Search Frequenty Asked Questions

I. Applying for a HIFA demonstration

This guidance outlines the program and budget parameters for proposals to qualify as a HIFA demonstration. For consideration as a HIFA demonstration, a proposal must be statewide and must seek to develop coordinated private and public health insurance coverage options to low income uninsured. The most comprehensive approaches will include both Medicaid and SCHIP waiver requests, but proposals that utilize only Medicaid or only SCHIP funds may be considered as part of the HIFA demonstration initiative if the demonstration goals are consistent with those outlined in this guidance. Demonstrations that differ from the HIFA model will continue to be reviewed by the Administration on a proposal-by-proposal basis.

State proposals that meet the parameters outlined in this guidance, including complete submission of accurate data required to develop a demonstration budget agreement, will receive efficient and priority review. The State proposal must contain all of the required information before the proposal will be considered officially submitted to HHS. HIFA demonstration proposals should be submitted via the application template (PDF 222KB) developed by HHS. The application template (PDF 222KB) outlines the information that must accompany a HIFA proposal.

In addition to the application template, the state should complete the Medicaid budget neutrality template and/or SCHIP allotment neutrality template, depending upon the financing structure of the proposed demonstration.

Note: The neutrality templates are in CSV (comma delimited) format and also zipped to minimize download time. After downloading, you should unzip with the appropriate software and then open the files using a spreadsheet program.

II. Eligibility

Eligibility definitions used in this guidance

This guidance will refer to possible populations that may be covered under a HIFA demonstration as follows:

1. Mandatory Populations: Refers to those eligibility groups that a State must cover in its Medicaid State Plan, as specified in Section 1902(a)(10) and described at 42 CFR Part 435, Subpart B. For example, States currently must cover children under age 6 and pregnant women up to 133 percent of poverty.
2. Optional Populations: Refers to eligibility groups that can be covered under a Medicaid or SCHIP State Plan, i.e., those that do not require a section 1115 demonstration to receive coverage and who have incomes above the mandatory population poverty levels. Groups are considered optional if they can be included in the State Plan, regardless of whether they are included. The Medicaid optional groups are described at 42 CFR Part 435, Subpart C. Examples include children covered in Medicaid above the mandatory levels, children covered under SCHIP, and parents covered under Medicaid. For purposes of the HIFA demonstrations, Section 1902(r)(2) and Section 1931 expansions constitute optional populations.
3. Expansion Populations: Refers to any individuals who cannot be covered in an eligibility group under Title XIX or Title XXI and who can only be covered under Medicaid or SCHIP through the section 1115 waiver authority. Examples include childless non-disabled adults under Medicaid.

Eligibility parameters under a HIFA demonstration project

Under a HIFA demonstration, States will retain current law flexibility to decide their Medicaid and SCHIP coverage levels. States must continue to cover mandatory populations as specified in Title XIX. States that receive SCHIP funding must maintain their Medicaid eligibility levels for children as of June 1997.

The HIFA demonstration initiative does not limit the upper eligibility level; however, the focus of the HIFA initiative addresses uninsurance among individuals with incomes below 200 percent of the FPL. Within the program and budget parameters outlined in this guidance, we encourage states to think creatively about how Medicaid and SCHIP funding can be used to maintain and encourage coverage in the group health plan market. States requesting the use of waiver authority to extend Medicaid or SCHIP eligibility above 200 percent of the FPL will be expected to demonstrate in their waiver submission that: 1) Focusing resources on populations below 200 percent of the FPL is unnecessary because the State already has high coverage rates in this income range; and 2) covering individuals above 200 percent of the FPL under the demonstration will not induce individuals with private health insurance coverage to drop their current coverage.

III. Benefit Package

States will be required to continue to provide the benefit package specified in their Medicaid State plan to mandatory populations. However, States will have additional flexibility under the HIFA initiative to modify their current benefit packages for optional Medicaid and SCHIP populations. For optional Medicaid populations and SCHIP-eligible children that may be covered under the state plan, the State may provide one of the benefit packages identified in Title XXI. These packages include:

• The benefit package for the health insurance plan that is offered by an HMO and has the largest commercial, non-Medicaid enrollment in the State;
• The standard Blue Cross/Blue Shield preferred provider option service benefit plan that is described in, and offered to Federal employees under 5 U.S.C. 8903(1). (Federal Employees Health Benefit Plan (FEHBP));
• A health benefits coverage plan that is offered and generally available to State employees;
• A benefit package that is actuarially equivalent to one of those listed above; or,
• Secretary approved coverage.

Benefit packages for optional populations should include these basic services: inpatient and outpatient hospital services, physicians surgical and medical services, laboratory and x-ray services, well-baby and well-child care, including age appropriate immunizations.

