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Key Changes and Notable Provisions of Illinois’ 1115 Waiver: A First Look

Wesley Epplin and Sharon Post
February 20, 2014
On Monday, February 10th, the State released Illinois’ Path to Transformation 1115 waiver proposal, an update from a draft waiver proposal that received feedback from dozens of stakeholders.  Below are some key changes and issues of support and concern we’ve identified from the draft and other notes on the latest 1115 waiver proposal. We encourage advocates to engage with the issues and questions raised in this post.
The waiver application includes a new goal: decoupling HCBS and institutional eligibility (page 11):

The waiver lists 11 goals, one of which (#6) is consolidating the nine 1915(c) waivers that Illinois currently uses to provide home and community-based services. The final waiver application adds to that goal the promise of “thoughtful review and adjustments to current institutional eligibility thresholds, allowing HCBS waiver services to be provided to individuals who meet specific program eligibility criteria that may be less stringent than the institutional threshold.”  This would be an important move away from existing eligibility criteria that require individuals to demonstrate a need for a ‘nursing facility level of care’ in order to qualify for home and community-based services.  As Illinois expands community-based alternatives, it should also consider going a step further and raising the standard for nursing facility level of care as well as reducing the threshold for HCBS eligibility.

Advocates who attended the Governor’s Conference on Aging in December 2013 may have heard Mike Hall of the National Association of States United for Disability and Aging explain how requiring individuals to meet a nursing facility level of care threshold before they may receive home and community-based services means we intervene too late; people need to be sick or impaired enough to be eligible for the intensive services of a nursing facility before they can receive the home and community-based services that could prevent them from becoming so sick or impaired to begin with. Illinois has missed opportunities to prolong independence and enhance long-term quality of life for seniors and people with disabilities, and naming this eligibility reform as a goal of the 1115 waiver is a step in the right direction.

Access Living called for decoupling HCBS and institutional eligibility standards in its comments on the 1115 Waiver Concept Paper, so this change also demonstrates responsiveness to stakeholder input.

Delivery System Reform Incentive Payments (DSRIP) to Cook County (pages 17-19):

The Cook County Health and Hospital System DSRIP section on pages 13-15 of the first draft of the waiver application included provisions for: 1) Redirecting resources to more appropriate locations for primary care, subspecialty consultation, and diagnostics; 2) integrating behavioral health and primary care; 3) addressing food security; and 4) promotion of continuity of care for the justice-involved population.  The final waiver application has three additional initiatives that were not in the first draft:

  • Form a public-private partnership to consolidate selected resources across organizations.
  • Collaborate with the University of Illinois College Of Nursing to Improve CCHHS workforce capacity and competency.
  • Develop a community health worker residency program and collaborate on other training programs to address workforce shortages.
We would like to call attention to two of the total seven initiatives under CCHHS’ DSRIP proposal:

  • The concept of forming a significant new public-private partnership that will bring “a full array of comprehensive services to the delivery of patient care, including highly specialized interventions,” as noted in Appendix B, raises serious concerns.  Given that there are many examples of privatization that have led to very serious problems, including in health and healthcare services, any effort to privatize any part of public systems should be heavily scrutinized.  Illinois’ own experience using private contractors in its new Medicaid managed care programs is still in its early stages, and we have yet to fully draw the lessons we need to know how private sector enterprises can and cannot intersect with public sector missions.  Past experience provides a cautionary tale of private contractors violating public trust. Even with coverage expansion, public health systems will always play a key safety net role that is incongruent with private sector contractors’ business model. The waiver should not be a vehicle for privatization of public hospitals’ services or administration.
  • Another item to highlight is that in the draft application, the provision for promoting continuity of care for the justice-involved population included the creation of “a patient registry of justice involved patients”.  Health and Medicine supports the intention of this initiative, which seems to be focused on the stable living, continuity of care and medication, and reductions in recidivism; however, we did raise concerns about this in our 1115 comment submission.  Our comment stated that this “raises serious concerns about privacy and stigmatization related to people who have a background with the criminal justice system. Any effort to improve services and care coordination for people who are justice-involved must ensure patients' privacy, dignity, and equitable treatment” (page 4 of Health and Medicine’s comments).  We are pleased to see that this provision has been changed and that the “registry” language has been removed from the waiver application.  We do remain cautious about this initiative and, as we also noted in our comments, recommend that advocates continue to be engaged to protect the justice-involved patients’ rights, privacy, dignity, and equitable treatment, both as the waiver is negotiated with CMS and during the later implementation phases.
DSRIP Payments to University of Illinois Hospital and Health Sciences System (pages 19-20 and Appendix B):

