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GAO-14-689R 1 (2014-08-08)

handle is hein.gao/gaobaaifa0001 and id is 1 raw text is: GAO U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 August 8, 2014 The Honorable Orrin Hatch Ranking Member Committee on Finance United States Senate The Honorable Fred Upton Chairman Committee on Energy and Commerce House of Representatives Medicaid Demonstrations: HHS's Approval Process for Arkansas's Medicaid Expansion Waiver Raises Cost Concerns Section 1115 of the Social Security Act authorizes the Secretary of the Department of Health and Human Services (HHS) to waive certain federal Medicaid requirements and allow costs that would not otherwise be eligible for federal matching funds for demonstration projects that promote the objectives of the Medicaid program.1 A significant and growing portion of federal Medicaid expenditures, which totaled $265 billion in fiscal year 2013, is for care provided under section 1115 demonstrations, which allow states to test and evaluate new approaches for delivering and financing Medicaid services.2 Under the Patient Protection and Affordable Care Act (PPACA),3 states may opt to expand their Medicaid programs by covering adults with incomes at or below 133 percent of the federal poverty level (FPL) under their state plan.4 In August 2013, Arkansas proposed an unprecedented alternative to this expansion under the authority of a section 1115 demonstration. In September 2013, HHS approved Arkansas's demonstration proposal to expand its program by allowing federal Medicaid funds to be used to provide premium assistance to enable newly eligible beneficiaries to purchase private insurance offered through the state's health insurance exchange.5 This approved demonstration, for the 142 U.S.C. § 1315(a). The federal government and states share in the financing of Medicaid expenditures with the federal government matching most state expenditures for services on the basis of a statutory formula known as the Federal Medical Assistance Percentage (FMAP). The FMAP may range from 50 to 83 percent, which depends, in part, on a state's per capita income. 2in 2013, $70 billion in federal funds, or about one-fourth of the $265 billion in federal Medicaid expenditures, were for services, coverage initiatives, and delivery system redesigns provided under section 1115 demonstrations. 3pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and Education Reconciliation Act of 2010 (HCERA), Pub. L. No. 111-152,124 Stat. 1029 (2010). For purposes of this report, references to PPACA include the amendments made by HCERA. 4Beginning in 2014, states may cover non-elderly, non-pregnant adults under their state plan with incomes at or below 133 percent of the FPL. PPACA also provides for a 5 percent disregard when calculating income for determining Medicaid eligibility for this population, which effectively increases this income level to 138 percent of the FPL. In this report, we refer to this population as newly eligible beneficiaries. 5pPACA required the establishment of health insurance exchanges (hereafter referred to as exchanges)-also known as marketplaces-in all states. Through the exchanges, eligible individuals can compare and select private health plans, known as qualified health plans (QHPs). QHPs offered through the exchanges are required to meet certain benefit design, consumer protection, and other standards. GAO-14-689R Medicaid Demonstrations Page 1

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