KY Policy Blog

What Are Medicaid Waivers?

By Dustin Pugel
May 20, 2016

Kentucky has had great success in reducing the number of people who are uninsured since it expanded Medicaid coverage through the Affordable Care Act. Since that time, Governor Bevin has announced he will seek changes to the program through a federal waiver process.  But the word waiver has more than one meaning when it comes to Medicaid, and can mean both positive changes to the program as well as changes that create new barriers to the coverage and care Kentuckians need.

The federal government offers two ways a state can make changes to its Medicaid program: State Plan Amendments (SPA) and Waivers. States can make many administrative changes through a SPA as long as they don’t violate federal Medicaid regulations. However, when a state is seeking to change their Medicaid coverage in a way that would require CMS to waive certain regulations, states must ask for a waiver, which is what Kentucky is currently exploring.

Kentucky’s Medicaid program currently uses two types of waivers to shape how care is delivered: 1915 (b) and 1915 (c). The type of additional waiver Gov. Bevin is seeking is called an 1115 waiver. The numeric titles refer to the section of the Social Security Act where they can be found, and though there are more waivers than are explained here, these represent the most commonly used options. Each waiver has a different purpose and different requirements.

Section 1915 (b) Waivers:

  • While there are different iterations of this waiver, the 1915 (b1) waiver is often referred to as the Managed Care waiver. In Kentucky, it has been used to offer Medicaid benefits through five private statewide organizations, rather than state government directly reimbursing healthcare providers for their services to Medicaid beneficiaries.
  • This type of waiver must cost no more than a traditional fee-for-service Medicaid structure and cannot restrict access to or quality of healthcare. These waivers are approved for up to five years, but are often renewed.
  • Twenty-two states use this kind of waiver.
  • Kentucky also uses a 1915 (b4) waiver so that it can provide non-emergency medical transportation through contracts with private transportation companies. This way the state can offer multiple ways of helping people get to doctor’s appointments who would normally have a hard time arranging for transportation.

Section 1915 (c) Waivers:

  • These are often referred to as Home and Community-Based Services (HCBS) waivers. Kentucky uses seven different kinds of these waivers in order to allow people to remain in the community who might otherwise need care in institutional settings such as traumatic brain injury patients and those with intellectual or developmental disabilities.
  • This waiver must cost no more per-person than traditional nursing home costs would be. They are approved for three year periods, but can be renewed every five years thereafter.
  • There are currently 302 such waivers being used by 48 states.

Section 1115 Waivers:

  • These waivers are known as demonstration waivers, because they are intended to allow a state to experiment with how best to cover and deliver healthcare for Medicaid and Children’s Health Insurance Program recipients.
  • The criteria for approving a state’s demonstration waiver are:
    1. increase and strengthen overall coverage of low-income individuals in the state;
    2. increase access to, stabilize and strengthen providers and provider networks available to serve Medicaid and low income populations in the state;
    3. improve health outcomes for Medicaid and other low-income populations in the state; or
    4. increase the efficiency and quality of care for Medicaid and other low-income populations through initiatives to transform service delivery networks. Cost saving cannot be the only purpose of the waiver.
  • 1115 waivers last for five years, and can be extended for an additional three years. Evaluations of the waiver’s impact are conducted while the waiver is in effect and after the waiver has expired in order to share best practices and determine what shouldn’t be repeated in other states.
  • While the current discussion around 1115 waivers has centered around Medicaid expansion, this kind of waiver has been in existence for much longer. In fact, CMS has approved 1115 waivers in 27 states, though most of them pre-date the implementation of the Affordable Care Act.

Medicaid is designed to offer flexible implementation so each state can respond to the unique needs of its people, and so that innovations of healthcare coverage and delivery can be attempted and shared. All 50 states go about offering Medicaid differently, but the common goal of the program is that everyone has access to quality, affordable healthcare when they need it. It will be important to keep that goal at the center of the discussion about pursuing an 1115 waiver for Medicaid in the Commonwealth.

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