A welcome change in the new 1115 waiver application is the expanded detail on the University of Illinois Hospital and Health Sciences System’s Delivery System Reform Incentive Payments (DSRIP) provisions.  The 1115 waiver application and Appendix C contain detailed proposals for the following projects:

  • Medication therapy management services for patients outside of coordinated care networks or in rural areas to better identify and prevent drug-related problems.
  • Patient-centered medical homes for individuals with sickle cell and for individuals with HIV.
  • Expansion of the Emergency Patient Interdisciplinary Care Coordination (EPIC) Model to address medical and social determinants of health for frequent ER visitors.
  • Building telemedicine capacity in psychiatry and dermatology and expanding hepatitis C and HIV telemedicine clinics.
One of the U of I Health System DSRIP projects raise specific concerns:
  • Medicaid care coordination network at UI Health. Health and Medicine supports building the U of I system into an integrated delivery system and leveraging its successes to improve service delivery statewide.  However, the reliance on a decade-old report on managed care savings--commissioned by the health insurance trade association— to set metrics for this project is worrisome.  The U of I health care coordination project assumes an average per patient per year cost reduction of 10% based on the Lewin Group’s 2004 report, “Medicaid Managed Care Cost Savings:  A Synthesis of Fourteen Studies,” prepared for America’s Health Insurance Plans. The goal of building an integrated delivery system must be first and foremost to improve the quality of care available to the population the U of I system serves. With that starting point, a much more serious consideration of opportunities for cost savings and more recent research should guide assumptions for annual cost reduction goals.
Some recent research casts doubt on the ability of Medicaid managed care to produce savings. To the extent that managed care programs can achieve other policy objectives and, in concert with other reforms, improve access and quality while controlling costs, it should be incorporated into the waiver. Invoking ‘managed care’ as a panacea for Medicaid’s challenges should not become a shortcut around the hard work of genuinely confronting those challenges.  Integration of services through the U of I health system has great promise, but the proposal in the 1115 waiver application was disappointing. We hope it can be strengthened during negotiation and implementation.

Access Assurance Program will shift to payments based on uncompensated care costs (page 22)

The original waiver draft stated on page 18 that the Access Assurance Program, the program being proposed to replace Medicaid Upper Payment Limit (UPL) supplemental payments to hospitals, would move UPL payments to Access Assurance Program payments. The new waiver application revises that statement to say that the Access Assurance Pool will initially replicate the methodology for UPL payments in the State Medicaid plan but that it will transition to a payment methodology based on uncompensated care costs. In a letter to HMA, Health and Medicine suggested that a minimum amount charity care, the best measure of uncompensated care, should be a prerequisite to qualifying for Access Assurance Program payments. Advocates will need to continue engaging with the State and CMS as new payment methodologies for this program are negotiated to ensure access to care for un- and under-insured people.

Definition of “Distressed Hospital” for Health System Integration and Transformation Performance Program (HSITPP) and for the Loan Repayment Program (page 21-22; 28-29)

The 1115 waiver proposes a performance-based incentive pool, the HSITPP, to encourage hospitals to invest in quality improvements. The original waiver draft divided the HSITPP into two pools—one for “distressed” hospitals and one for all others—but did not define “distressed hospital.” The original draft waiver application also proposes to allow “distressed hospitals” to set up their own loan repayment programs without defining “distressed hospital.” The new waiver application establishes two criteria for the ‘distressed’ designation.

To sum up the new definition, a “distressed hospital” is either of the following:

1)    a Critical Access Hospital (CAH). Critical Access Hospitals are hospitals in rural areas with no more than 25 inpatient beds that are more than 35 miles from any other hospital; or,
2)    a “safety net hospital” as defined in 305 ILCS 5/5-5e.1. That section of the Public Aid Code defines “safety-net hospital” as a general acute care or pediatric hospital that is also a Disproportionate Care Hospital under the Social Security Act (in general, DSH hospitals serve largely Medicaid and low-income uninsured patients) and either:
a.    at least 40% of its inpatient days are provided to Medicaid patients AND at least 4% of its total charges are charity care charges for uninsured patients
b.    at least 50% of its inpatient days are provided to Medicaid patients

Advocates should note the provenance of this statute. The State of Illinois defined ‘safety-net hospitals’ in 2012 to exempt those hospitals from cuts to Medicaid rates. It is worth considering whether a new definition of ‘safety net hospital,’ designed to meet the policy goals of the waiver, is necessary. Some questions on this matter:

  • Should the incentive pool be available to rehabilitation hospitals, which are excluded in the existing definition?
  • Charity care is defined as “charity charges for services provided to individuals without health insurance or another source of third party coverage.”  Does this neglect the need for and impact of financial assistance for insured individuals who are unable to pay deductibles and co-payment or co-insurance?  Would including charity charges to cover health insurance cost sharing requirements water down the charity care standard in the safety net decision, or would it strengthen it by taking into account the difficulties facing the under-insured and the hospitals that serve them?
  • Do the criteria target the right hospitals for special consideration under the Health System Integration and Transformation Performance Program? Are there hospitals that would be considered ‘distressed’ under this definition that in fact have ample alternatives to affordably finance investments in quality and integration? Are there other hospitals that need more support to meet the waiver’s delivery system transformation goals that will be left out of the distressed pool?

