Arizona Medicaid Waiver Amendment Does Not Include Analysis of Impact on Budget and Individuals

Arizona will shortly be submitting an amendment to its existing Section 1115 waiver that includes some very major and unprecedented changes to its Medicaid expansion such as the imposition of a work requirement (which has to be verified on a monthly basis!), and a five-year life- time limit on Medicaid benefits.

The state also seeks to establish a one year “lockout” period for individuals who knowingly fail to report a change in family income or work status. I guess they will need to ask Professor Snape for some “veritaserum” to administer that last one since these complex proposals have already been shown to cause much confusion among beneficiaries in places like Indiana and Michigan.

While many of these proposals were denied last year by the Obama Administration, the submission itself was mandated by the legislature.  Arizona law requires the Governor to keep submitting these changes until CMS approves them. And this year may be the year it gets approved with President Trump’s appointee and “Healthy Indiana” architect Seema Verma at the helm. We shall see. But there are questions about whether or not CMS has the discretion to approve such changes.

Regardless of what one might think about these changes (full disclosure: we signed onto comments opposing many of them), there should be widespread agreement on the need for a reasonable degree of information about the possible budgetary and enrollment impacts of such major change.

In the section on “Data Analysis” the amendment itself only states this: “The imposition of work requirements, additional verification requirements, and time limits on coverage as stated in the proposal will have a positive effect on budget neutrality.” That is it! No details about the impact on spending – either federal or state – or enrollment for that matter. The proposed policy changes will impact hundreds of thousands of people. And Arizona is a sophisticated state that prides itself on being data-driven so why haven’t they included more sophisticated and data-driven analysis to back up this waiver request?

Budget neutrality has been a key tenet of waiver policy under Administrations of both parties. This amendment could impact federal and state spending in a myriad of ways. CMS should ask questions before it considers this amendment. Here are just a few areas where they should delve deeper:

  • Approval of these changes would likely result in substantial new administrative expenditures for the state, including potentially the need to hire new state employees to start checking income on a monthly basis, which is an extremely heavy lift.
  • Federal costs could go up in other areas if enrollment starts declining in the expansion category due to the new barriers established by these policies. For example, enrollment in Supplemental Security Income (SSI) might rise as more people attempt to be declared eligible as a path to receiving Medicaid.
  • Some of the folks losing coverage may become uninsured – and for a federal waiver that is supposed to be a research and demonstration exercise, tracking this seems essential. The evaluation section notes that the state will track those that lose coverage but there is no discussion as to where their uncompensated care costs may crop up – for example in the mental health and substance abuse treatment systems.

None of these issues have been raised yet, however, the state says the impact on budget neutrality will be positive. One assumes this must be so because the state anticipates coverage losses that are significant enough to counteract the increased administrative costs

Prior to new rules and procedures established by the Affordable Care Act, Section 1115 waiver approvals routinely raised eyebrows for the lack of scrutiny of state’s budget neutrality agreements and inadequate transparency with respect to the process. A January 2008 GAO report entitled Recent HHS Approvals Continue to Raise Cost and Oversight Concerns found that “HHS did not adequately ensure that Florida’s and Vermont’s Medicaid demonstrations will be budget neutral before approving them.”

This was back in 2005 when Florida set something of a dubious world record of reaching an agreement on a complex waiver in just 16 days from official submission to approval with no opportunity for public comment on a meaningful version of the proposal.