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DSHS Proposes Sweeping Medicaid Changes
New waiver would allow state to reduce benefits, impose premiums and cost-sharing, and deny coverage to people with disabilities, low-income families, and elderly citizens.
by Julie Chinitz, Northwest Health Law Advocates (NOHLA)
September 18, 2001
Washington State’s Department of Social and Health Services (DSHS) is preparing a Medicaid demonstration waiver proposal to send to the federal government. This waiver will result in dramatic changes in the state’s Medicaid program and could shut out many thousands of current and future low-income families and individuals from needed health care. The state plans to submit its final proposal by October 31, 2001.
What is a Medicaid Demonstration Waiver?
Medicaid is a health care program for people in financial need and is funded jointly by the federal and state governments. To receive federal funds, the state must comply with federal Medicaid laws. These laws include important protections relating to health care benefits, co-payments and premiums, and guaranteed enrollment. However, a state may be permitted to use different rules for its Medicaid program through a "Section 1115" waiver for demonstration, pilot, or experimental projects. It is this type of waiver that DSHS is applying for.
What Medicaid changes does DSHS want to make through the waiver?
DSHS is seeking blanket authority to override many client protections and has provided only limited information on the changes they would introduce once these protections are lifted. The changes would be made primarily through the legislative budget negotiation process and/or by DSHS. Under the proposal, the following existing federal protections would be removed:
 | Enrollment Guarantee: Currently, the state may not turn away anyone who is eligible for Medicaid. Under the waiver, DSHS would have unilateral power to impose waiting lists for certain clients, even if they cannot afford to purchase other health insurance. |
| Health Care Benefits: Medicaid law requires states to provide a specified minimum of services and give the same coverage to all clients, with limited exceptions (states may, however, provide a less comprehensive benefit package to clients who must spend a certain amount in medical expenses before being financially eligible for Medicaid. These are often called "spend-down" programs). In addition, states must cover treatment for all conditions discovered during well-child exams. |
However, DSHS is seeking authority to provide benefits below the specified minimum to "optional" client groups, which include categories of children, pregnant women, the elderly, people with disabilities, and others. DSHS has stated that these clients would receive benefits at least the same as the state’s Basic Health Program benefits, plus rehabilitation therapy. However, in its proposal, DSHS does not make a commitment to maintain even this level of coverage. In fact, the proposal allows for changes in the Basic Health package. Moreover, the Basic Health package does not now cover medical equipment or supplies, complications resulting from excluded services, emergency facility services for non-emergency situations, dental care, custodial care, complete mental health services, and other services. For example, under this package, a child could be denied necessary asthma equipment and supplies.
| Cost-sharing Limitations (such as co-payments and coinsurance): Under current rules, the highest co-payment a state may collect for non-institutional services is $3.00. A state may charge no more than a $2.00/month deductible for non-institutional services, such as care received in a doctor’s office. Furthermore, women receiving pregnancy-related care, children, nursing home residents, and others may not be charged any cost-sharing, and no Medicaid client may be denied services if he or she cannot afford the co-payment. Under the waiver, DSHS plans to charge cost-sharing for all clients, with select services exempted for certain client groups. The DSHS proposal does not state the amount of cost-sharing it would charge, but indicates that it could reach 5% of a family’s income. |
| Premiums: At present, the vast majority of clients may not be charged premiums for Medicaid coverage. States may collect limited premiums from very select groups of clients. Under the waiver, DSHS could charge premiums for all clients above 100% of the federal poverty level, which is currently $14,630/year for a family of three. In its proposal, DSHS states that it would charge "reasonable" premiums, but does not specify what they consider reasonable. However, DSHS does state that combined premiums and cost-sharing could be as high as 5% of a family’s annual income. Therefore, a member of a three-person family with income of only $18,288/year could be charged a premium as high as $76/month. |
| Program Simplification: The waiver would allow the state to make changes to simplify the Medicaid application process. Some of these could be done without a waiver; others (such as removing the requirement of a signature on the application) require a waiver. |
Will Washington be able to cover more people under this waiver?
The waiver proposal also requests using Washington’s unspent federal funding for Washington’s Children’s Health Insurance Program (CHIP) for parents of Medicaid and CHIP children. However, DSHS has already discussed such a family expansion waiver with the federal government and would not need to pursue the demonstration waiver in conjunction with it.
Would the state save money through this waiver?
The waiver would save money by reducing and denying coverage to low-income families, elderly and people with disabilities. The proposal does not address the leading single driver of Medicaid spending increases - the cost of prescription drugs - even though several states are exploring ways of reducing such costs. Furthermore, many questions remain as to how cost-savings, if any, would be achieved. No cost-benefit analysis has been cited by DSHS and none has been made public. Such an analysis, which must take into account costs to clients and long-term costs (such as increased use of emergency rooms), is essential for understanding the potential outcome of the DSHS proposal.
For example, the collection of premiums and co-payments requires a costly and sophisticated administrative structure that DSHS does not now have. Recently, the state decided to impose Medicaid premiums on clients coming off welfare and admitted that the cost savings would come primarily from clients dropping coverage because they could no longer afford it, rather than from premiums.
How will decisions about Medicaid changes be made if the waiver is approved?
Many of the decisions about how to change Medicaid would occur during legislative budget negotiations and would not necessarily be raised or discussed in public hearings. DSHS would have discretion to impose enrollment caps and waiting lists if it ran out of funds. There is no additional public process mentioned in the waiver memo. There is also no indication of which changes will be considered when, because the purpose of the waiver is to give the state flexibility to make the changes however and whenever it chooses.
How can Washington residents express their concern about this waiver?
Advocates have expressed concern about the lack of real public process for the waiver. DSHS is presenting information on the waiver in its Community Conversations meetings in various cities and towns, but has not widely publicized these meetings. Meetings have already been held in several locations, but for meetings in Spokane and Colville potential participants were provided less than one week advance notice.
In September, Community Conversations meetings will be held in Wenatchee, Yakima, Pasco, Seattle and Bellingham. On September 14, a meeting was held in the Seattle area. It included a presentation by Secretary Braddock and public questions and comments. There will also be a Title XIX Medicaid Advisory Committee meeting on September 28 in SeaTac.
Concerned individuals should also contact Governor Locke, their legislators, and Secretary Braddock (of DSHS) to express their concerns. Let them know that Washington should:
| pursue the Family Expansion Waiver. |
| seek to control drug costs, rather than seeking a blanket waiver that would allow the state to cut benefits, deny coverage using enrollment caps and waiting lists, and raise the costs to clients of Medicaid coverage. |
| provide real opportunities for the public to review and provide meaningful input on the decision-making process. |
For more information on this issue, contact Julie Chinitz, Northwest Health Law Advocates, 1820 E. Pine Street, Suite 322, Seattle, WA, 98122, (206) 325-6464, juliec@nohla.org.
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