Types and Purposes of Medicaid Waivers

How States Use Medicaid Waivers to Customize Their Medicaid Programs

Medicaid is jointly funded by the federal and state governments, to provide assistance to individuals and families with low income who lack health insurance and for whom health care would otherwise be a significant financial burden.

Medicaid is managed by each individual state. Federal guidelines set various minimum requirements, but various eligibility rules differ from state to state.

A Medicaid waiver allows a state to test and develop approaches to Medicaid that differ from the standard federal program. These programs may have unique eligibility requirements, or the programs may operate like managed care organizations. For example, Medicaid programs might be designed for specific populations in need, such as the elderly or for pregnant women. 

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In the United States, Medicaid and the Children's Health Insurance Program (CHIP) provide coverage to more than 80 million people, accounting for nearly a quarter of the U.S. population.

Though all states currently accept some Medicaid funding and have their own Medicaid programs, those programs vary. In addition to being able to apply for Medicaid waivers, states may also "opt-out" of accepting new Medicaid funding and requirements. 

Waivers may also be applied to the CHIP, which provides federal funds to match state funds used to cover uninsured children in families that have incomes that are fairly low but not low enough for Medicaid eligibility (CHIP eligibility varies considerably from one state to another, but extends to households with income of at least 200% of the poverty level in nearly every state; in New York, kids are eligible for CHIP with household incomes as high as 400% of the poverty level).

Medicaid Waivers

Medicaid waivers can go by a variety of names. These names include 1115 waivers (authorized by Section 1115 of the Social Security Act ), 1915 waivers (authorized by Section 1915 of the Social Security Act), waiver services, waiver programs, Home and Community Based Services (HCBS) waivers, as well as names unique to specific states.

There are several types of Medicaid waivers, although they fall under the authority of Sections 1115 and 1915 of the Social Security Act:

  • Section 1115 waivers allow for research and demonstration projects designed to temporarily test expanded eligibility or coverage options, as well as methods for financing and delivering Medicaid. Section 1115 waivers essentially allow "pilot" or "demonstration" programs that are expected to enhance or promote coverage and efficiency.
    With the expansion of Medicaid under the Affordable Care Act, 1115 waivers have become increasingly popular as states look for unique ways to implement Medicaid expansion and utilize the additional federal funding that has flowed to the states to expand access to coverage. The Kaiser Family Foundation tracks approved and pending 1115 waivers and their purposes by state; this information is publically available online.
    To be approved, a Section 1115 waiver proposal has to be budget-neutral for the federal government (ie, the federal government can't spend more with the waiver in place than they would spend without it).
    Starting in 2018, the Trump administration approved Medicaid work requirements for several states via the 1115 waiver process. The work requirements faced numerous legal and operational challenges. Some were overturned by the courts, and the COVID pandemic made work requirements essentially unworkable. Additional federal Medicaid funding was provided to states during the COVID pandemic, but only on the condition that nobody would be disenrolled from Medicaid for the duration of the pandemic. And in early 2021, the Biden administration notified states that approved Medicaid work requirements were being reconsidered; authorization for several had been revoked by mid-2021.
  • Section 1915(b) waivers allow states to develop Medicaid managed care plans. State Medicaid agencies can contract with managed care organizations (MCOs) to help manage quality, utilization, and costs, while also working to improve plan performance and patient outcomes. MCOs provide healthcare services to Medicaid beneficiaries and receive payment for these services from the state Medicaid fund. As of 2018, 69% of all Medicaid beneficiaries nationwide were enrolled in MCOs.
  • Section 1915(c) Home and Community-Based Services (HCBS) waivers allow beneficiaries to receive long-term healthcare benefits at home or in community settings outside of institutional settings, such as nursing homes. Native American Tribes can contract with states to administer 1915(c) waivers via Indian Health Services. Within the realm of HCBS, states can also propose 1915(i), 1915(j), and 1915(k) waivers, all of which provide additional flexibility in providing HCBS to eligible residents.
  • Combined or concurrent Section 1915(b) and 1915(c) waivers allow a state to provide services identified in Section 1915(c) by contracting with managed care organizations defined in Section 1915(b). The contracted managed care organizations deliver home and community-based healthcare services.

Rules and Waiver Approval Process

Each type of Medicaid waiver has various rules that apply to it. State waiver proposals are evaluated and approved/pending (or rejected) on a case-by-case basis.

Section 1115 waivers have historically been approved for up to five years initially, with three-year renewals. But new guidance issued in 2017 allows for ten-year waiver extensions in some circumstances, and a few of those have been granted.

Section 1915 waivers used to be approved for two-year periods, but in some circumstances, they can also be approved for five years.

What Is Institutional Care and Home and Community-Based Services?

For individuals who require long-term care, such as the elderly, Medicaid helps pay for this care in institutions, such as nursing homes. This may not always be possible for or helpful to the beneficiary, however. Medicaid's Section 1915(c) Home and Community-Based Services waivers provide services to those who do not live in nursing homes.

Beneficiaries may instead reside in their own homes, or they may live with family members or other caregivers, or in special assisted living or senior living residences and communities other than their own homes or nursing homes.

Medicaid "Opt-Out"

In addition to waivers to create unique Medicaid programs, states may also choose to "opt-out" of certain Medicaid funding but still retain previously established funding.

The Affordable Care Act (ACA) provides funding for the expansion of Medicaid for low-income families, and lawmakers had intended to make acceptance of that funding mandatory, with states unable to retain their existing federal Medicaid funding if they didn't accept Medicaid expansion funding.

But the Supreme Court ruled in 2012 that states could not be obligated to accept the new funding (and in turn, cover the state's portion of the cost of Medicaid expansion). This ruling also means that states do not lose their existing Medicaid funding if they reject the Medicaid expansion funding.

As a result, there are 13 states that have not expanded Medicaid, but that continue to receive their pre-ACA federal Medicaid funding. These states have not had to use a waiver to do this; they simply haven't changed their Medicaid eligibility guidelines and haven't accepted the federal funding they would receive if they were to expand Medicaid.

Several states have, however, opted to use 1115 waivers to expand their Medicaid programs in a manner that differs somewhat from the expansion guidelines outlined in the ACA.

For example, Arkansas uses Medicaid expansion funding to purchase private plans in the state health insurance exchange for the Medicaid expansion population, and the state obtained an 1115 waiver to allow this.

Monthly premiums for some Medicaid expansion enrollees is another provision that several states have implemented under 1115 waivers. As noted above, several states sought federal approval (and several received it) for 1115 waivers that implemented Medicaid work requirements for their Medicaid expansion population. But no work requirements were in effect by mid-2020, and the Biden administration is in the process of officially revoking authorization for Medicaid work requirements.

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12 Sources
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