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Emory Law Journal

Nicole Johnson

Abstract

The Medicaid program operates as a federal-state partnership, in which the states agree to meet certain federally mandated requirements in exchange for federal matching funds for program expenditures. These federal matching funds can be anywhere from 50–90% of health care expenses incurred through state Medicaid programs. As such, states have a substantial interest in continuing this partnership and ensuring that their state plans comply with federal requirements. There is a way, though, in which states can gain more freedom in building their individual state plans. Through section 1115 waivers, states can ask the Centers for Medicare and Medicaid Services (“CMS”) to waive certain federal requirements, thereby allowing a state to implement an “experimental, pilot, or demonstration project” as its Medicaid program. Demonstration projects are intended to benefit health care by allowing states to try innovative ideas. These projects also benefit states and state Medicaid beneficiaries by allowing states to try different approaches to Medicaid that are better tailored to local needs. However, since their inception in the 1960s, section 1115 waivers have been abused. For example, the federal government has used these waivers to push political agendas on states, and states have used the waivers to cut corners purely in the interest of saving money. Many scholars have spoken to these issues and proposed novel solutions. This Comment specifically looks to one aspect of potential abuse: the duration of the operation of demonstration projects.

In 2017, CMS promulgated guidance that allowed for extensions of “routine, successful, non-complex” demonstration projects for up to ten years. However, section 1315, the governing statute of section 1115 waivers, only allows for extensions of up to three or five years. In fact, the statute explicitly limits waiver extensions to three or five years in two separate provisions, reinforcing Congress’s intention. Therefore, Congress did not leave a gap for CMS to fill in regard to this precise issue and CMS’s 2017 guidance is an impermissible construction of the statute. Additionally, the language “routine, successful, [and] non-complex” is in tension with the requirement that section 1115 waivers apply to “experimental, pilot, or demonstration project[s].” Experimental, pilot, and demonstration describe projects that have experimental value in that the projects test or trial experimental procedures. Routine, successful, and non-complex describe projects that no longer have experimental value because these projects have already been evaluated and determined to be successful with well-established procedures. In 2022, CMS removed the 2017 guidance and replaced it with 2015 guidance that only allows for waiver extensions up to the statutory limits of three or five years. But before replacing the 2017 guidance, CMS approved waiver extensions ranging from seven to ten years in nine states. A tenth state received an extension of ten years and nearly four months. All but one of those excessive extensions still stand today, unchanged.

The original purpose of section 1115 waivers was to create meaningful innovations and improve outcomes for Medicaid beneficiaries. This Comment contends that ten-year extension periods obstruct this purpose. Long project durations like this hinder and delay innovation by allowing stagnant projects to continue to operate for extended periods of time under CMS’s radar. More regular reviews conducted at intervals of five years or fewer provide more opportunities for external review and data examination so CMS and states can make any necessary adjustments. Additionally, ten-year extension periods block stakeholders from participating in the decision-making process for an inordinate amount of time. Stakeholders have shown that they value the opportunity to participate in public notice and comment periods regarding section 1115 waivers and that they do not want to wait ten years to do so. Finally, ten-year extensions effectively solidify the negotiations and agreements made between two administrations—one state and one federal—for an unreasonable amount of time. The effect of this is that future administrations and future voters will be bound by a contract negotiated by individuals who may no longer be in office. Future voters, and the agendas they vote for, should be protected by limiting demonstration project extensions to three or five years.

This Comment argues that, going forward, CMS should refrain from granting extensions in excess of the statutory three- or five-year limits. Further, while CMS has replaced the 2017 guidance, the agency must rescind or amend those extensions approved for periods in excess of five years under it. By revising the extensions to the statutorily prescribed operating periods, CMS would not only improve the functionality of the demonstration projects, but it would also address the invalidity of the 2017 guidance, thereby deterring administrations from reimplementing the ten-year extensions. Taking action by rescinding or amending these extensions is a critical step in ensuring that section 1115 waivers are able to fulfill their potential to create meaningful innovation and improved outcomes for Medicaid beneficiaries.

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