Medicaid Demonstrations:

Approvals of Major Changes Need Increased Transparency

GAO-19-315: Published: Apr 17, 2019. Publicly Released: May 17, 2019.

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Contact:

Carolyn L. Yocom
(202) 512-7114
yocomc@gao.gov

 

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About a third of Medicaid spending is for demonstrations, which allow states to test new approaches to delivering services. States and the federal government are supposed to be transparent about the demonstrations that are proposed and give the public a chance to weigh in. Is that happening?

The short answer is sometimes. Transparency has improved, but there are still significant gaps. For example, the federal government doesn't always require states to share the projected effects of proposals, even when they could significantly affect beneficiary eligibility.

We recommended ways for Medicaid to address these issues.

States that received a demonstration approval from January 2017 through May 2018

Map showing states that received demonstration approvals from January 2017 through May 2018

Map showing states that received demonstration approvals from January 2017 through May 2018

Additional Materials:

Contact:

Carolyn L. Yocom
(202) 512-7114
yocomc@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

Medicaid demonstrations allow states flexibility to test new approaches for providing coverage and delivering Medicaid services. Since 2012, the Centers for Medicare & Medicaid Services (CMS), which oversees demonstrations, has developed procedures to improve the transparency of the approval process. For example, CMS reviews demonstration applications (including for new demonstrations, extensions, and amendments to existing demonstrations) for their compliance with applicable transparency requirements, including that states seek public input on their applications.

States that Received Demonstration Approvals, January 2017–May 2018

States that Received Demonstration Approvals, January 2017–May 2018

However, GAO found weaknesses in CMS's policies for ensuring transparency.

Changes to pending applications for new demonstrations or extensions. CMS lacks policies for ensuring transparency when states submit major changes to pending applications. For two of the four approvals of new demonstrations or extensions GAO reviewed in-depth, states submitted changes to their applications that could have significant effects on beneficiaries (such as disenrollment or other penalties) without first obtaining public comment on these changes at the state level.

Amendments to existing demonstrations. CMS's transparency requirements for amendments are limited. For example, CMS does not require amendment applications to include how the changes may affect beneficiary enrollment or report on concerns raised in state public comments. However, states have proposed major changes—such as work and community engagement requirements—through amendments, raising concerns that major changes to states' demonstrations are being approved without a complete understanding of their impact.

Why GAO Did This Study

Section 1115 demonstrations are a significant component of Medicaid spending and affect the care of millions of beneficiaries. The Patient Protection and Affordable Care Act required the Department of Health and Human Services (HHS) to establish procedures to ensure transparency in approvals of new demonstrations and extensions to existing demonstrations. The act did not address amendments, which are subject to long-standing guidance on public input.

GAO was asked to examine the transparency of demonstration approvals. Among other things, this report examines CMS's transparency policies and procedures for new demonstrations and extensions, and amendments to existing demonstrations. To review a variety of approval types across a large number of states, GAO examined all approvals of new demonstrations and extensions of and amendments to existing demonstrations granted from January 2017 through May 2018. GAO also conducted in-depth reviews of one approval in each of seven states, selected to include at least two approvals of each type. GAO reviewed demonstration documentation for these states, and interviewed state and federal Medicaid officials. GAO also assessed CMS's procedures against federal internal control standards.

What GAO Recommends

CMS should develop policies for ensuring transparency when states (1) submit major changes to pending demonstration applications and (2) propose amendments to existing demonstrations. HHS concurred with these recommendations.

For more information, contact Carolyn L. Yocom at (202) 512-7114 or yocomc@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: HHS concurred with this recommendation. In its comments on a draft of the report, HHS stated that it would develop (1) standards for determining when changes to a pending demonstration application are so substantial that it would be appropriate for HHS to solicit additional public input and (2) a process for informing states and the public about the additional comment period. Our recommendation, however, requires that CMS develop and communicate a policy that defines when changes are substantial enough to warrant a new review of the application against the transparency requirements, which, among other things, call for states to provide for public notice and input before they submit their applications to CMS. Holding an additional federal comment period would not be sufficient to meet our concerns. We will continue to monitor CMS's actions in this area.

    Recommendation: The Administrator of CMS should develop and communicate a policy that defines when changes to a pending section 1115 demonstration application are considered major and should prompt a new review of the application against the transparency requirements applicable to the pending application. (Recommendation 1)

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  2. Status: Open

    Comments: HHS concurred with this recommendation. In its comments on a draft of the report, HHS said that it has implemented enhanced processes to improve transparency and will develop additional policies and processes, as needed. However, the enhanced processes HHS referred to do not apply to amendments. HHS's efforts should result in actions to develop and communicate a policy that holds amendments with significant impacts accountable for meeting transparency requirements comparable to other applications, namely those for new demonstrations and extensions. We will continue to monitor CMS's actions in this area.

    Recommendation: The Administrator of CMS should develop and communicate a policy whereby applications for section 1115 demonstration amendments that may have significant impact are subject to transparency requirements comparable to those for new demonstrations and extensions. (Recommendation 2)

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

 

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