States Should Reevaluate Harmful Medicaid Waivers to Respond to COVID-19

To respond to the COVID-19 crisis, many states have made significant, temporary changes to their Medicaid programs, mostly through emergency waivers and state plan amendments. However, states also have the option to make more lasting changes by reversing harmful policies in their Section 1115 waivers. Unwinding bad waivers not only makes it easier for states, beneficiaries, and providers to navigate the current pandemic, but also will result in improved coverage and access for beneficiaries in the long term.

States have pursued a number of restrictive policies over the past few years that limit or risk coverage and care including work reporting requirements, premiums (often with disenrollment provisions), cost-sharing, and eliminating retroactive coverage. The courts and the COVID pandemic have put a stop to work requirements for the time being, but the other burdensome policies remain in place for many other states (7 states impose premiums and/or cost-sharing on low-income parents through waivers; 3 more are seeking approval to do so). Some states though have taken steps, both pre-COVID and during the pandemic, to remove these barriers and improve beneficiaries’ access to necessary care. States are able to make changes to their Section 1115 waivers, and routinely do, as evidenced by New Mexico’s recently approved amendment.

In July 2019, New Mexico submitted an amendment to its Centennial Care 2.0 Section 1115 demonstration at the direction of Governor Lujan Grisham to remove copayments for beneficiaries, eliminate premiums for expansion adults, and reinstate retroactive eligibility. Under the state’s previous waiver approval, beneficiaries were subject to copayments for non-emergent use of the emergency department and use of non-preferred drugs while expansion adults were subject to monthly premiums with the penalty of disenrollment and a three-month lockout for failure to pay. The amendment was finally approved by CMS on April 2, eliminating barriers to receiving care at a crucial time.

Virginia has similarly reconsidered its restrictive policies over the past few months. In December, Governor Ralph Northam suspended the state’s pursuit of work requirements in Medicaid which the state was originally seeking through a Section 1115 wavier. Just a few weeks ago, Virginia’s state plan amendment was approved to remove cost-sharing for Medicaid beneficiaries – getting rid of a financial burden for low-income individuals in need of health care services.

States have several options to improve beneficiaries’ access to coverage and care. If a waiver has been submitted but not approved, a state can withdraw its proposed waiver – as Maine Governor Janet Mills did with the state’s work requirement waiver after she was elected in 2018. Once approved, a waiver can still be changed through an amendment to a state’s demonstration or through a SPA. The process to amend previously approved waivers is explained in the Special Terms and Conditions (STCs) of each state’s demonstration. States must receive CMS approval in advance in order implement desired changes to a previously approved waiver.

During the COVID pandemic, Arizona has temporarily suspended some of its harmful policies (i.e. cost-sharing and premiums), while others with approved waivers have chosen to continue imposing premiums and cost-sharing. Though this suspension provides temporary relief for beneficiaries, they will continue to face financial burdens and barriers to care once the time-limited waivers expire.

No state with a waiver of retroactive coverage (AZ, FL, and IA) has pursued reinstating retroactive eligibility, even temporarily. Lack of retroactive coverage is an even greater concern during health and economic crises since it places more beneficiaries at financial risk of high medical costs and increases uncompensated care for providers and hospitals.

The ongoing COVID crisis has highlighted states’ ability to reverse detrimental policies and adjust to evolving circumstances. States should use this opportunity to review and amend harmful waivers, and instead, focus on making health care and coverage more accessible to beneficiaries.

Allexa Gardner is a Research Fellow at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.