Sneak Preview: Section 1115 Monitoring Procedures Coming Soon

June 9, 2017 | By Jerry Ashworth | Post a Comment

xsass_bookshot(The following was excerpted from a recent article in the Single Audit Information Service.) The Department of Health and Human Services’ (HHS) Centers for Medicare and Medicaid Services (CMS) is developing internal procedures to support more consistent monitoring of states conducting section 1115 Medicaid program demonstrations, in response to a recent recommendation by the Government Accountability Office (GAO).

When administering their Medicaid programs, states have flexibility in establishing provider payment rates, and in covering many types of optional benefits and populations. Under section 1115 of the Social Security Act, states may allow Medicaid providers to deliver care in innovative ways that fall outside of many of the program’s applicable requirements, and section 1115 demonstrations enable CMS to allow costs under Medicaid state projects that otherwise would not be covered. For example, states may use these demonstrations to test new approaches to delivering care to generate savings or efficiencies or improve quality and access. Demonstrations are typically approved for an initial five-year period that can be renewed for future demonstration periods.

As of November 2016, 37 states had Medicaid demonstrations under section 1115. Medicaid policy requires that these demonstrations must be “budget neutral,” in that the federal government would spend no more for a state’s Medicaid program than it would have spent without the demonstration. In addition, CMS places limits on the amount of federal funds that states can spend over the life of a demonstration, referred to as “spending limits.”

GAO found that federal spending under section 1115 demonstrations has increased significantly, rising from $29 billion in expenditures in federal fiscal year (FY) 2005 to $109 billion in FY 2015. Along with the number of states with demonstrations increasing during this period, states expanded their programs under these demonstrations. For example, some states shifted expenditures for managed care, home and community-based services and services to low-income adults from other Medicaid authorities to section 1115 demonstrations.

“Medicaid section 1115 demonstrations are an important tool for states to test new approaches to delivering care that, among other things, may be more cost effective,” GAO said. “However, the growing federal expenditures for demonstrations … for costs that, in some cases, would not otherwise be eligible for Medicaid funding, makes monitoring of those dollars critical.”

(The full version of this story has now been made available to all for a limited time on Thompson’s Grants Compliance Expert site.)

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