Why Illinois’ Medicaid 1115 waiver is cause for concern
This week, the governor’s office is scheduled to submit “The Path to Transformation: Illinois 1115 Waiver Proposal” to the U.S. Department of Health and Human Services. If approved by the federal government, this proposal would overhaul the Illinois Medicaid program. The state would not only consolidate multiple health-care programs aimed at providing home and community-based...
This week, the governor’s office is scheduled to submit “The Path to Transformation: Illinois 1115 Waiver Proposal” to the U.S. Department of Health and Human Services.
If approved by the federal government, this proposal would overhaul the Illinois Medicaid program. The state would not only consolidate multiple health-care programs aimed at providing home and community-based care. It would also seek additional federal funding for some state-only programs in exchange for promising to be budget neutral over a five-year period. Section 1115 waivers are designed to give states more flexibility in designing and operating their Medicaid programs.
Medicaid is a federal-state health care program for the low-income and disabled individuals in the state. The federal government pays for about half of the program costs for most enrollees and almost the entire cost for newly eligible enrollees under the Affordable Care Act.
There is no doubt that the Medicaid program in Illinois is in need of large-scale, comprehensive reform. But the Quinn administration plan is thin on details and is based on inconsistent and questionable budget information. The risk of the proposed approach is that it is unlikely to achieve the desired goals – increasing costs for taxpayers and further compromising patient care in an already-strained system.
Spending estimates questioned
For starters, there are concerns about just how accurate the state’s projected spending will be under the proposed approach. For example, the waiver proposal claims the costs of those newly eligible under the Affordable Care Act’s Medicaid expansion to be 94 percent higher than the Department of Healthcare and Family Services was estimating as recently as last year.
The difference leaves one wondering whether the state used faulty estimates to pass the state’s Medicaid expansion or if the state is submitting inflated estimates to the U.S. Department of Health and Human Services.
Furthermore, the state now expects 430,000 new Medicaid enrollees by the end of the year, which is much higher than the state previously estimated. If these individuals were previously eligible, but not enrolled in Medicaid, the state could be facing much higher Medicaid costs since the federal government will only be contributing about half of these enrollees’ costs.
No spending caps or enrollment limits
The state could have, but did not, propose spending caps and enrollment limits on the program to operate under the proposed waiver authority, which would have provided some assurances to taxpayers on the budget front. It would have also created a much larger incentive to meet the budget goals of the new approach.
Early evidence with the state’s Medicaid “coordinated care” programs illustrates the difficulty and challenge in any large-scale reform project – even with strong financial incentives in place. If the state does not impose strict controls and incentives to meet its own targets under this waiver, achieving success will become all the more difficult. Instead, the state’s costs remain open-ended.
Risk analysis needed
Another area of great concern is whether the state has conducted an economic forecast and risk analysis to assess how changes to the state’s Federal Medical Assistance Percentage rate might affect the state budget. The federal government’s contribution rate to the program is based on the state’s median income relative to other states, as well as the poverty level. If, for example, the state faces an increase in the poverty rate with a simultaneous increase in median income relative to other states, the federal matching rate for Illinois could fall – leaving the state’s taxpayers on the hook for a greater share of program costs.
Harm to other government services
The biggest concern is that a failure to hit estimated savings – which is likely – is going to do irreparable harm to competing state services that will be further crowded out by Medicaid spending, Illinois taxpayers who will be footing the bill for this ill-fated venture and, most important, the people who rely on the most intensive and highest-cost services under the program.
Illinois should pursue Section 1115 Medicaid waiver demonstration approval, but it should be based on stringent standards of budget neutrality. In addition, Illinois’ reform proposals should include spending caps, patient choice, and customized benefit packages. These approaches could significantly shore up the program’s finances while better meeting individual patient needs and preferences. Reinstating strict eligibility verification can also help to ensure that the state is actually serving its neediest residents. Unfortunately, “The Path to Transformation” proposal is a missed opportunity for long-term and sustainable reform.