includes all of the requirements that a State
must include in their State plan. There are currently 83
requirements that a State plan must comply with in order to
participate
– Section 1115 grants the Secretary the discretion to waive compliance
with any of these 83 different requirements
– Example: a state can seek a waiver of section 1902(a)(10)(B) so as to
provide a more robust benefit package to some beneficiaries
9. Frequently Waived Provisions
Authority Short Description Rationale
1902(a)(1) Statewideness To enable a state to operate a
Demonstration on less than a
statewide basis
1902(a)(4) Proper and efficient
Administration
To enable a state to change
methods of program administration
(i.e. methods of transportation)
1902(a)(8) Reasonable Promptness To enable a state to limit
enrollment
1902(a)(10)(B) Amount, Duration and Scope To enable a state to provide benefit
packages that are different from
the standard benefit package
1902(a)(13) and (a)(30) Rate-Setting/Payment
Methodologies
To permit a state to change its rate-
setting methodology
1902(a)(17) Comparability To permit states to use differing
standards for determining eligibility
for benefits
1902(a)(23)(A) Freedom of Choice To enable participants to receive
benefits through certain providers
1902(a)(34) Retroactive Eligibility To enable states to waiver the
requirement to provide benefits up
to three months prior to application
10. Promoting the Objectives of the
Medicaid Program
• While the Secretary’s waiver authority under 1115 is broad, it
contains an important qualification: the waiver must be
“likely to assist in promoting the objectives” of the Medicaid
program
– The SSA contains no definition of the “objectives of the Medicaid
program
– CMS has also adopted no regulatory definition to this end
– As recently as April 2015, the GAO called out the lack of sufficiently
specific criteria as problematic
• As a result of this lack of a defined standard, different
Administrations (with different political and policy goals) have
taken different approaches to defining these objectives
11. Different Administrations –
Different Goals
Obama Administration 1115 Waiver Objectives Trump Administration 1115 Waiver Objectives
1. Increase and strengthen overall coverage of low-
income individuals in the state
1. Improve access to high quality, person-centered
services that produce positive health outcomes for
individuals
2. Increase access to, stabilize, and strengthen
providers and provider networks available to
service Medicaid and low-income population in the
state
2. Promote efficiencies that ensure Medicaid’s
sustainability for beneficiaries over the long term
3. Improve health outcomes for Medicaid and
other low-income population in the state
3. Support coordinated strategies to address
certain health determinants that promote upward
mobility, greater independence, and improved
quality of life among individuals
4. Increase the efficiency and quality of care for
Medicaid and other low-income populations
through initiatives to transform service delivery
networks
4. Strengthen beneficiary engagement in their
personal healthcare plan, including incentive
structures that promote responsible decision-
making
5. Enhance alignment between Medicaid policies
12. Key Court Decisions
• Crane v. Matthews, 417 F. Supp. 532 (N.D. Ga. 1976): In
Crane, the State of Georgia wanted to impose a minimal cost
sharing requirement on Medicaid enrollees in the State. The
Secretary of HHS approved a waiver permitting the State to
do so. A group of Medicaid beneficiaries challenged the
approval of the waiver in court. The court concludes that:
“[g]iven the large degree of judgment vested in the Secretary
with respect to approval of section 1115 projects, it is not for
the courts to deny the Secretary the right to approve a project
just because the Court might in certain situations disagree
with his judgment. That judgment is committed to the
Secretary.” Emphasis added.
13. Key Court Decisions (cont.)
• Aguayo v. Richardson, 473 F.2d 1105 (2nd
Cir. 1973): In Aguayo
(a non-Medicaid case), the Second Circuit upheld an 1115
waiver allowing the creation of a mandatory “workfare”
demonstration project for Aid to Families With Dependent
Children (AFDC, now TANF) recipients in New York, holding
that section 1115 waiver decisions by the Secretary were
valid so long as the Secretary had a “rational basis for
determining that the programs were ‘likely to assist in
promoting the objectives’ of [the Social Security Act].”
14. Key Court Decisions (cont.)
• Beno v. Shalala, 30 F.3d 1057, 1069 (9th
Cir. 1994): In Beno, the
9th Circuit set forth three factors, tracking the statutory
requirements in section 1115, that the Secretary must
“examine” prior to approving a waiver. First, whether the
project is an “Experimental, Pilot or Demonstration Project.”
Second, whether the project is “Likely To Assist in Promoting
The Objectives Of The Act.” Third, “the extent and period” for
which she finds the project is necessary.