States will have even greater flexibility in designing the benefit package for expansion populations. The benefit package for this population must include a basic primary care package, which means health care services customarily furnished by or through a general practitioner, family physician, internal medicine physician, obstetrician/gynecologist, or pediatrician. With this definition states have flexibility to tailor the individual definition to adapt to the demonstration intervention and may establish limits on the types of providers and the types of services. Benefit packages that differ from the State Plan or one of the above will be subject to the Secretary's approval and must be comprehensive enough to be consistent with the HIFA goal of increasing the number of individuals in the State with health insurance coverage. The additional costs of expansion populations must not increase Federal expenditures in excess of a State's waiver budget neutrality agreement (as outlined under "Financing and Budget Neutrality" below).

IV. Cost Sharing

Cost sharing for mandatory populations will continue to be limited to nominal amounts as defined in regulation. States will be provided flexibility to define cost sharing for optional Medicaid populations and expansion populations. However, cost sharing for optional children eligible for Medicaid or SCHIP should not exceed 5 percent of the family's income. In cases where an entire family is covered, this guideline does not need to apply to cost sharing not attributable to individual family members, such as a family premium. However, the 5 percent limit should apply to cost sharing attributable to children, such as copayments for children's visits to physicians.

V. Emphasis on Private Health Insurance Coverage

Under the HIFA demonstration initiative, the Administration strongly encourages State proposals that would further integrate, or at a minimum coordinate, Medicaid and SCHIP funding with private health insurance options. Private health insurance options include both group health plan coverage and health insurance coverage as defined in section 2791 of the Public Health Service Act. The Secretary will permit flexibility in the State's definition of benefit package and cost-sharing for optional and expansion populations in support of increased use of private group health plan premium assistance programs. States should continue to ensure that mandatory Medicaid eligibility populations continue to receive the benefit package specified in its Medicaid State plan and are subject to only nominal cost sharing.

States will not be required to meet a specific cost effectiveness test for premium assistance programs as part of comprehensive approaches that promise to decrease the number of uninsured under 200 percent of the FPL. States should monitor that aggregate costs for those enrolled in premium assistance programs are not significantly higher than costs would be if under a direct coverage program, for the propose of controlling both State and Federal costs under the demonstration. All premium assistance benefit costs will be subject to the demonstration budget limits outlined under "Financing and Budget Neutrality" below.

Medicaid and SCHIP expenditures are not intended to supplant employer contributions to their employees' health coverage. Moreover, Medicaid and SCHIP coverage is not intended to replace insurance coverage that individuals currently purchase. States should closely monitor changes in employer contribution levels and be prepared to make modifications in their programs if providing premium assistance proves to negatively affect employer coverage. For example, a State might make sure that employers participating in the State's premium assistance program maintain the same contribution level for its employees regardless of their eligibility for the program. In exchange for flexibility in designing its premium assistance programs, States will be expected to closely evaluate these elements as described further in the "Tracking the Uninsured Rate and Evaluating the HIFA Waiver Approach" section. States are also encouraged to make accurate information on any enacted federal health insurance tax credits available to anyone applying for Medicaid or SCHIP benefits.

VI. Waiver Approval Period

As with other section 1115 demonstrations, HIFA projects will be approved for an initial five-year period from the date of project implementation. The Administration is committed to work with States and legislators to seek permanent statutory changes incorporating successful coverage approaches demonstrated under the HIFA waiver initiative. State requests for extensions of previously approved statewide waivers will be reviewed per section 4757 of the Balanced Budget Act of 1997 and section 703 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000. These states will be asked to begin tracking and reporting the data requested under Section VIII of this waiver guidance if the State is not tracking the information at this time.

VII. Financing and Budget Neutrality

The HIFA demonstration project is a venue for States to explore methods to use current level Medicaid and SCHIP resources to increase health insurance options within their state. Section 1115 waivers are required to be budget neutral to Medicaid to ensure that demonstration projects do not increase federal funding over what would have been spent under current law program requirements. Each state demonstration will operate under a budget neutrality agreement that will limit federal financial payments over the life of the demonstration and that is negotiated prior to approval of the waiver. Below are guidelines under which the Administration will negotiate budget neutrality agreements with States. HHS has developed a sample worksheet for States to use to facilitate the review of their waiver proposals. The information is intended to facilitate State and Federal officials reaching agreement on budget neutrality in the briefest possible period of time.

