Medicaid Demonstration Waivers

States provide health care coverage to about 60 million low-income individuals through Medicaid, a joint federal and state program established under title XIX of the Social Security Act (the Act). Title XIX of the Act established parameters under which states operate their Medicaid programs, such as requiring states to cover certain services for certain mandatory groups of individuals such as low-income children; pregnant women; and aged, blind, or disabled adults. The Secretary of Health and Human Services (HHS), however, possesses authority to allow states to depart from these requirements under certain conditions. Under section 1115 of the Act, the Secretary may waive certain Medicaid requirements and authorize Medicaid expenditures for experimental, pilot, or demonstration projects that are likely to assist in promoting Medicaid objectives. Medicaid section 1115 demonstration projects vary in scope, from targeted demonstrations, which are limited to specific services and populations, to comprehensive demonstrations, which affect Medicaid populations statewide, cover a broad range of services, and account for the majority of a state's Medicaid expenditures. Since 1982, the Secretary has approved comprehensive demonstration projects in a number of states, including Arizona, Florida, Hawaii, Oregon, Tennessee, and Vermont. Since our 2002 report, and our subsequent 2004 report on 1115 demonstration approvals, HHS has continued to review and approve waivers of federal requirements for new comprehensive demonstration proposals. At Congress's request, we reviewed recently approved comprehensive demonstrations, including the process HHS used to obtain public input on these proposals. This correspondence addresses (1) implications for beneficiaries of recently approved comprehensive Medicaid demonstrations and (2) the extent to which the Secretary ensured opportunities for public input during the approval process. Our review encompassed recently approved comprehensive demonstration programs in two states, Florida and Vermont. These were the two demonstration programs meeting our criteria of (1) being approved by HHS from July 2004 (when we last reviewed HHS-approved section 1115 demonstrations) through December 2006 and (2) being comprehensive, including accounting for greater than 50 percent of the state's Medicaid expenditures.

Recently approved Medicaid section 1115 demonstrations in Florida and Vermont have mixed implications for beneficiaries in terms of coverage and eligibility. The demonstrations are implementing different methods for administering each state's Medicaid program and, as of March 2007, had been under way less than 8 months in Florida and less than 18 months in Vermont. Consequently, the actual effect of the demonstrations on beneficiaries was not yet known. Officials in both states took steps to obtain public input in line with HHS's 1994 policy, but HHS did not provide opportunity for public input at the federal level once the proposals were received or post the states' proposals on its Web site before approving them. Instead, HHS relied on Florida and Vermont officials to obtain and respond to public comments. Both states provided opportunities for public input--for example, by holding public hearings and posting drafts of the demonstration proposal on the states' Web sites. Even so, stakeholders in each state and at the national level said they lacked access to specific information about aspects of the proposals that directly affected beneficiaries or lacked sufficient time to review and comment on the proposals. In Vermont, for example, the state's Medical Care Advisory Committee, established by the state to facilitate consumer input in state Medicaid policy, voted against approval of the demonstration proposal because members said they lacked sufficient time and information to understand the proposal. In Florida, stakeholders said that information about the demonstration proposal provided during public meetings was insufficient for adequately understanding implications and that, upon request, state officials did not provide key documents related to the demonstration, such as budget and demographic information related to the proposal. At the federal level, organizations representing individuals aged 50 and above, children and families, and other Medicaid beneficiaries affected by the Florida and Vermont demonstrations said that HHS did not post the proposals to its Web site or provide them with timely information about the demonstrations upon request. Unless Congress and HHS take actions in response to the matters for congressional consideration and recommendations to HHS presented in our July 2002 report, it appears likely that HHS will continue to approve waivers for comprehensive demonstration proposals--with potentially significant implications for program beneficiaries--without adequate opportunity for public input.