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CMS Announces Medicaid “Healthy Adult Opportunity” Demonstration

January 31, 2020

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CONTACTS
Mary Mullaney, Director, Hospital Payment Policies
Jason Kleinman, Senior Legislative Analyst, Govt. Relations

The Centers for Medicare and Medicaid Services (CMS) Jan. 30 announced the Healthy Adult Opportunity (HAO), an optional Medicaid demonstration initiative that would essentially block grant payments to states that expand coverage to adults under age 65 who are not otherwise eligible for Medicaid and who are not eligible under a current state plan. States would apply for this new option under an 1115 waiver demonstration and agree to operate their program like any section 1115 demonstration. 

AAMC President and CEO David J. Skorton, MD, issued a statement expressing concern about the announcement from CMS.  Dr. Skorton noted, “This guidance would limit the federal government’s congressional mandated responsibility to the Medicaid program and could result in reductions in coverage, access, and quality care for the millions of vulnerable patients who rely on this critical program.”

Under the HAO demonstration, states would receive a defined budget target, set either on total expenses or per-enrollee basis, for costs incurred to cover these enrollees. Total expenditures for covered populations in excess of the annual budget would not be eligible for federal financial participation. The financial parameters would be tied to inflation. While total federal funding would be capped, states would still be required to submit claims reflecting actual expenditures to obtain federal matching funds for the Medicaid program. 

If approved by CMS, states choosing to apply for an HAO demonstration would have the flexibility to set income standard eligibility and the ability to target a defined subset of high-need individuals. An income standard of at least 133% of the federal poverty level and eligibility for all individuals described in the adult group is required in order for states to be eligible for the enhanced federal medical assistance percentage available for this population under the statute. States could also waive retroactive coverage and hospital presumptive eligibility requirements.    

The benefit package under an HAO demonstration would need to include essential health benefits (EHBs) similar to the requirements in the individual health insurance market as required by law. Drug formularies under an HAO would be required to contain at least the greater of one drug in each U.S. Pharmacopeia category and class or the same number of prescription drugs in each category and class in the benefit package the state is using for defined EHBs. States will also be expected to apply certain protections for people with HIV and behavioral health conditions. 

Demonstration applications submitted under the HAO are subject to all relevant public notice and transparency requirements associated with section 1115 demonstrations. In general, HAO demonstrations would be approved for an initial five-year period from the date of implementation, and successful demonstrations may be renewed for a period of up to 10 years. 

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