This article was written by Senior Consultants Amanda Schipp and Lora Saunders of HMA Medicaid Market Solutions (HMA MMS). HMA MMS helped the Commonwealth of Kentucky secure a groundbreaking Medicaid Section 1115 Waiver. Below is a summary of what the waiver entails.
On January 12, 2018, Kentucky’s section 1115 Medicaid Demonstration Waiver was approved by the Centers for Medicare and Medicaid Services (CMS). The demonstration includes two significant components: an expansion of substance use disorder (SUD) services, including a waiver of the Institution for Mental Disease (IMD) exclusion, and the creation of a new Medicaid program for able-bodied adults, known as Kentucky HEALTH (Helping to Engage and Achieve Long Term Health). The demonstration contains several groundbreaking policies never previously approved by CMS, most notably, a requirement for non-exempt Medicaid enrollees to work or participate in approved work-related activities, such as education, training, or volunteering as a condition of Medicaid eligibility. This approval paves the way for the nine other states that also have pending waivers requesting similar work requirements.
The following summarizes the key provisions contained within the approved Special Terms and Conditions.
Kentucky HEALTH will require members to pay monthly premiums instead of copayments, which are applied on a sliding income-based scale. Certain vulnerable populations, including pregnant women and children, are exempt from premiums. Other populations, including medically frail adults and former foster youth up to age 26, will be asked to pay an optional premium, and will not lose benefits if they do not pay. However, for other adults, premiums are required as a condition of eligibility. Further, CMS explicitly provided a waiver to allow Kentucky to vary premium amounts based on an individual’s length of enrollment in Medicaid, limited to a cap not to exceed 4 percent of income.
Kentucky HEALTH will provide enrollees with two spending accounts, a “Deductible” account to cover the first $1,000 of traditional healthcare services (to be used like a health savings account to fund a deductible), and a “My Rewards” account to purchase optional enhanced benefits (to be used like a flexible spending account to pay for vision, dental, over-the-counter medications, and fitness services). Individuals will be able to earn dollars for their My Rewards Account for healthy behaviors, such as completing a smoking cessation course or getting a yearly physical. Kentucky’s original waiver requested that the balance of the My Rewards Account – up to $500 – could be paid out to individuals who obtained employment and successfully transitioned off Medicaid to commercial health coverage for at least 18 months. However, CMS did not approve this policy in the waiver approval documents.
Similar to Indiana’s 1115 waiver, the Kentucky HEALTH waiver will test a combination of incentives and disincentives to encourage members to take personal responsibility for their health. Individuals who regularly pay premiums will have a My Rewards Account that can be used to access certain enhanced benefits, such as vision and dental services. Individuals with income less than the federal poverty level who fail to make required premium payments will lose access to this account, and therefore, will lose access to vision and dental coverage. Further, these individuals will also be subject to the standard state plan copayments for all covered medical services. By contrast, individuals with income above 100 percent of the federal poverty level who do not pay the monthly premiums will be suspended from coverage, similar to the commercial market. These members will not have access to health benefits for up to six months.
In addition, to better align with commercial market practices, Kentucky HEALTH adults who fail to complete annual redetermination processes will be disenrolled and will be required to wait up to six months before they can re-enroll in Kentucky HEALTH. Also, individuals who fail to timely report a change in circumstances that impacts eligibility will also be disenrolled for up to six months. However, for each of the various disenrollment and subsequent lock-out reasons, there are specific “on-ramps” for individuals to regain coverage, such as through the completion of a health or financial literacy course.
Kentucky HEALTH will become the first state to require all able-bodied working age adult members without dependents to work or participate in work-related activities as a condition of Medicaid eligibility. Members will be required to participate in this community engagement and employment initiative for at least eighty (80) hours per month. In addition to employment, qualifying activities include job training, education, job search, caregiving, volunteering, and substance use disorder treatment. Pregnant women, medically frail individuals, former foster care youth up to age 26, primary caregivers of a dependent, full-time students, children under age 19, and adults over age 64 are exempt from this requirement. Further, to align with existing work requirements under the Supplemental Nutrition Assistance Program (SNAP), anyone enrolled in and subject to the SNAP work requirement policies will be considered meeting the work requirements for purposes of Kentucky HEALTH.
Substance Use Disorder Waiver
In addition to the Kentucky HEALTH program, Kentucky’s demonstration approval also includes a substance use disorder (SUD) waiver, similar to at least seven other states. Specifically, the SUD portion of the demonstration includes a waiver of the institution of mental disease (IMD) exclusion, giving the state federal match for services provided in IMD facilities. Among other services, Kentucky HEALTH will also cover methadone treatment services; but unlike other states, Kentucky was awarded a waiver from the requirement to provide non-emergency medical transportation (NEMT) to get individuals to those treatment services. This waiver of NEMT for methadone treatment applies to all Medicaid recipients except children under age 21 subject to Early and Periodic Screening, Diagnosis and Treatment (EPSDT), former foster care youth up to age 26, and pregnant women.
Editor’s Note: On January 11, the CMS issued new Medicaid guidance to states regarding “opportunities to promote work and community engagement among Medicaid beneficiaries.” Click here to read the State Medicaid Director Letter.
 Arizona, Arkansas, Indiana, Kansas, Maine, New Hampshire, North Carolina, Utah and Wisconsin.
 California, Maryland, New Jersey, Utah, Vermont, Virginia, and West Virginia.