Idaho’s ambitious waivers

Idaho is odd. It is a Republican tri-fecta state. It runs its own state based Exchange for the ACA. It has not expanded Medicaid. It has a pair of fascinating waivers that they want to submit to the Center for Medicare and Medicaid Services.

The first waiver is a Section 1115 Medicaid Waiver. They are not asking for an ACA Medicaid Expansion. Instead, they are asking for the authority to create a high-risk pool in Legacy Medicaid for about 1,500 people who have certain severe, high-cost conditions including hemophilia, cystic fibrosis, and certain cancers. These folks would see lower cost sharing and lower premiums. Idaho would pay their normal state match. Cost of care would go down as Idaho pays their Medicaid providers roughly 95% of Medicare rates and Medicare tends to pay providers significantly less than commercial rates.

The objective is to pull a small number of chronically ill and very expensive people out of the ACA individual market risk pools. With those people out of the risk pool, average claims costs go down by 19% which makes insurance a whole lot cheaper for non-subsidized buyers. This makes the non-subsidized market better off as a lot of people who are reasonably healthy and currently deterred from buying because the plans are too expensive will see cheaper plans. This would lead to more people covered and an even healthier risk pool.

If this was the only waiver, it would be a good waiver. However, Idaho is more ambitious. They are also planning a 1332 waiver that will allow people under 100% Federal Poverty Level (FPL) (<$12,060 for an individual) to claim that their income is actually 100% FPL and thus qualify for Advanced Premium Tax Credits and CSR Silver plans. This is a back-door Medicaid-esque expansion along the Arkansas Model but with the Federal government and the individual paying all of the cost without the state needing to commit new money to the coverage expansion.

Idaho wants to use the savings from pulling out the patients with high cost chronic diseases to fund the state pass-through amount for this 1332 waiver. It is an elegant solution if one starts with an assumption that Medicaid Expansion is politically non-viable in Idaho. It will lead to roughly half the currently uncovered population who are in the Medicaid gap to receive coverage. I am concerned that this cohort will be sicker and more expensive than the people who don’t buy this coverage but earn under 100% FPL. I am not sure how this would play with the risk pool improvement from more non-subsidized buyers entering the market. The signs are in opposition to each other but I don’t know magnitude.

I have mechanical worries about these waivers. I don’t think that the initial financial estimates are fully accounting for how CMS scores waivers. We know from Iowa that CMS will count the loss of individual mandate penalties against a state’s budget neutrality calculation. I don’t know if CMS will allow the sequencing that Idaho needs for budget neutrality. I think that this type of waiver is innovative and creative. It solves several problems but the mechanics are tough under the 2015 Section 1332 guidance. Here is a where an Alexander-Murray waiver modification could make a lot of sense.

I am intrigued by what Idaho is trying to do. I am just not sure that they will be allowed to do what they want to do or at least receive as much money as they think they should receive to do what they want to do.