In August 2001 President George W. Bush announced a new waiver initiative titled the Health Insurance Flexibility and Accountability (HIFA) demonstration initiative.
The HIFA waivers are applicable to Medicaid and the State Children’s Health Insurance Program (SCHIP). SCHIP was passed in 1997 to provide health care coverage to children living in low-income families whose incomes exceed the eligibility requirements for Medicaid. The program generally is targeted to families with incomes at or below 200 percent of the federal poverty level.
HIFA, according to Bush’s written statement, was designed to encourage innovation, give states programmatic flexibility to increase private health insurance coverage options, simplify the waiver process, and increase accountability.
Prior to HIFA, under Section 1115 of the Social Security Act, states could receive waivers of certain federal requirements for Medicaid and SCHIP coverage, as long as the activities the states proposed promoted the objectives of the Medicaid program, as determined by the secretary of Health and Human Services (HHS).
Waivers have been used to require Medicaid beneficiaries to enroll in managed care, expand coverage to people who did not meet Medicaid income requirements, and experiment with new forms of coverage, such as hospice care.
According to the Kaiser Commission on Medicaid and the Uninsured, in 2001 more than 20 percent of Medicaid spending was governed by waivers granted under Section 1115.
Both HIFA and earlier Section 1115 waivers must be budget neutral; that is, increased costs due to an expansion of services or populations served by the program must be offset by equivalent savings elsewhere.
HIFA expanded states’ flexibility in determining benefits offered and permitted them to use unexpended SCHIP funds to establish that the effect of waivers would be budget neutral.
When HIFA was announced, policy analysts expressed concern about the potential for loss of Medicaid benefits, particularly for the disabled.
Leighton Ku, a Medicaid expert at the Center for Budget and Policy Priorities (CBPP), said, "Contrary to the way this is advertised, states could reduce benefits and offer either no or a very small coverage expansion so they save state dollars."
Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, said that states may reduce benefits for seniors and the disabled—the "most expensive people served under Medicaid"—to generate enough money to cover substantially more people.
Both statements are quoted in an August 7 article on www.kasiernetwork.org.
According to the July report of the General Accounting Office (GAO) titled "Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver Projects Raise Concerns," HHS approved a waiver that allows Arizona to expand coverage to an estimated 27,000 childless adults at or below the federal poverty level. The cost is to be covered through unspent SCHIP funds and Medicaid funds.
Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa) wrote HHS Secretary Tommy Thompson charging that Arizona’s waiver violated congressional intent, because Congress established the SCHIP program to serve children.
Baucus is chair of the Senate Finance Committee, which has authority over the program, and Grassley is the committee’s senior Republican member.
According to the August 7 New York Times, CBPP’s Leighton Ku said that at least a dozen states had spent their 2000 allotments of SCHIP money on children and would be shortchanged if other states chose to spend money on childless adults. Unspent SCHIP money can be redistributed to states that have spent their allotments.
USA Today on August 15 editorialized against the waiver, calling it a "backdoor attempt" to expand coverage for adults that hides the "broader problem" of the increasing number of uninsured.
In their August 13 editions, the Des Moines Register and San Diego Union Tribune also criticized the diversion of funds from children.
The GAO found that "opportunity for the public to learn about and comment on pending waivers has not been consistently provided in accordance with policy adopted by HHS in 1994."
In 1998, HHS ended its practice of publishing notification of pending waivers in the Federal Register with a 30-day comment period. HHS officials told the GAO that solicitation of comments about waivers is now regarded as a state responsibility.
During the time of the GAO study (December 2001 through June 2002), HHS had approved four of 13 waiver proposals. The remaining nine were under review.
On August 23 HHS announced approval of a HIFA waiver for New Mexico. According to the press release, New Mexico would expand coverage to two populations: parents with children enrolled in either Medicaid or SCHIP whose family income is at or below 200 percent of the federal poverty level and childless adults aged 19 to 64 at the same income level.
The primary source of money for the new coverage, according to the release, will be SCHIP funds. Those funds will be used to subsidize health insurance coverage through private insurers.
Jay Cutler, J.D.: "APA continues to monitor HIFA implementation to determine its impact on mental health services."
Jay Cutler, J.D., director of APA’s Division of Government Relations, told Psychiatric News
, "The Bush administration acted unilaterally when it offered states opportunities to reduce benefits via HIFA waivers. APA continues to monitor HIFA implementation to determine its impact on mental health services and also supports legislation to eliminate the use of waivers."
The GAO report can be accessed on the Web at www.gao.gov by clicking on "Find GAO Reports" and then "GAO-02-817." "The New Medicaid and CHIP Waiver Initiatives," a report by the Kaiser Commission on Medicaid and the Uninsured, is posted at www.kff.org/content/2002/4028/4028.pdf. An issue brief with background information on the HIFA waivers by the Robert Wood Johnson Foundation’s State Coverage Initiatives program is posted at http://statecoverage.net/pdf/SCIBrief.pdf. ▪