United States: NC DHHS Submits Section 1115 Waiver Application For Medicaid Reform, But The Process Is Far From Complete

Last Updated: June 20 2016
Article by Iain M. Stauffer

The North Carolina Department of Health and Human Services (DHHS) submitted the Section 1115 Demonstration Waiver application (waiver application) to the Centers for Medicare and Medicaid Services (CMS) on June 1, 2016, meeting a deadline established by the North Carolina General Assembly. DHHS released the draft waiver application on March 1, and from that time hosted 12 public hearings across North Carolina and conducted a formal public comment period for 34 days, ending on April 18, 2016. The submission of the waiver application to CMS continues North Carolina's transition from a Medicaid fee-for-service system to a capitated Medicaid managed care system.

The waiver application contains some notable differences from the original draft and clarifies some sections based on public comment. Specifically, the changes and clarifications included in the waiver application and the DHHS' Response to Public Comments include:

  • A better description for the waiver application rationale. The revised description provides a thorough explanation for the transformation from a fee-for-service model to a managed care model.
  • More detail on provider network adequacy standards to ensure that beneficiaries have access to adequate and sufficient provider networks within the PHPs. Also, the waiver application adds requirements from the recently issued final Medicaid managed care rule.
  • Clarification regarding the plan for DHHS to contract with three statewide Prepaid Health Plans (PHPs).
  • Clarifying that the North Carolina PHPs, either Provider Led Entities or Commercial Plans, will be Managed Care Organizations as defined in federal regulations.
  • Clarifying that North Carolina's enhanced Primary Care Case Management (ePCCM) and Patient-Centered Medical Home (PCMH) models are the foundations for the Person-Centered Health Communities (PCHC) model in the waiver application.
  • Additional details regarding the PCHC model that will extend care management activities beyond the present systems and will be anchored on the physical health, behavioral health and social determinants of health for beneficiaries.
  • Clarifying that the waiver application does not change the benefits that individuals receive currently under the State Plan and waiver programs for long-term services and supports. The change under the waiver application will be to the delivery system which if approved, will allow the services to be delivered through capitated PHPs.
  • Clarifying that "wrap around" payments for Federally Qualified Health Centers and Rural Health Clinics will be part of the capitated PHP system. The "wrap around" payment is a supplemental payment by the Medicaid agency to cover the difference between the contracted rate with the PHP and the prospective payment system rate or alternate payment methodology rate in place presently.
  • Requesting authority for the provision of "wrap around" payments to Emergency Medical Services agencies providing ambulance services. These providers presently are subject to an annual cost settlement. The "wrap around" payment would make up the difference between the contracted rate and the provider's costs at cost settlement.
  • Including a sample list of Delivery System Reform Incentive Payment (DSRIP) projects. The DSRIP system will provide incentive payments to hospitals, local health departments, and academic health systems for meeting certain objectives aligned with the purposes of the waiver. Projects could be focused on decreasing hospital admissions, reducing emergency department visits, and improving access to home and community based supports for Long-Term Services and Supports beneficiaries.
  • Clarifying that the NC Health Insurance Premium Payment Program (NC HIPP) will continue as a fee-for-service program and that beneficiaries enrolled in NC HIPP will be excluded from participation in PHPs. The NC HIPP reimburses its members for the cost of a health insurance policy that covers the policyholder and their dependents that are Medicaid beneficiaries.
  • Clarifying that the payment of claims incurred during a beneficiary's retroactive authorization period would be through the fee-for-service structure. The period of retroactive coverage for a beneficiary would not be part of the PHP contract coverage so would not be reimbursable by the PHP.

While the submission of the waiver application is an important milestone, it is also important to remember that the transformation process remains in its early stages. CMS will begin its review process to determine whether to approve or deny the waiver application. This will likely involve substantial negotiations between CMS and DHHS, and may lead to other revisions or changes before the waiver application can be approved. Another key step will involve DHHS's development of the Request for Proposal to procure PHPs, along with developing the PHP contracts. These contracts are important because they will need to address the details regarding implementation and operation of the program. This will include topics such as network adequacy standards and value based purchasing requirements. Also, DHHS needs to continue its work to develop the North Carolina Health Transformation Center (formerly known as the Innovations Center), and develop a long-term strategy to cover dual eligibles through capitated PHP contracts.

Even though DHHS is not anticipating approval of the waiver application from CMS for approximately 18 months, a significant amount of work remains to be done to keep the transformation moving forward. Providers and those impacted need to continue to monitor any developments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Iain M. Stauffer
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