On September 28, 2022, the Centers for Medicare & Medicaid Services (CMS) issued approval letters for Section 1115 Medicaid demonstration applications previously submitted by Oregon and Massachusetts.  Section 1115 waivers allow the Secretary of Health and Human Services to waive certain provisions of the Medicaid law to provide states with additional flexibilities to design and improve their Medicaid programs through experimental, pilot, or demonstration projects. These projects must be budget neutral and are approved for a five-year period, with the possibility of extension for three to five more years. According to CMS, “both demonstrations aim to test improvements in coverage, access, and quality with innovative approaches to ensure more eligible people retain their Medicaid coverage.” However, several important components of each state's original application, such as a request for certain pharmacy benefit flexibilities (Oregon) and a request to provide coverage to justice-involved youths and adults for a certain number of days prior to release from correctional facilities (Oregon & Massachusetts) were either removed from the application during negotiations with CMS or excluded from CMS' ultimate approval.

Oregon. Oregon originally submitted its application for its Section 1115 waiver demonstration in February 2022. Its application included several proposals intended to address health disparities by expanding the scope of coverage and populations covered by the state's Medicaid program. Additionally, in its application, Oregon asked CMS for certain “pharmacy flexibilities” – specifically the ability to exclude from coverage drugs approved under the FDA's accelerated approval (AA) pathway. FDA's AA pathway program allows for expedited approval of drugs that treat serious conditions and fill an unmet medical need based on a measure used to predict clinical benefit or a surrogate endpoint. Instead, Oregon requested “the ability to use its own rigorous review process to determine coverage of drugs previously granted accelerated approval that have not had benefit confirmed with conversion to full FDA approval in the expected time interval.” During the state-level comment period, commenters voiced concerns that the exclusion of drugs approved under the FDA's AA pathway would harm patients by restricting access to novel and lifesaving therapies, undermine the FDA's scientific approach regarding drug safety and efficacy, as well as potentially limit innovation for rare diseases. Oregon had also considered a separate proposal to implement a closed formulary in its Medicaid program, but dropped the proposal from its final application to CMS after the state-level public comment period.

In its September 28, 2022 letter approving the demonstration, CMS clarifies that, after discussions with the agency, Oregon decided to drop its request for pharmacy benefit flexibilities relating to AA drugs. CMS notes that it received several comments raising “concerns about how the state's requested prescription drug coverage flexibilities could restrict beneficiary access to critical medicine.”

CMS did approve several notable aspects of the application, including:

• Provision of continuous eligibility for children from the time of initial eligibility determination until they reach age six;
• Provision of continuous two-year eligibility for children and adults ages six and older, regardless of changes in circumstances, such as income fluctuations, that would otherwise cause a loss of eligibility;
• Expansion of Medicaid eligibility and benefits for “youth with special health care needs” (YSHCN) up to the age of 26 with income levels up to 300 percent of the federal poverty level, to provide more time for these individuals to better navigate transitions to Oregon's adult benefit package with fewer disruptions in coverage;
• Ability to provide or increase coverage of services that address certain health-related social needs (HRSN), including nutrition services and transitional housing supports, as well as case management and infrastructure investments as support services. Though Oregon limited these services to individuals experiencing life transitions (e.g., individuals who are homeless or at risk of homelessness and individuals transitioning from Medicaid only to dual Medicaid-Medicare coverage).

CMS also noted that it would not be approving the following notable proposals included in Oregon's OHP application at this time:

• Request to fund community-led health equity interventions, managed by new Community Investment Collaborative (CICs), composed of community-based organizations and healthcare providers;
• Request to provide benefits under the demonstration for the duration of incarceration for youth in juvenile correctional facilities, as well as all individuals in jail or other local/tribal correctional facilities;
• Request to provide a limited benefit package to adults in prison or IMDs for up to 90 days prior to their release from these settings.

However, CMS noted that the agency is “supportive of increasing pre-release services for justice-involved populations and of supporting individuals' transitions from institutional settings back into the community, and will continue to work with the state on this component of its proposal…”

Oregon's demonstration approval is effective as of October 1, 2022, through September 30, 2027.

Massachusetts. MassHealth's Section 1115 demonstration extension application included several significant proposals. Notably, CMS approved the state's request to provide 12-month eligibility for Medicaid and CHIP beneficiaries upon release from a correctional facility and 24-month continuous eligibility for beneficiaries with a confirmed status of homelessness. CMS states that “[t]he continuous eligibility policy is likely to assist in promoting the objectives of Medicaid as it is expected to minimize coverage gaps and to help maintain continuity of access to program benefits for the relevant populations.”

CMS additionally approved expanded authority for MassHealth to provide certain time-limited housing supports, clinical nutritional education, and medically-tailored food assistance services. For children or pregnant woman with special clinical needs, there will be additional meal support provided.

However, CMS did not approve the state's request to provide coverage to justice-involved youths and adults 30 days prior to release from correctional facilities. CMS notes, however, that it is generally supportive of increasing pre-release services for justice-involved populations in order to assist in making successful transitions from the justice system back into the community, and will continue to work with the Commonwealth on this request.

CMS did approve a variety of additional requests included in the MassHealth demonstration extension application, including:

• Extension of a variety of existing programs, including:
  • Both primary care case management (PCCM)-based delivery systems, which include the Primary Care Clinician (PCC) Plan and Primary Care Accountable Care Organizations (ACOs), with behavioral health services provided through the managed behavioral health vendor (PIHP) and Managed Care Organization (MCO)-based delivery systems, which include MCOs and Accountable Care Partnership Plans;
  • The Specialized Community Support Programs (CSPs), which allow beneficiaries with a history of psychiatric or substance use disorder, and/or for whom a psychiatric or substance use disorder diagnosis interferes with their ability to access essential medical services;
  • The Flexible Services Program (FSP) that enables MassHealth ACOs to provide support addressing HRSN;
  • The Safety Net Care Pool (SNCP) that provides uncompensated care payments to safety net providers that serve Medicaid and low-income, uninsured individuals;
  • Expenditures for demonstration populations, such as CommonHealth and former foster care youth who were in foster care in another state;
  • Premium and cost-sharing subsidies for low- and moderate-income residents purchasing health insurance through the Health Connector;
  • Expenditures for substance use disorder (SUD) and serious mental illness (SMI) treatment services and ongoing recovery support; and
  • Diversionary behavioral health services.
• Expenditure authority to implement an innovative Hospital Quality and Equity Initiative for private acute care hospitals and the Commonwealth's only non-state- owned public hospital, Cambridge Health Alliance, to link provider payments directly to improving the quality of care for Medicaid beneficiaries. This authority helps Massachusetts to identify substandard health outcomes and incentivize hospitals to deliver high quality care;
• Ability to provide or increase coverage of services that address certain HRSN, including nutrition services and housing supports for individuals with a clinical need and who are transitioning out of institutional care or congregate settings, out of homelessness or a homeless shelter, or the child welfare system.

The MassHealth demonstration extension approval is effective from October 1, 2022 – December 31, 2027.