Advancing Postpartum Coverage in Medicaid: Waiver or SPA?

young woman contemplating a tough decision

The recently enacted American Rescue Plan Act has many new opportunities and important provisions that we are still absorbing and unpacking. One key change, as readers of SayAhh! know, is the new state option to provide 12 months of postpartum Medicaid and CHIP coverage to women after the end of their pregnancy, well beyond the current cutoff of just 60 days postpartum. My colleague Maggie Clark has blogged about this new option and why it is a good start but not enough to end the crisis the country is facing in maternal mortality – especially in communities of color. But in the near future, pushing states to adopt this option is an important goal to improve families’ health.

A good summary of the new option is available from the Kaiser Family Foundation. Like everything else, it will require guidance from the Centers for Medicare and Medicaid Services (CMS) to unpack fully. But in the meantime, one question arises immediately for many of us – what does this mean for pending section 1115 Medicaid demonstration requests to extend postpartum coverage? Should states use the new Medicaid and CHIP (CHIP) state plan amendment option (SPA) or will they continue to pursue section 1115 requests?

Some quick background: section 1115 Medicaid demonstrations (or “waivers”, as they are more commonly called) are opportunities for states to try out new ideas that promote the objectives of the Medicaid program. Section 1115 authority also applies to CHIP. States pursuing a waiver must construct an application, take public comment and submit the revised application to the federal government, noting and responding to commenters. From there, the Secretary of HHS is required to open an additional 30-day public comment period, and, once completed, has discretion over what to approve. You can see an application’s status as it moves through the process at here.

Numerous states have requested section 1115 waivers to extend postpartum coverage for different lengths of time (i.e. six months in the case of New Jersey and Georgia, 12 months in the case of Illinois) and for more limited groups of people and/or more limited benefits. Missouri is the best example of a limited approach, as they proposed to limit the additional months of postpartum coverage only to women with substance abuse disorders, and only for related services. See Table 1 below.

Postpartum Coverage Section 1115 Waivers – Proposed as of March 17, 2021

State Proposal Effective Date Requested Coverage Estimate (first DY-final DY) Total Expenditures Estimate (first DY – final DY)
IL Extend coverage to 12 months (additional 10 months of coverage) for all pregnant women with incomes between 138% to 213% FPL including LPR pregnant women under the 5-year limit January 1, 2020 3,934 – 4,007 $6,900,648 – $16,122,024
VA Extend coverage to 12 months (additional 10 months of coverage) for all pregnant women with incomes between 138% to 205% FPL including lawfully residing pregnant women in the US for less than 5 years January 1, 2022 914 – 1,592 $3,832,192 – $8,171,356
NJ Extend coverage to 6 months (additional 4 months of coverage) for all pregnant women with incomes between 138% and 205% FPL N/A 8,717 $13,638,426 – $13,877,093
GA Extend coverage to 6 months (additional 4 months of coverage) for all pregnant women with incomes up to 225% FPL July 1, 2021 12,630 – 15,501 (monthly) $55,875,423 – $81,783,795
SC* Extend coverage up to 12 months (additional 10 months of coverage) for all pregnant women with incomes up to 246% FPL July 1, 2020 4,100 (monthly) N/A
MO Limited benefit extension (related to SUD and mental health treatment) for an additional 12 months for pregnant women with substance use disorder with incomes up to 196% FPL January 1, 2020 755 – 891 $4,822,822 – $7,755,372
IN Extend coverage to 12 months (additional 10 months of coverage) for pregnant women with opioid use disorder with incomes up to 213% FPL July 1, 2021 725 $921,350 – $2,073,976

* SC amended their request to no longer include the full postpartum coverage extension prior to the proposal’s approval by CMS in December 2019

Generally speaking, when Congress enacts a SPA option, it is expected that that is the path that states can and should take going forward. That is not universally what happens, but there are reasons why SPAs are preferable – they are easier for a state to take up quickly (there are not the same public comment rules) and there is no budget neutrality requirement (we will explain this more shortly). In fact, it is likely that federal CMS will develop a template for states to use when seeking to adopt the 12 months postpartum coverage option and that federal approval of such SPAs will happen very quickly. It is also possible that the Biden Administration will issue some guidance on what kinds of section 1115 demonstration requests it would consider in this area.

Another virtue of the SPA approach is that it limits the ways in which some states could seek to avoid federal minimum standards. Section 1115 demonstrations are neither inherently good or bad – any value judgment should depend on how a state uses them and whether they promote the objectives of Medicaid. Unlike the more streamlined SPA approach, however, a state could try to negotiate with CMS to provide more limited coverage through a section 1115 approach by shortening the time period (to six months instead of 12), providing coverage for a leaner set of benefits (as Missouri’s pending proposal illustrates), or only covering a subset of people (again like Missouri, as well as Indiana).  All of these possibilities raise concerns from the perspective of the beneficiary, especially now that Congress has enacted the state plan option and there are good reasons to avoid the section 1115 process – although presumably, the Biden Administration will not approve more limited approaches.

Because Section 1115’s are intended to demonstrate a new approach to administering a state’s Medicaid program, they also come with the added complexity of what’s known as a budget neutrality requirement. While the budget neutrality requirement is not statutorily required, it has been universally applied — though often differently interpreted – so it is here to stay. Essentially the state and federal government have to agree that under (typically) five-year budget projections, federal spending with the waiver (WW baseline) will not be higher than projected federal spending without the waiver (WOW baseline).

None of this is required with a SPA. Instead, a state that takes up a SPA option receives its regular federal matching rate for that category of beneficiaries. In the case of extended postpartum coverage, this will be the state’s regular FMAP rate (which, with the enhanced rate during the public health emergency, currently ranges from 56% to 84%).

So in most cases, the SPA option should be the way to go – however there are a few good reasons at the moment that a state may wish to go the section 1115 route.  The most obvious is timing. Federal matching funds for states that take up the state plan option don’t become available until April 1, 2022. For as long as the COVID-19 public health emergency remains in place (which it likely will until at least that date), women covered by Medicaid who give birth won’t be cut off coverage. But that is not a legal certainty at this point and a state may want to get this new coverage up and running.

And of course, a state could seek to go further than the federal requirements for coverage through a section 1115 demonstration – perhaps proposing an even longer period of continuous coverage or extending coverage to a group of women who are not otherwise eligible (which Massachusetts is considering).

Bottom line: if you are in a state considering this new option, push for a SPA unless there are very obvious and good reasons not to. The word SPA conjures up thoughts of calm, relaxation and in this case, the acronym fits.

Joan Alker is the Executive Director of the Center for Children and Families and a Research Professor at the Georgetown McCourt School of Public Policy.