Expenditures subject to a federal waiver limit

HIFA demonstration budget agreements will place a limit on all expenditures affected by the proposed demonstration. This agreement may include several of a State's Medicaid and SCHIP resources, including:

• Medicaid Medical Assistance Payments: Demonstration expenditures limited by the budget ceiling will include all medical assistance payments for those Medicaid eligibility groups affected by waiver provisions in a State's proposal. The technical approach to establishing a limit on federal medical assistance payments is described below and CMS staff is available to lend technical assistance.
• Medicaid Disproportionate Share Payments: States may reallocate State and Federal share of DSH funding to increase health insurance options. State will receive the authority to access Federal payments for expenditures which would not have otherwise be matchable. However, in order to maintain budget neutrality, HIFA waivers will not permit States to access more DSH funding than is possible under their current law DSH funding formulas. The lower of the statewide DSH allotment or current level DSH expenditures will be a component of the budget ceiling if the State is reallocating funds which would otherwise become DSH payment. The hospital-specific DSH limits under OBRA 1993 will continue to apply.
• SCHIP allotments: Any State submitting a proposal that includes Title XXI funds may include the full amount of their allotment, but may not including future redistributed funds since these funds are not available to a State on an ongoing basis. All proposals should be allotment neutral, i.e., should not project spending above the allocated funding level for SCHIP-eligible populations provided by statute. States may enroll individuals in both Medicaid and SCHIP programs under a HIFA demonstration. However, the HIFA demonstration will not result in changes to the rate for Federal matching payments for program expenditures. If individuals are enrolled in both Medicaid and SCHIP programs under a HIFA demonstration, the Medicaid match rate will apply to FFP for Medicaid eligibles, and the SCHIP enhanced match rate will apply to FFP for SCHIP eligibles.

Calculation of federal limit on Medicaid medical assistance payments

CMS will work with states on the following calculations to ensure budget neutrality of proposed waiver projects. Actual Federal expenditures under the waiver demonstration will be limited by a budget ceiling calculated from the following components:

1. Base year per capita estimate: A base year for purposes of calculating the budget neutrality ceiling will be established. The base year will be a recent 12-month period of experience prior to approval of the waiver. Base year expenditure and enrollment data (calculated in member months) will be used to calculate base year per capita costs for each mandatory and optional eligibility group included under a HIFA waiver proposal. The state will be required to finalize all base year expenditure and enrollment data with CMS no later than one year from waiver approval. No amendments will be made to the per capita calculations for State Plan amendments submitted after approval of a HIFA demonstration.

   Exclusion of impermissible base year expenditures: Base year expenditure and per capita amounts, and trended per capita amounts will be adjusted to be consistent with enforcement of impermissible provider payments, health care related taxes, new Federal statutes, or policy interpretations implemented through letters, memorandums or regulation. CMS reserves the right to make adjustments to the budget neutrality cap if any health care related tax that was in effect during the base year, or provider related donation that occurred during the base year, is determined by CMS to be in violation of the provider donation and health care related tax provisions of 1903(w) of the Social Security Act. Adjustments to annual budget targets will reflect the phase out of impermissible provider payments by law or regulation, where applicable.

2. Growth rate calculation: An annual trend rate will be applied to the per capita calculation in #1 based on:

   (1) Medical Care Consumer Price Index, published by the Bureau of Labor Statistics. This option does not account for State-specific variation in projected program growth, but permits the State to avoid the trend rate negotiations over historical expenditure data. The Medical Care Consumer Price Index will only be offered to States proposing statewide waivers under the HIFA demonstration project.

   OR

   (2) State Medicaid-specific growth rate. States should submit five years of historical data for assessment by CMS, with quantified explanations of trend anomalies. Impermissible provider payments should be removed from the expenditure history. The application template developed by HHS includes a sample worksheet for submission of historical data. This option permits States to negotiate with CMS a trend rate indicative of what the state specific spending would have been in absence of an approved HIFA waiver. CMS will maintain a policy that trend rates are the lower of State specific history or the President's Budget Medicaid baseline for the eligibility groups covered by a State's proposal. This option will lengthen the review time for a State's HIFA proposal because of the data generation and assessment required to establish a state specific trend factor.

3. Calculation of federal waiver annual expenditure ceiling: Annual expenditure limits for each eligibility group are the product of the number of current law eligibles (calculated in member months) reported by the State multiplied by the appropriate annual per capita expenditure estimate (product of base year per capita in #1 above and trend rate in #2). Expansion populations are not included in these calculations. States are at risk for the Federal cost of expenditures for expansion populations under their budget neutrality agreement. As part of the waiver partnership, States will agree to work with CMS to complete annual budget neutrality assessments based on actual State demonstration expenditures within three months of the end of each demonstration year.

