On January 30th, Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma announced a new plan to give states the flexibility to use a block grant funding structure for their Medicaid expansion population.

The Healthy Adult Opportunity (HAO) program provides states with the option of adopting capped federal financing for their Medicaid expansion population instead of the federal match rate financing model that currently exists for Medicaid. Participating states can set a funding cap that is based on either total program expenses or on a per-enrollee basis.

Under the aggregate expenses model, CMS will calculate a base year amount using historic expenditures for the state’s expansion population and the benefits included in the state’s HAO demonstration. CMS will trend this amount forward to each demonstration year without regard to changes in Medicaid enrollment.

Under the per enrollee model, CMS will determine a per enrollee base amount for each eligibility group included in the HAO demonstration using historic year expenditures. CMS will trend each group’s base amount forward to the demonstration year and then multiply the trended base amount by the number of enrollees for that year. The amount for each group will be added together to create an overall per enrollee cap.

The per-enrollee model’s budget amount can fluctuate based on enrollment. However, the aggregate cap budget amount does not fluctuate based on enrollment.

According to CMS, states that participate in the HAO will gain the ability to:

  • Adjust cost-sharing requirements to incentivize high value care,
  • Align benefits more closely to what is available through a commercial insurance benefit package,
  • Improve negotiating power to lower drug costs by adopting a closed formulary similar to those provided in the commercial market (see section below for more detail),
  • Make timely programmatic adjustments without additional federal approval,
  • Apply additional conditions of eligibility which support the objectives of the program,
  • Deliver care through innovative delivery systems, and
  • Waiving retroactive coverage and hospital presumptive eligibility requirements.

States will need to apply for a Sec. 1115 waiver to get CMS’ approval to adopt the HAO financing model.

Participating states will still be required to meet the Essential Health Benefits (EHB) standard. HAO participants will also be required to ensure that any aggregate limit on premiums and cost sharing does not exceed five percent of family income.

As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.

Best regards,
Kirk Reinitz, CPA