Medicaid Program; Demonstration Proposals Pursuant to Section 1115(a) of the Social Security Act; Policies and Procedures 

59 FR 49249 

DATE: Tuesday, September 27, 1994 

ACTION: Public Notice.  

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 [*49249]  
SUMMARY: This public notice informs interested parties of (1) the principles the Department of Health and Human Services ordinarily will consider when deciding whether to exercise its discretion to approve or disapprove demonstration projects under the authority in Section 1115(a) of the Social Security Act, 42 U.S.C. §  1315(a); (2) the kinds of procedures the Department would expect States to employ in involving the public in the development of proposed demonstration projects under Section 1115; and (3) the procedures the Department ordinarily will follow in reviewing demonstration proposals. The principles and procedures described in this public notice are being provided for the information of interested parties, and are not legally binding on the Department of Health and Human Services. This notice does not create any right or benefit, substantive or procedural, enforceable at law or equity, by any person or entity, against the United States, its agencies or instrumentalities, the States, or any other person.  

FOR FURTHER INFORMATION CONTACT: Howard Rolston, Administration for Children and Families, Department of Health and Human Services, at (202) 401-9220.
Thomas Kickham, Health Care Financing Administration, Department of Health and Human Services, at (410) 966-6503.  

SUPPLEMENTARY INFORMATION:

I. Introduction

Demonstration Proposals Pursuant to Section 1115 of the Social Security Act-General Policies and Procedures
Under Section 1115, the Department of Health and Human Services is given latitude, subject to the requirements of the Social Security Act, to consider and approve research and demonstration proposals with a broad range of policy objectives. The Department desires to facilitate the testing of new policy approaches to social problems. Such demonstrations can provide valuable knowledge that will help lead to improvements in achieving the purposes of the Act. The Department also is committed to both a thorough and an expeditious review of State requests to conduct such demonstrations.
In exercising her discretionary authority, the Secretary has developed a number of policies and procedures for reviewing proposals. In order to ensure a sound, expeditious and open decision-making process, the Department will be guided by the policies and procedures described in this statement in accepting and reviewing proposals submitted pursuant to section 1115.

II. General Considerations
To facilitate the testing of new policy approaches to social problems the Department will-
.Work with States to develop research and demonstrations in areas consistent with the Department's policy goals;
.Consider proposals that test alternatives that diverge from that policy direction; and
.Consider, as a criterion for approval, a State's ability to implement the research or demonstration project.
While the Department expects to review and accept a range of proposals, it may disapprove or limit proposals on policy grounds or because the proposal creates potential constitutional problems or violations of civil rights laws or equal protection requirements. The Department seeks proposals which preserve and enhance beneficiary access to quality services. Within this overall policy framework, the Department is prepared to-
.Grant waivers to test the same or related policy innovations in multiple States, (replication is a valid mechanism by which the effectiveness of policy changes can be assessed);
.Approve demonstration projects ranging in scale from reasonably small to state-wide or multi-state, and
.Consider joint Medicare-Medicaid demonstrations, such as those granted in the Program for All-Inclusive Care for the Elderly (PACE) and Social Health Maintenance Organization (SHMO) demonstrations, and Aid to Families with Dependent Children (AFDC)-Medicaid waivers.

III. Duration
The complex range of policy issues, design methodologies, and unanticipated events inherent in any research or demonstration makes it very difficult to establish a single Department policy on the duration of 1115 waivers. However, the Department is committed, through negotiations with State applicants, to-
.Approve waivers of at least sufficient duration to give new policy approaches a fair test. The duration of waiver approval should be congruent with the magnitude and complexity of the project (for example, large-scale statewide reform programs will typically require waivers of five years);
.Provide reasonable time for the preparation of meaningful evaluation results prior to the conclusion of the demonstration; and
.Recognize that new approaches often involve considerable start-up time and allowance for implementation delays.
The Department is also committed, when successful demonstrations provide an appropriate basis, to working with State governments to seek permanent statutory changes incorporating those results. In such cases, consideration will be given to a  [*49250]  reasonable extension of existing waivers.

IV. Evaluation
As with the duration of waivers, the complex range of policy issues, design methodologies, and unanticipated events also makes it very difficult to establish a single Department policy on evaluation. This Department is committed to a policy of meaningful evaluations using a broad range of appropriate evaluation strategies (including true experimental, quasi- experimental, and qualitative designs) and will be flexible and project-specific in the application of evaluation techniques. This policy will be most evident with health care waivers. Within-site randomized design is the preferred approach for most AFDC waivers. The Department will consider alternative evaluation designs when such designs are methodologically comparable. The Department is also eager to ensure that the evaluation process be as unintrusive as possible to the beneficiaries in terms of implementing and operating the policy approach to be demonstrated, while ensuring that critical lessons are learned from the demonstration.

V. Cost Neutrality
The Department's fiduciary obligations in a period of extreme budgetary stringency require maintenance of the principle of cost neutrality, but the Department believes it should be possible to apply that principle flexibly.
.The Department will assess cost neutrality over the life of a demonstration project, not on a year-by-year basis, since many demonstrations involve making "up-front" investments in order to achieve out-year savings.
.The Department recognizes the difficulty of making appropriate baseline projections of Medicaid expenditures, and is open to development of a new methodology in that regard.
.In assessing budget neutrality, the Department will not rule out consideration of other cost neutral arrangements proposed by States.
.States may be required to conform, within a reasonable period of time, relevant aspects of their demonstrations to the terms of national health care reform legislation, including global budgeting requirements, and to the terms of national welfare reform legislation.