15. Key Court Decisions (cont.)
• Newton-Nations v. Betlach, 655 F.3d 1066 (9th Cir. 2011): In
Newton-Nations, the 9th Circuit reviewed a challenge by
Arizona Medicaid recipients against Arizona and HHS for
approving an 1115 waiver which increased cost-sharing for
childless adults. The 9th Circuit concluded that because the
administrative record in the case consisted of “one statement
in [a] 2004 retroactive approval letter,” the Secretary’s review
of the proposed copay changes waiver did not satisfy the
waiver test to determine whether the proposal was likely to
further the goals of the Medicaid program.
16. The Waiver Process
• Informal Discussions: The waiver process typically begins with
state officials having multiple meetings (over multiple
months) with CMS officials to discuss the demonstration
authority they are seeking
• Formal Procedures Required:
– An Independent evaluation
– A State public comment process
– A Federal public comment process
– (Budget neutrality rules apply – but this is not statutory)
17. State Public Process
• Public notice and comment rules apply as a result of the ACA.
On February 27, 2012 CMS issued a final rule creating new
procedural standards at 42 CFR Part 431, Subpart G
• 30 day state public comment process:
– State must provide a comprehensive description of the
waive “to ensure meaningful input”
– State must hold two public hearings and have a website to
keep public informed
– State’s final application must note how public comments
were incorporated
– State may have their own rules too
18. Federal Public Process
• Federal government has 15 days to certify an application is
complete and send state notice of receipt
• Once certified federal public comment opens for 30 days;
unlike states feds don’t have to provide a written response
• Federal government cannot render a decision until at least 45
days after receipt
– Note the decision process is typically much longer, particularly for
waivers never previously approved
• All documents are posted on medicaid.gov
19. Key Documents
• Key document in an approved waiver is the “Special Terms
and Conditions”
• Important pieces to focus on include the requested waivers
in the application which results in the waiver list
• Medicaid Costs Not Otherwise Matchable or CNOM – this
specifies where federal funds can be used in different ways
• Budget neutrality agreement
20. Waiver Financing
• Although not required by statute or regulation, longstanding
administrative policy has required waivers to be budget
neutral for the federal government, meaning that federal
spending under a waiver must not be more than projected
federal spending in the state without the waiver
• CMS enforces budget neutrality caps by establishing a cap on
Federal funds over the life of the waiver, calculated either as:
– Per-capital caps (most common): State claims match for all people
covered by the waiver but cannot claim more than permitted under
cap
– Global caps (rare): Similar in nature to a block grant but goal is not
necessarily to cut overall funding
21. How Courts View Waiver Authority
• The Courts have been incredibly deferential to the Secretary
judgment when waiver approvals have been challenged in the
past
• The legal standard:
– An aggrieved party challenging an approved 1115 waiver would
challenge the waiver in court as a final agency action under the
Administrative Procedures Act
– Thus a court would likely assess whether the Secretary’s decision to
waiver compliance with Section 1902(X) may be found to be
“arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law. “
22. Recent Key Waiver Guidance
Letter to Governors from Secretary Thomas E. Price and
CMS Administrator Seema Verma (March 14, 2017).
CMCS Informational Bulletin, “Section 1115
Demonstration Process Improvements,” from Brian Neale,
Director, Center for Medicaid and CHIP Services
(November 6, 2017).
State Medicaid Director Letter 17-005, “RE: Phase-out of
expenditure authority for Designated State Health
Programs (DSHP) in Section 1115 Demonstrations,”
(December 15, 2017).
State Medicaid Director Letter 18-002, “RE: Opportunities
to Promote Work and Community Engagement Among
Medicaid Beneficiaries,” (January 11, 2018).
23. Thank you!
Ross D. Margulies
Associate, Healthcare Practice
Foley Hoag LLP
202.261.7351
rmargulies@foleyhoag.com
Check us out at:
www.medicaidandthelaw.com
Editor's Notes
Good morning – my name is Ross Margulies. I’m an attorney at Foley Hoag and me and my panelists are here today to talk about Medicaid waivers. This is a really exciting time for this topic – probably actually the most exciting time for this topic. The Trump Administration, not unlike the Obama Administration, has embraced 1115 waiver authority and we are seeing this through major changes to what the Medicaid program looks and feels like. So we are here today to help you understand what the waiver process is, how it is currently changing the Medicaid program as we know it, and what the impacts of those changes may be on the program.
So you understand the flow of this program – I’m going to begin by briefly giving an overview of Medicaid waivers. MaryBeth will then go next and really dig deep with some awesome charts and graphs on what is happening on the ground – right now – in states across the country using waivers. Next, Leo will walk you through some very interesting legal challenges against these precise changes – and help us get a better understand of the legal construct of the waiver authority. Finally, Matt will give us the unique perspective of what it looks like on the ground as state Medicaid director.