General budget neutrality principles:

• Use of prior year "savings": While annual assessments of State spending will be conducted, budget neutrality will be assessed over the life of the initial five-year demonstration. For each subsequent three-year extension approved by HHS, budget neutrality will be assessed over the most recent five-year window. For example, budget neutrality for a three-year extension of a waiver that has operated for its initial five year demonstration will be calculated based on year 4 and 5 of the initial demonstration, plus the three years of the extension.
• Amendments to the budget neutrality agreement: For the most part, amendments to the budget neutrality agreement will not be permitted. Specifically, the base year per capita amount will not be adjusted to reflect changes to a State's Medicaid plan in areas such as benefit package and provider payments. States' requests to amend their HIFA budget neutrality agreements to include additional optional populations will be considered by CMS if these populations are provided coverage statewide and receive one of the benefit packages described in Section III for optional populations.

Other General Financing Principles

· State proposals that include waiver requests of Medicaid provider payment rules (such as the inpatient upper payment limit requirements at 45 CFR 447.272) will be closely scrutinized and may result in a lengthened waiver review period.

· Premium collections and other offsets will be used to reduce overall program expenditures before the State claims Federal match. Federal financial payments will not be provided for expenditures financed by collections in the form of pharmacy rebates, third party liability, or premium and cost sharing contributions made by or on behalf of program participants.

· As the purpose of the HIFA waiver is to create new coverage options, states will not be permitted to receive additional Federal match for previously state-only heath service programs under a waiver. Federal financial participation will not be claimed for any existing State-funded program. If the State is seeking to expand participation or benefits in a State-funded program, a maintenance of effort requirement will apply. Waiver proposals that request Federal match for direct services rather than health insurance coverage will be closely scrutinized and are not likely to be approved.

VIII. Tracking the Uninsured Rate and Evaluating the HIFA Waiver Approach

The purpose of HIFA demonstrations is to reduce the number of uninsured individuals, particularly with incomes under 200 percent of the FPL (in certain limited circumstances described above, coverage can be extended to individuals with incomes above 200 percent of the FPL). States should present detailed coverage goals in their submission. The HIFA demonstration data reporting requirements outlined below are intended to build upon the performance and data systems that States already have in place for their current law SCHIP programs.

Required Proposal Elements

States should provide:

(a) An assessment of the current uninsured rates within the state for all groups under 200 percent of the FPL and any other group the state is proposing to cover under the HIFA demonstration. States should also provide any available projections of future uninsured rates.

(b) An assessment of insurance coverage levels in the state categorized by coverage sources, including Medicaid and SCHIP direct coverage, Medicaid and SCHIP premium assistance programs, and those covered through employer sponsored insurance, other group health plans including COBRA coverage, and individual market coverage.

(c) The state's coverage goals. For example, as a result of the HIFA demonstration, the state expects the uninsured rate for families to decrease by 5 percent. Moreover, states should articulate their comprehensive strategy to address the uninsured.

(d) A plan to track changes in the uninsured rate and trends in sources of insurance as listed above. States should monitor employer contribution levels and whether there are unintended consequences of the demonstration, such as major decreases in employer contribution levels or high levels of substitution of private coverage. This can be done using CPS or a state survey, provided that the survey instrument is consistent throughout the life of the demonstration.

(e) As part of their proposal, States are encouraged to submit a list of performance measures they plan to use to evaluate the effectiveness of their HIFA demonstration. Performance measures should address issues like access to care, quality of care, and outcomes.

State Progress Reports

Within 6 months of the end of each demonstration year, states should submit a progress report on their demonstration addressing:

(a) Uninsured Rates- whether the state's HIFA demonstration has resulted in a decrease in the rates of uninsurance,

(b) Effectiveness of HIFA Approach- What aspects of the HIFA demonstration appear to be more or less effective; e.g., were beneficiaries enrolled in private insurance more or less likely to remain insured than those receiving direct coverage.

(c) Impact on Employer Coverage- Assessment of whether the approach is displacing employer contribution levels or beneficiary enrollment in private group health plan coverage.

(d) Other Contributing Factors- The extent to which other factors (e.g., changes in the economy) resulted in a change the uninsured rate.

(e) Progress on any other performance measures the state has identified for its demonstration.

Independent Evaluation

In addition to the state progress reports, an independent evaluation on the HIFA demonstrations will be conducted. CMS will procure an independent evaluation contractor (or contractors) to conduct evaluations on the HIFA demonstrations. The contractor(s) will compare states' progress with their stated goals, make comparisons across states, evaluate differences in outcomes according to the different approaches used by states, and generally evaluate the effectiveness of the HIFA demonstrations in reducing overall uninsurance rates.

Inquiries:
Send inquiries to the HIFA information clearinghouse at: HIFA@cms.hhs.gov