CMS announces Medicaid healthy adult demonstration initiative

Jan. 31, 2020

The Centers for Medicare & Medicaid Services (CMS) announced the Healthy Adult Opportunity (HAO), an optional demonstration initiative. It is designed to give states unprecedented tools to design innovative health coverage programs tailored to the unique needs of adult beneficiaries, while holding states accountable for results and maintaining strong protections for our most at risk populations.

The HAO puts patients first through state flexibility, accountability and patient protections. It provides states an opportunity to meet the needs of their adult beneficiaries under age 65 who aren’t eligible on the basis of a disability or their need for long-term care and for whom Medicaid coverage is optional for states. Other low-income adults, children, pregnant women, elderly adults and people with disabilities will not be directly affected. Improvements are expected to result from states reinvesting savings to improve and sustain Medicaid.

“Vulnerable populations deserve better care. Data shows that barely half of adults on the Medicaid program report getting the care they need,” said CMS Administrator Seema Verma. “This opportunity is designed to promote the program’s objectives while furthering its sustainability for current and future beneficiaries and achieving better health outcomes by increasing the accountability for delivering results. We’ve built in strong protections for our most vulnerable beneficiaries and included opportunities for states to earn savings that have to be reinvested in strengthening the program so that it can remain a lifeline for our most vulnerable.”

For the first time, participating states will have more negotiating power to manage drug costs by adopting a formulary similar to those provided in the commercial market, with special protections for individuals with HIV and behavioral health conditions. In exchange for increased flexibility offered through the Healthy Adult Opportunity, states must accept increased accountability for the program’s results.

The HAO also provides the opportunity for flexibilities that CMS has historically provided through section 1115 demonstrations – in addition to some that are entirely new – and outlines them in a streamlined application template. These include flexibilities to waive requirements like retroactive coverage periods and the ability to engage beneficiaries through nominal premiums and cost-sharing. Subject to comprehensive expectations for minimum standards for approval of a HAO demonstration, states will also have the opportunity to customize the benefit package for those covered and make needed program adjustments. 

Key federal benefit and eligibility protections as well as due process and civil rights remain in place and beneficiaries will still have important protections through minimum benefit requirements, eligibility protections, and limits on out-of-pocket expenses. The HAO establishes financial metrics to ensure states are driving affordability and quality, with savings shared between the federal government and state governments to protect taxpayers. States participating in the Healthy Adult Opportunity will be required to report on a set of key quality measures. In a new initiative specific to Healthy Adult Opportunity, states will report real-time performance indicators to CMS for detection of any potential beneficiary quality or access issues that need to be quickly addressed. 

All proposals that states submit in response to this demonstration will still need to comply with existing transparency and public notice requirements, and states will need to ensure adequate public notice before any prospective changes are implemented.

CMS has the announcement