Starting in 2017, the Affordable Care Act will allow states to use waivers to pursue virtually any type of proposals for health care reform that they can imagine. It’s a huge opportunity for states interested in expanding or changing how health care is delivered.
But will anyone actually take advantage of it?
California has discussed providing health coverage to its undocumented immigrants. Hawaii might want to reinstitute the more stringent employer mandate that the state had before Obamacare. Arkansas may use the waivers to continue and reshape its trendsetting “private option” for Medicaid expansion.
At least a half-dozen states have taken public steps toward seeking a 1332 waiver, according to a June report from Health Affairs.
The 1332 waiver is the ACA’s Swiss Army knife. States can ask for almost anything, including relief from many of the law’s major provisions, so long as it is determined by the Health and Human Services Department that they are still working toward the law’s goals of coverage and affordability. It is a huge, open-ended opportunity that has had health policy wonks nerding out since the law passed.
But so far, less than 18 months until they can be implemented, the biggest news about the waivers has been a failure: Vermont’s ambitious plan to create single-payer health care. At the end of last year, after months of planning, the state announced it wouldn’t be moving forward with the project because it was too expensive.
Vermont’s experience, paired with states’ frustration that the Obama administration hasn’t given them enough guidance on what they can propose through the five-year waivers, has ratcheted down expectations about what states will actually do in 2017.
“Given the Vermont experience, I think that that’s certainly something that everybody’s aware of,” said Joy Wilson, who is a health policy expert at the National Conference of State Legislatures. “They don’t want to be in that space.”
“I think you’re still going to see some ambitious waivers,” added Joel Ario, a former Obama administration official and state insurance commissioner who has advised states on 1332 waiver planning for the Manatt, Phelps & Phillips consulting firm. “But it was certainly a cautionary tale about the challenges you face.”
For now, the focus is on more minor alterations. Commonly floated options include lining up the differing definitions of Native Americans between Medicaid and the ACA’s insurance exchanges or redefining the small-group market under the law. States could come up with plans to ease the transition for people moving from Medicaid to exchange coverage or vice versa.
They would be meaningful changes, if on a much smaller scale than what Vermont had attempted.
“Vermont was trying something that was really expansive and ambitious,” said Heather Howard, director of the State Health Reform Assistance Network at Princeton University. “It doesn’t have to be that whole scale of improvement.”
If Vermont was a reminder of the hurdles that states need to clear with the 1332 waiver, experts say the other problem is that states feel like they don’t have enough information from HHS to weigh the risks and rewards. The timeline is already tight: State legislatures must approve 1332 waiver efforts, and most of them have already adjourned until next year.
Then comes the actual analysis and planning, followed by negotiations with the feds — all with the specter of Obama’s expiring presidency and the possibility of a new administration with a very different outlook that could render all of that expended energy moot.
“It’s a heavy lift,” said Trish Riley, executive director of the National Academy for State Health Policy. “Then if the rules change midcourse, that’s something to think about.”
HHS recently released more guidance for states and announced a single contact point for state questions about the waivers. But it hasn’t totally satisfied states’ desire for more detailed instructions. More details from the feds are expected, but the timing remains an unknown.
“Most states feel like that’s not quite enough,” Wilson said. “It’s fine to tell me how to turn my paper in, but what’s my paper supposed to be about?”
This is the wrinkle: Under the ACA, the 1332 waiver proposals must be budget-neutral, they must cover a comparable number of people to Obamacare, and they must provide a comparable level of benefits. Within those constraints, states can do almost anything, up to and including a repeal of the individual mandate or, as Vermont had wanted to do, create a single-payer system.
“If a state can figure out a way to meet those conditions,” HHS Secretary Sylvia Mathews Burwell said last month at a meeting with the nation’s governors, “we want to give states that opportunity to come in.”
But many state officials feel like they don’t have enough detail about how those various metrics will be calculated — which could end up being the difference between an approved waiver or a rejected one. And the planning that goes into the applications isn’t free; Vermont had spent at least six figures before deciding its plan wouldn’t work.
Wilson described the impasse between states and the administration this way: States want more information about what they can do before they put the time and money into planning, but the administration is urging states to give them a proposal and then the feds can tell states what they can do.
“I think there’s kind of this dance going on,” Wilson said. “People don’t want to spend a lot of money putting something together and then the administration says, ‘Nope, that’s not it.’”
In a rare bipartisan showing involving Obamacare, Democratic Sen. Al Franken and Republican Sens. Tom Cotton and John Boozman — whose states, Minnesota and Arkansas, have expressed interest in the 1332 waivers — sent a letter to HHS this month urging the administration to release more specifics about how it would evaluate the coverage and cost metrics.
There are a number of other issues complicating things: Many states have a number of demonstration projects already under way under Obamacare, leaving fewer resources for 1332 planning. They are also still working out the kinks of regular ACA implementation, which could make it difficult to try to come up with a strategy for reimagining or improving it.
“I’ve heard a couple states say, ‘This sounds really interesting, I wish I could take it on now, but I’m still focused on the core functionality,’” Howard said.
Ario said he would be watching the 2016 state legislative sessions for signs of how eager states are to pursue the 1332 waivers.
“If it ends up being 20 or 30 states that have 1332 legislative proposals under active consideration, that would signal that the interest is broader and that it may happen more quickly,” he said. “If it’s still less than a dozen states, that tells you that it’s probably on the slow path.”