California?s Section 1115 Waiver Amendment Request Regarding

Via electronic mail:
Cindy Mann
Deputy Administrator and Director
Center for Medicaid, CHIP, and Survey and Certification
U.S. Department of Health and Human Services 200 Independence Avenue, S.W.
Washington, DC 20201
Re:  California?s Section 1115 Waiver Amendment Request Regarding the Children?s Health Insurance Program Transition to Medicaid Program
Dear Ms. Mann,
We are submitting objections and comments to the proposed California Bridge to Reform Demonstration (No. 11-W-00193/9) Amendment regarding the Children?s Health Insurance Program (CHIP) Transition to Medicaid. The California Health and Human Services Agency (CHHS) sent stakeholders California?s formal submission of the Waiver Amendment which the state submitted to the Center for Medicaid and CHIP Services, and Centers for Medicare and Medicaid Services (CMS), Region IX, on October 30, 2012. Stakeholders were given nine days to provide comments, and the Waiver documents were also posted on the Department of Health Care Services? (DHCS) website.
We are concerned that in an attempt to start the implementation of the CHIP transition to Medicaid on January 1, 2013, the State of California has submitted a request to amend an unrelated waiver, instead of following the proper process of applying for a new 1115 Waiver. In doing so, the state?s request circumvents the requirements of the new transparency regulations in the Affordable Care Act (ACA) which provide for a meaningful opportunity to comment on waiver proposals, including at a minimum 30 days for public comment before the proposal is submitted to CMS.
State of California?s Proposal
The State of California is proposing to amend the Special Terms and Conditions (STC) and Expenditure Authority of Waiver 11-W-00193/9, ?California Bridge to Reform Demonstration? to enable the transition of California?s CHIP, the Healthy Families Program (HFP), to California?s Medicaid Program (Medi-Cal). Children enrolled in the HFP will be transitioned into Medi-Cal?s Targeted Low-Income Children?s (TLIC) Program in five phases. Families seeking coverage for children eligible as a new TLIC, upon implementation of the transition, will be enrolled under Medi-Cal.
Waiver authority
Section 1115 of the Social Security Act allows the Secretary of Health and Human Services (Secretary) to authorize states to implement experimental, pilot or demonstration projects which are likely to assist in promoting the objectives of the Medicaid Act. Unless specifically prohibited by Congress, the Secretary may waive provisions of section 1396a to the extent and for the period necessary to enable the state to carry out the project.
At the time of its enactment, Congress described section 1115 as a way to ?test out new ideas and ways of dealing with problems of public welfare recipients.?1 The State of California is requesting to enroll all children with family income up to 250% of the federal poverty level (FPL) into the Medi-Cal program in phases.
1115 Waiver of Comparability
As mentioned above, absent a waiver, state Medicaid programs must meet the minimum requirements of the federal Medicaid law. This includes a provision for comparability of benefits among recipients.2 Services made available to any individuals in the categorically needy or medically needy group must be equal in amount, duration, and scope for all individuals within the group.
California is proposing to transition HFP subscribers to the Medi-Cal program through a phased-in approach, involving five phases. As a result, children that are similarly situated, during the transition year, will receive services different in ?amount, duration, and scope.? Therefore, an 1115 waiver of comparability is required.
New 1115 Waiver is Needed
The State of California proposes to amend the STC and Expenditure Authority of the state?s ?Bridge to Reform Demonstration?. Yet a new waiver is required because the transition of HFP subscribers to Medi-Cal is unrelated to the purpose of the ?Bridge to Reform? waiver which allows for an early expansion of Medicaid to adults in preparation for 2014. Covering children up to 250% FPL under Medi-Cal is already allowed under federal law with a state plan amendment and therefore does not fit within the existing demonstration. Therefore, amending this existing waiver is not the proper vehicle for this change. The state should instead submit a new 1115 Waiver application to request a waiver of comparability to allow for the state?s proposed phased-in approach of the transition of HFP subscribers to the Medi-Cal program.
The transition of HFP subscribers to Medi-Cal should only occur when it is clear that DHCS, CHHS, the Managed Risk Medical Insurance Board (MRMIB), and Department of Managed Health Care (DMHC), (hereinafter collectively referred to as ?Departments?) are all prepared for a smooth transition, without disruption in services, and ensuring access to and continuity of care. The Departments are pushing for a January 1, 2013 start date for the transition and we do not believe the Departments are ready to make the transition by that date. There are serious health and dental plan network adequacy issues for children in Phase 1 that have not been addressed. In the state?s HFP Transition to Medi-Cal Network Adequacy Assessment, DHCS and DMHC identified three of eighteen plans that are not ready to transition. Over 100,000 children in Phase 1 are enrolled in one of these three plans. There are also issues related to continuity of care that still need to be addressed. This includes issues around dental and mental health services where continuity of care needs are complex and require additional specific planning coordination and action steps to protect consumers. There are also issues related to Eligibility and Enrollment Requirements which have not been resolved, including technical changes and training of staff. We are also concerned about timely notice to families, providers, and certified application assistors. The transition of HFP children to Medi-Cal must be done in a responsible manner, and we are concerned of the harm which can result from moving too quickly.
