DHSS discusses financing details for 1115 waiver

“The 1115 waiver is on track to be submitted to CMS as early as the end of January.”

That was the message from DHSS Behavioral Health Policy Advisor Gennifer Moreau-Johnson.  Moreau-Johnson is one of the department leads in the development of the 1115 waiver, and spent about 45 minutes with me on the phone this week.

The department received a number of emails and phone calls in response to our coverage of the 1115 waiver last week.  So, Moreau-Johnson made herself available to answer my questions in detail about the proposed financing of the waiver and the status of the application.

Moreau-Johnson wanted first to make sure our conversation was not talking about apples and oranges.  That started with a discussion on process.

“We are in the application development process now.  Our public comment period lasted from November 28 – December 29.  After the application is submitted, and assuming it gets approved, we’ll enter into negotiations about implementing the waiver.  Those are two different parts of this process. Within the proposed 1115 Demonstration Project Alaska proposes using standard FMAP funds.”

FMAP is the acronym for the federal dollars that fund Medicaid as part of the federal government’s contract with the State of Alaska.  Moreau-Johsnon said also that “Alaska will work with CMS during the negotiation of implementation to identify appropriate federal funds to use for infrastructure funding to support the project.”

While funding and semantics are tied closely together during this complex process, and Moreau-Johnson is taking care to be careful in her framing, I took her comments to mean that the State of Alaska is pursuing at least the two following financing strategies:

  1. An application of federal funding through FMAP to be applied to a new set of services not currently authorized in the Medicaid benefit and for which there are no federal funds available today
  2. Other federal dollars as warranted and available, based on negotiations with CMS, and which she couldn’t speak to openly as the negotiations have yet to get underway.

The federal government provides different levels of FMAP contributions based on eligibility.  Tribal beneficiaries receive services that are 100% funded by the federal government, while traditional Medicaid beneficiaries (parents, children, pregnant women) receive services that are funded 50% by the federal government.  The expansion population of childless adults up to 133% of the federal poverty level are funded at 90%.

According to Moreau-Johnson, the purpose of the waiver is to expand services to a narrow set of three discrete populations.

  • Children, adolescents, and their parents or caretakers with – or at risk of – mental health and/or substance-use disorders.
  • Individuals (ages 18-64) with acute mental health needs.
  • Individuals (ages 12-64) with substance use disorders.

By investing an increased suite of services for these cohorts, DHSS expects their care outcomes will improve and, over time, this will result in cost avoidance for the system overall.

That cost avoidance results in savings to both the federal and state governments.  It helps the State of Alaska meet a key requirement of any waiver that is approved by CMS:  budget neutrality.  In other words, any change to the Medicaid program, including increasing services as Alaska is proposing, must result over time in a no additional costs to the federal government.

From this savings to the federal government, states often request an investment from the federal government, beyond the FMAP match, in order to fund the transition to the system envisioned in the waiver application.

Moreau-Johnson expects there will be an ask for additional federal dollars during the negotiation on the waiver’s implementation.  The separation between the application submittal and approval, and the negotiation of the special terms and conditions (STCs) to implement the waiver was important for Moreau-Johnson to clarify.

She also wanted to clarify that the CMS notice we included in last week’s email was not relevant to the DHSS ask of CMS.

“The letter you linked to references DSHP, which funds programs.  We are asking for funding for services.  Those are different.  We never intended to ask for funds for programs,” she said.

She added that “Getting the waiver passed might be the easiest part of this process.”  Following the waiver approval, and the negotiation of the STCs, the state will then need to file a series of state plan amendments (SPAs).  These amendments will update the contract between the State of Alaska and the federal government to fund and implement the Medicaid program.

Once the SPAs are filed and approved, state administrative code will need to be updated to reflect the new model.  Procurement will need to be finalized during that period for the ASO entity to administer this model, too.

In my experience watching other states, and working some of these processes directly, this entire process could easily take 12 months.  It may take that long to get the waiver approved.  In December, Texas had its waiver approved after an almost 2-year negotiation process.  Moreover, that was for a waiver renewal rather than a new model.

However, Alaska’s waiver is relatively narrow in focus.  So, it’s also possible most of the work could be done by year’s end.

Moreau-Johnson noted that there would be some infrastructure costs that the state would have to bear in order to implement this waiver.

“We (the State of Alaska) will have to come up with the matching funds to cover that infrastructure to do this work…  But this will all have to be budget neutral, to the federal government and the state.

I asked about the timeline and voiced concerns that perhaps the administration could run into challenges with a looming gubernatorial election.  If Gov. Walker loses re-election, I wondered aloud whether that would sidetrack, and possibly derail this work.

I asked Monique Martin about the timeline and my concern. She serves as a Health Care Policy Advisor at DHSS.  While addressing my concern about politics would not have been appropriate for her to speak to, given her role as a state employee, she did offer an important perspective.

“The Department is required to submit the 1115 waiver for behavioral health reform in state statute.  This requirement was directed by the Legislature through SB 74. The waiver is a critical tool that provides the Department the necessary flexibility to reform Alaska’s behavioral health system.”