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The myth of Medicaid flexibility and Obamacare Waivers

The myth of Medicaid flexibility and Obamacare Waivers

Fred Birnbaum
November 2, 2016
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November 2, 2016

Upon review of the imploding Affordable Care Act (ACA), one wonders: Was there any intention on behalf of the law’s congressional authors and President Obama to provide states with flexibility to adhere to the law’s broad mandates? It’s an important question, because health care expenditures, overall, consume nearly one of every five dollars -- nearly 20 percent -- of the US economy.

ACA proponents would likely say “yes,” flexibility does exist. To support their answer, said proponents would point to two waivers, the Section 1332 “Innovation Waivers,” and the Section 1115 Medicaid expansion waivers.

However, when we examine the details of the policy options these waivers allow, we see that the options allowed give little flexibility to the states and seemingly exist to give political cover to governors and state legislators. Such state officials can claim they are pushing back on Obamacare – rather than the reality, which is, that they accepted its entire premise. That premise is the ACA is a viable program and Americans just have to accommodate its design flaws.

The Section 1332 waivers, assuming they are applied for and granted, go into effect as early as January 1, 2017. The Section 1332 waivers must be applied for, jointly, to the US Department of Health and Human Services and the US Treasury. These waivers allow states to modify the rules that govern covered benefits and subsidies, modify plans and eligibility for subsidies, modify or eliminate the individual mandate, and modify or eliminate the employer mandate.

Too good to be true? Well, it is.

The Section 1332 waivers have federal guardrails that require four criteria be satisfied before a waiver is granted. The healthcare coverage must be “at least as comprehensive” as it would have been without the waiver; it must provide “coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as affordable” as coverage without the waiver; the scope must include “at least a comparable number of residents” as absent the waiver; and, finally, the changes must not increase the federal deficit. Of course, to begin, the ACA is itself not guarding against many of the requirements that the states’ waivers are supposed to adhere to.

Yes, I know, this is a head-scratcher. It reminds one of Henry Ford’s dictum about a car customer’s color choice, “Any customer can have a car painted any color that he wants so long as it is black.” The Section 1332 waiver merely nibbles around the edges of the ACA and cements in all its unaffordable promises.

When we turn to the Section 1115 waivers that some states have used to expand Medicaid, we see the same sort of limitations – waivers as window dressing and political cover for politicians who understand that most voters are deeply skeptical of the ACA.

The Section 1115 waiver process has been used or applied for in about eight states. These waivers are provided by the Center for Medicare and Medicaid (CMS), which is part of the US Department of Health and Human Services.

Again, superficially, these waivers appear to be policy alternatives because they suggest the promotion of personal responsibility, healthy behaviors, cost sharing, and connection to work - goals we don’t normally associate with the ACA. However, when we examine the details we see that there are no teeth in these alternatives.

For example, a waiver may require a work referral but may not condition coverage on having a job. Premiums are not required for those below 100 percent of the Federal Poverty Level, but may offered in exchange for added benefits. The premiums required are low and the process for disenrollment is a high bar to clear. Of course, there is no guarantee that the federal government will accept a waiver application and the waivers are also not forever.

Indiana is being allowed a “two-year test” of a $25 co-pay for repeated “non-emergency” use of emergency care. Continuation of this waiver will be determined by CMS after the test period.

Ohio’s modest Medicaid waiver request for all able-bodied adults to make a contribution to a Health Savings Account, to cover some of their expenses, was shot down by CMS. The modest amount, which would have been capped at $99 per year or two percent of income, whichever was less, was considered too onerous by CMS. “CMS is concerned that these premiums would undermine access to coverage and the affordability of care,” according to Andrew Slavitt, the acting Administrator of CMS.

The fact that the federal government would consider $99 per year, only $8.25 per month, too onerous for an able-bodied adult to pay for health care coverage, tells us everything we need to know about the central design of the ACA: Expand the entitlement portion as far and wide as possible and create an entirely new class of federal dependents.

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