New Transparency Regulations
Section 10201(i) of the ACA included new requirements to provide opportunities for public comment and feedback of the review and approval process for a states? section 1115 demonstration application. CMS issued a final rule implementing these provisions, which became effective on April 27, 2012. The regulations apply to all new section 1115 waiver proposals, but do not apply to waiver amendments.
As mentioned above, California is preparing for the transition of HFP subscribers to the Medi-Cal program, and it has been clear that the Departments intend to start the implementation of the transition on January 1, 2013. Now DHCS has submitted to CMS an amendment to an unrelated waiver, which has allowed the state to circumvent the new federal regulations which require for an opportunity for public comment and greater transparency of section 1115 demonstration projects. Stakeholders have been given nine days to provide comments after the waiver amendment has already been submitted to CMS, which does not represent a meaningful opportunity to comment. We have serious substantive concerns about the haste of the implementation and the consequences this may have on children?s health.
The new federal regulations say that prior to submitting an application to CMS for a new demonstration project, the state must provide at least a 30-day public notice and comment period.3 The public notice must include a comprehensive description of the demonstration application the state intends to submit to CMS, and contain a sufficient level of detail to ensure meaningful input from the public.4 This includes an evaluation of the parameters of the demonstration and specific waiver and expenditure authorities the state believes necessary to authorize the demonstration.5 In addition, the state must convene at a minimum two public hearings on separate dates and locations regarding the state?s demonstration application.6 These hearings must occur at least 20 days prior to the state?s submission of the new demonstration project application to CMS and provide an opportunity for members of the public to give comments regarding the state?s demonstration application.7 Once the state submits the application to CMS it must include written documentation of its compliance with the public notice requirements, as well as a report of the issues raised by the public and how the state considered those comments when developing the demonstration application.8
The State of California?s comparability waiver request for children transitioning from the HFP to Medi-Cal represents a significant change to the Medi-Cal program, and one that requires a new 1115 demonstration waiver. A new waiver application will trigger the protections in the ACA to ensure public input into the development and approval of a new section 1115 demonstration. These new federal regulations were adopted to prevent states from rushing through the 1115 waiver process without transparency, accountability or a meaningful opportunity for public participation in the review process. Therefore, CMS should not approve any requests to circumvent its own new regulations.
Expenditure Authority
CMS should not interpret section 1115 to include a separate, freestanding ?expenditure authority? that allows the Secretary to authorize federal Medicaid funding without a waiver or requiring states to adhere to provisions of the Medicaid Act.
Section 1115 provides:
(a) Waiver of State plan requirements; costs regarded as State plan expenditures; availability of appropriations.
In the case of any experimental, pilot, or demonstration project which, in the judgment of the Secretary, is likely to assist in promoting the objectives of subchapter . . . XIX [42 U.S.C. § 1396 et seq.] . . . in a State or States?
(1) the Secretary may waive compliance with any of the requirements of section . . . 1396a, . . . to the extent and for the period he finds necessary to enable such State or States to carry out such project, and
(2)(A) costs of such project which would not otherwise be included as expenditures under section . . . 1396b . . . shall, to the extent and for the period prescribed by the Secretary, be regarded as expenditures under the State plan or plans approved under such subchapter, . . . . (emphasis added).
When read in its entirety, as it must be, section 1115(a) reveals that Congress adopted a cohesive approach to demonstration projects that is premised on the waiver of only those provisions of the Medicaid Act listed in section 1115(a)(1). Then, under section 1115(a)(2)(A), the costs of any demonstration project properly implemented pursuant to section 1115(a)(1) are regarded as Medicaid reimbursable expenditures of the state Medicaid plan. Section 1115(a)(1) empowers the Secretary to waive statutory requirements in section 1396(a), while 1115(a)(2) merely states that the costs of ?such projects? should qualify for federal funding through the state Medicaid plan. The clauses in sections (1) and (2) of the statute are connected by the word ?and? rather than the word ?or?. These words are ordinarily not interchangeable. Section 1115(a)(2) should not be read to give the states (or federal agency) separate and distinct unrelated expenditure authority to waive the requirements under the law. Only this reading gives meaning to every part of section 1115(a), and only this reading avoids the implausible conclusion that Congress carefully circumscribed the Secretary?s authority in section 1115(a)(1) only to give the Secretary unbridled authority in section 1115(a)(2).
Based on the required clear reading of the Medicaid statute, a new 1115 waiver is required for California to waive comparability of services under the state?s proposed phased-in approach to transition HFP subscribers to the Medi-Cal program, as part of a separate and distinct demonstration project.
Thank you for the opportunity to provide these comments. We look forward to our continued discussion about these issues. If you have any questions about these comments, please contact Michelle Lilienfeld at (310) 736-1648 or  [email protected]
Kimberly Lewis
Managing Attorney
Michelle Lilienfeld
Senior Attorney, on behalf of
National Health Law Program
California Coverage and Health Initiatives Children Defense Fund
Children NOW
Maternal and Child Health Access The Children?s Partnership
Western Center on Law and Poverty
cc: Victoria Wachino, Center for Medicare and Medicaid Services Toby Douglas, Department of Health Care Services
René Mollow, Department of Health Care Services Janette Casillas, Managed Risk Medical Insurance Board Shelley Rouillard, Department of Managed Health Care
Katie Johnson, California Health and Human Services Agency

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