VI. Timeliness and Administrative Complexity
The Department is committed to minimizing the administrative burden on the States and to reducing the processing time for waiver requests. In order to accomplish this the Department has adopted a number of procedures, including-
.Expanding pre-application consultation with States;
.Setting, and sharing with applicants, a well-defined schedule for each application, with established target dates for processing and reaching a decision on the application;
.Maintaining, to the extent feasible, a policy of one consolidated request for further information;
.Sharing proposed terms and conditions with applicants before making final decisions;
.Establishing concurrent, rather than sequential, review of waivers by all relevant units of the Department and with other relevant Departments and the Office of Management and Budget;
.Expanding technical assistance activities to the States; and
.Developing multi-state waiver solicitations in areas of priority concern, including integrated long-term care system development, services for adolescents, and services in rural areas.
The Department will continue to follow and develop procedures, and commit internal resources to reviewing demonstration proposals, necessary for a sound and expeditious review process.

VII. State Notice Procedures
The Department recognizes that people who may be affected by a demonstration project have a legitimate interest in learning about proposed projects and having input into the decision-making process prior to the time a proposal is submitted to the Department. A process that facilitates public involvement and input promotes sound decision-making.
There are many ways that States can provide for such input. In order to allow for public input into the proposals, the Department expects States to ordinarily follow one (or more if the State desires) of the processes described in this section.
1. At any time prior to submitting a section 1115 demonstration proposal to the Department of Health and Human Services, a State may provide to the Department a written description of the process the State will use for receipt of public input into the proposal prior to its submission to the Department.
Within 15 days of receipt of such description, the Department will notify the State whether the described process provides adequate opportunity for public input. The Department will accept any process that-
.Includes the holding of one or more public hearings, at which the most recent working proposal is described and made available to the public, and time is provided during which comments can be received; or
.Uses a commission or other similar process, where meetings are open to members of the public, in the development of the proposal; or
.Results from enactment of a proposal by the State legislature prior to submission of the demonstration proposal, where the outline of such proposal is contained in the legislative enactment; or
.Provides for formal notice and comment in accordance with the State's administrative procedure act; provided that such notice must be given at least 30 days prior to submission; or
.Includes notice of the intent to submit a demonstration proposal in newspapers of general circulation, and provides a mechanism for receiving a copy of the working proposal and an opportunity, which shall not be less than 30 days, to comment on the proposal; or,
.Includes any other similar process for public input that would afford an interested party the opportunity to learn about the contents of the proposal, and to comment on its contents.
The State shall include in the demonstration proposal it submits to the Department a statement (a narrative of several sentences) briefly describing the process that it followed in implementing the process previously presented to the Department. The Department may find a proposal incomplete if the process has not been followed.
2. A State that has not followed the procedures described in paragraph 1. must submit a description of the process that was used in the State to obtain public input, at the time it submits its demonstration proposal. The Department will notify the State if the process was adequate within 15 days after the application is submitted, applying the same criteria as in paragraph 1. If the process was not adequate, the State can cure the inadequacy by-
Posting a notice in the newspaper of widest circulation in each city with a population of 100,000 or more, or in the newspaper of widest circulation in the State if there is no city with a population of 100,000, indicating that a demonstration proposal has been submitted. Such notice shall describe  [*49251]  the major elements of the proposed demonstration and any changes in benefits, payments, eligibility, responsibilities, or provider selection requested in the proposal. The notice shall indicate how interested persons can obtain copies of the proposal and shall specify that written comments will be accepted by the State for a period of thirty days. If a State follows such a procedure, the State should respond to requests for copies of the proposal within seven days. The State should maintain a record of all comments received through this process.
All HHS commitments with respect to times for responding to demonstration proposals shall be tolled until this process is completed.

VIII. Federal Notice
The Department of Health and Human Services intends to publish a monthly notice in the Federal Register of all new and pending proposals submitted pursuant to section 1115. The notice will indicate that the Department accepts written comments regarding all demonstration project proposals.
The Department will maintain a list of organizations that have requested notice that a demonstration proposal has been received and will notify such organizations when a proposal is received.

IX. Comments
The Department will not approve or disapprove a proposal for at least 30 days after the proposal has been received, in order to receive and consider comments. The Department will attempt, if feasible, to acknowledge receipt of all comments, but the Department will not provide written responses to comments.

X. Findings
The Department will prepare a decision memorandum at the time a demonstration proposal is granted or denied, discussing why the Department granted or denied the proposal and how an approved demonstration meets the criteria established by statute.

XI. Administrative Record
The Department will maintain an administrative record which will generally consist of: the formal demonstration application from the State; issue papers sent to the State and State responses; public and Congressional comments sent to the Department and any Department responses; the Department's decision memorandum regarding the granting or denial of a proposal; and the final terms and conditions, and waivers, sent to the State and the State acceptance of them.

XII. Sub-state Demonstrations
When a demonstration is to be implemented in only part of a State, the State will be required to provide information on the likely demographic composition of populations subject to and not subject to the demonstration in the State. When relevant, the Department will require that the evaluation component of a project address the impact of the project on particular subgroups of the population.

XIII. Implementation Reviews
As part of the terms and conditions of any demonstration proposal that is granted, the Department may require periodic evaluations of how the project is being implemented. The Department will review, and when appropriate investigate, documented complaints that a State is failing to comply with requirements specified in the terms and conditions and implementing waivers of any approved demonstration.

XIV. Legal Effect
This notice is intended to inform the public and the States regarding procedures the Department ordinarily will follow in exercising the Secretary's discretionary authority with respect to State demonstration proposals under section 1115. This notice does not create any right or benefit, substantive or procedural, enforceable at law or equity, by any person or entity, against the United States, its agencies or instrumentalities, the States, or any other person.

(Catalog of Federal Domestic Assistance Program, No. 93.779; Health Financing Research, Demonstrations and Experiments.)
Dated: September 16, 1994.