Medicaid Overhaul Includes Use of Quality Measures, Spending Caps

January 31st, 2020

By Jill Drachenberg, Editor, Relias Media

The Centers for Medicare & Medicaid Service (CMS) this week announced the largest-ever overhaul of the Medicaid program, a move that drew praise for its use of quality measures and concern that block grants could harm the program in the long term.

The Healthy Adult Opportunity (HAO) demonstration project is a voluntary program for states that wish to expand Medicaid access but wish to maintain more control over funding and program options. The voluntary program is for adults younger than 65 years of age who are not eligible for Medicaid based on disability or long-term care needs and who do not qualify for state Medicaid plans. States will have more control over plan structuring, including:

• Creating plans similar to commercial insurance;
• Negotiating lower drug prices by using a closed formulary;
• Making program adjustments without federal approval;
• Using innovative care delivery systems.

HAO will be funded through the controversial block grant system. States that opt in can choose the total expenses model, through which CMS will calculate funding based on the prior year’s expenditures, or the per-enrollee amount, calculated using prior expenditures for each eligibility group. The total expenses model will cap funding in the aggregate, although states will not be able to cap enrollment. The per-enrollee model budget will allow for fluctuation based on enrollment. Both models require states to submit reports on expenditures, integrity, and quality performance measures, including flu vaccines, depression treatment, controlling high blood pressure and diabetes, HIV treatment, and prenatal and postpartum care. States also must ensure protections for beneficiaries receiving HIV and mental health treatment, including full access to medications.

“Vulnerable populations deserve better care. Data shows that barely half of adults on the Medicaid program report getting the care they need,” CMS Administrator Seema Verma said in a statement. “We’ve built in strong protections for our most vulnerable beneficiaries, and included opportunities for states to earn savings that have to be reinvested in strengthening the program so that it can remain a lifeline for our most vulnerable.”

Reaction to the HAO program has been cautious and mixed. The American Medical Association (AMA) opposes funding caps and block grants because “they would increase the number of uninsured and undermine Medicaid’s role as an indispensable safety net,” said AMA President Patrice A. Harris, MD, MA, in a statement. However, AMA supports potentially beneficial program flexibilities. “While encouraging flexibility, the AMA is mindful that expanding Medicaid has been a literal lifesaver for low-income patients. We need to find ways to build on this success. We look forward to reviewing the proposal in detail,” Harris said.

Components of HAO “represent genuine steps forward for Medicaid,” said Association for Community Affiliated Plans CEO Margaret Murray. “We applaud the requirement that states taking up this waiver opportunity measure the quality of care delivered through the adult core quality measure set. But nothing about either policy mandates that it be tied to this program’s structural flaw—its spending caps. Since any state that exceeds its capped federal allotment will have to cover the excess costs from state taxpayer revenues, HAO will inject more uncertainty into state budgets. This uncertainty would leave people vulnerable to significant cuts in the event of a natural disaster, high-cost medical innovations, or an unanticipated event such as the recent outbreak of coronavirus.”