CMS Says Medicaid Waivers Will Be Tied to Expanding Medicaid

Nine states received letters from CMS that explicitly link Medicaid waivers with the expansion of Medicaid eligibility as authorized by the Affordable Care Act.


Medicaid waivers help safety net hospitals cover their uncompensated care costs and come up for renewal periodically. CMS said in the letters that federal funds for these waivers “would not be needed if states expanded Medicaid to provide coverage for uninsured residents.”


The Healthcare Financial Management Association (HFMA) noted: “The financial impact on hospitals from cutting off the waiver funds, which CMS can refuse to renew for any reason, would be significant.” (“Administration Links Hospital Funds to Medicaid Expansion,” HFMA Weekly, May 1, 2015)


CMS noted three key principles it would consider when considering the future of state low-income pools (LIP) established by the waivers:

  • Uncompensated care pool funding cannot be used to pay for health care for people whom the state could have covered through a Medicaid expansion.
  • Medicaid payments should be used to support services provided to Medicaid beneficiaries and low-income uninsured individuals.
  • Provider payment rates should be sufficient to ensure adequate provider participation in Medicaid, access to care for beneficiaries and care coordination by managed care plans.


In Florida, a non-expansion state and one of the nine states to receive the letter, LIP funding increased from $1 billion to $2.17 billion between the initial approval of the waiver in 2005 and the most recent one-year renewal by the Obama administration in 2014. (Center on Budget and Policy Priorities) Of that amount, about $1.9 billion went to cover uncompensated care costs.


California, a model eligibility expansion state, also received the CMS letter because its $636 million waiver expires this year. But it’s not clear whether its Medicaid provider rates—among the lowest in the nation—would pass the scrutiny mentioned in the letter. (“Administration Links Hospital Funds to Medicaid Expansion,” HFMA Weekly, May 1, 2015)


According to one expert at The Camden Group, the underlying rationale for waiver-based hospital funding programs is “substantially reduced or eliminated by Medicaid expansion . . . It brings into serious question the future of the large waiver-based hospital funding programs in states like California and New York.” (“Administration Links Hospital Funds to Medicaid Expansion,” HFMA Weekly, May 1, 2015)




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