Regional Pubic Health Hubs (page 24-25)

Another portion of the waiver that is worth advocates’ attention is the provision related to the Regional Public Health Hubs, found in the Population Health pathway, on page 24 of the waiver application.  This provision proposes to ”…incentivize integration of public health and traditional health care delivery toward achieving better overall population health outcomes, Illinois will create a bonus pool, funded at $10 million annually, for health plans that agree to use the funds to develop population health interventions in conjunction with public health entities, including newly created Regional Public Health Hubs.”  This section goes on to say that the hubs “will serve as a ‘nexus’ between the Illinois Department of Public Health (IDPH), local health departments (LHDs), communities, and the health plans and providers serving the region.”

Health and Medicine is supportive of funding for population health efforts.  We as well as others who commented on the draft of the waiver raised concern that this funding may move control and leadership for community health planning and program development away from health departments to managed care organizations who will be receiving such funds.  In the proposal LHDs and IDPH will be dedicating their limited resources – including staff time and their rich data, experience, and expertise in community health assessment and planning – to making the efforts of the Regional Public Health Hubs successful at improving population health.  Health and Medicine supports efforts for increased collaboration on this front; however, using the entirety of the $10 million for population health for payments to managed care organizations, whose missions are not focused on population health, does not align with the fourth goal: “Enhance the ability of the health care system to engage in population management, by leveraging public health resources and encouraging linkages between public health and health care delivery systems.”  Leveraging public health resources precludes privatizing control and leadership of those resources; the waiver funds ought to support entities with population health management expertise (that is, local and state health departments).

Managed care organizations lack the depth of community health needs assessment and planning knowledge and skills that local and state health departments and public health practitioners have built over decades of work and which they will contribute to the Regional Public Health Hubs.  Within their missions, health departments are dedicated to improved community and population health and they have carried out their duties with very limited resources.  Alternatively, privately-run managed care organizations are dedicated to population health only approximately as far as it impacts the patients that are enrolled through their plans.  The State already supports such entities by awarding them Medicaid contracts that already include quality metrics and incentive payments, so no further support is needed. 

The waiver is an opportunity to expand on the local and state health departments’ capacities to do the valuable work of supporting population health. Rather than giving additional payments to managed care organizations, the state should require that managed care organizations that receive Medicaid contracts participate in the Regional Public Health Hubs’ population health efforts as a prerequisite of receiving publicly-funded Medicaid contracts.  The $10 million in annual support for population health should go to support the local and state health departments whose very missions are focused on improving the health of the public and are in need of support to carry out that mission.  Privatizing the public’s funds and the expertise and data of health departments is unlikely to lead to the population health improvements that the State seeks as part of the Triple Aim.

Cost Sharing (page 46-47):

In an alarming shift, the new 1115 waiver application contains requests for waivers of federal requirements related to Medicaid cost sharing. The original draft stated simply, “Illinois is not requesting cost sharing as part of this demonstration.”  The new waiver application states that Illinois will maximize cost sharing and requests waivers of federal law requiring income tracking and patient/provider notification to ensure that cost sharing does not exceed 5% of the family’s income.  In addition, the new waiver application asks for a waiver of requirements that restrict collection of co-payments for non-emergency services furnished in an emergency department. Those requirements include informing patients of the cost sharing obligation and identifying an alternative non-emergency provider that can provider services in a timely manner.

Requesting waivers of these consumer protections while the state upgrades its MMIS system improperly    shifts a financial burden to Medicaid beneficiaries without meeting any clear policy objective.  The 1115 waiver application states strongly that Illinois will shift its Medicaid system to address the social determinants of health. The efficacy of cost sharing in Medicaid is contested to begin with, and implementing cost-sharing without solid consumer protections is contrary to the health equity goals described in the waiver application. As poverty is a key social determinant of health status, placing additional financial burdens on Medicaid enrollees is contrary to the “emphasis on the social determinants of health throughout all of our programs, services, policies and reform initiatives” stated on page 4 of the waiver application.