Medicaid Program; Demonstration Proposals Pursuant to Section 1115(a) of the Social Security Act; Policies and Procedures

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

Health Care Financing Administration

Administration for Children and Families

[ORD-069-N]

Medicaid Program; Demonstration Proposals Pursuant to Section

1115(a) of the Social Security Act; Policies and Procedures

AGENCIES: Office of the Secretary, Health Care Financing Administration

(HCFA), and Administration for Children and Families (ACF), HHS.

ACTION: Public Notice.

-----------------------------------------------------------------------

SUMMARY: This public notice informs interested parties of (1) the

principles the Department of Health and Human Services ordinarily will

consider when deciding whether to exercise its discretion to approve or

disapprove demonstration projects under the authority in Section

1115(a) of the Social Security Act, 42 U.S.C. Sec. 1315(a); (2) the

kinds of procedures the Department would expect States to employ in

involving the public in the development of proposed demonstration

projects under Section 1115; and (3) the procedures the Department

ordinarily will follow in reviewing demonstration proposals. The

principles and procedures described in this public notice are being

provided for the information of interested parties, and are not legally

binding on the Department of Health and Human Services. This notice

does not create any right or benefit, substantive or procedural,

enforceable at law or equity, by any person or entity, against the

United States, its agencies or instrumentalities, the States, or any

other person.

FOR FURTHER INFORMATION CONTACT: Howard Rolston, Administration for

Children and Families, Department of Health and Human Services, at

(202) 401-9220.

Thomas Kickham, Health Care Financing Administration, Department of

Health and Human Services, at (410) 966-6503.

SUPPLEMENTARY INFORMATION:

I. Introduction

Demonstration Proposals Pursuant to Section 1115 of the Social Security

Act--General Policies and Procedures

Under Section 1115, the Department of Health and Human Services is

given latitude, subject to the requirements of the Social Security Act,

to consider and approve research and demonstration proposals with a

broad range of policy objectives. The Department desires to facilitate

the testing of new policy approaches to social problems. Such

demonstrations can provide valuable knowledge that will help lead to

improvements in achieving the purposes of the Act. The Department also

is committed to both a thorough and an expeditious review of State

requests to conduct such demonstrations.

In exercising her discretionary authority, the Secretary has

developed a number of policies and procedures for reviewing proposals.

In order to ensure a sound, expeditious and open decision-making

process, the Department will be guided by the policies and procedures

described in this statement in accepting and reviewing proposals

submitted pursuant to section 1115.

II. General Considerations

To facilitate the testing of new policy approaches to social

problems the Department will--

Work with States to develop research and demonstrations in

areas consistent with the Department's policy goals;

Consider proposals that test alternatives that diverge

from that policy direction; and

Consider, as a criterion for approval, a State's ability

to implement the research or demonstration project.

While the Department expects to review and accept a range of

proposals, it may disapprove or limit proposals on policy grounds or

because the proposal creates potential constitutional problems or

violations of civil rights laws or equal protection requirements. The

Department seeks proposals which preserve and enhance beneficiary

access to quality services. Within this overall policy framework, the

Department is prepared to--

Grant waivers to test the same or related policy

innovations in multiple States, (replication is a valid mechanism by

which the effectiveness of policy changes can be assessed);

Approve demonstration projects ranging in scale from

reasonably small to state-wide or multi-state, and

Consider joint Medicare-Medicaid demonstrations, such as

those granted in the Program for All-Inclusive Care for the Elderly

(PACE) and Social Health Maintenance Organization (SHMO)

demonstrations, and Aid to Families with Dependent Children (AFDC)-

Medicaid waivers.

III. Duration

The complex range of policy issues, design methodologies, and

unanticipated events inherent in any research or demonstration makes it

very difficult to establish a single Department policy on the duration

of 1115 waivers. However, the Department is committed, through

negotiations with State applicants, to--

Approve waivers of at least sufficient duration to give

new policy approaches a fair test. The duration of waiver approval

should be congruent with the magnitude and complexity of the project

(for example, large-scale statewide reform programs will typically

require waivers of five years);

Provide reasonable time for the preparation of meaningful

evaluation results prior to the conclusion of the demonstration; and

Recognize that new approaches often involve considerable

start-up time and allowance for implementation delays.

The Department is also committed, when successful demonstrations

provide an appropriate basis, to working with State governments to seek

permanent statutory changes incorporating those results. In such cases,

consideration will be given to a reasonable extension of existing

waivers.

IV. Evaluation

As with the duration of waivers, the complex range of policy

issues, design methodologies, and unanticipated events also makes it

very difficult to establish a single Department policy on evaluation.

This Department is committed to a policy of meaningful evaluations

using a broad range of appropriate evaluation strategies (including

true experimental, quasi- experimental, and qualitative designs) and

will be flexible and project-specific in the application of evaluation

techniques. This policy will be most evident with health care waivers.

Within-site randomized design is the preferred approach for most AFDC

waivers. The Department will consider alternative evaluation designs

when such designs are methodologically comparable. The Department is

also eager to ensure that the evaluation process be as unintrusive as

possible to the beneficiaries in terms of implementing and operating

the policy approach to be demonstrated, while ensuring that critical

lessons are learned from the demonstration.

V. Cost Neutrality

The Department's fiduciary obligations in a period of extreme

budgetary stringency require maintenance of the principle of cost

neutrality, but the Department believes it should be possible to apply

that principle flexibly.

The Department will assess cost neutrality over the life

of a demonstration project, not on a year-by-year basis, since many

demonstrations involve making ``up-front'' investments in order to

achieve out-year savings.

The Department recognizes the difficulty of making

appropriate baseline projections of Medicaid expenditures, and is open

to development of a new methodology in that regard.

In assessing budget neutrality, the Department will not

rule out consideration of other cost neutral arrangements proposed by

States.

States may be required to conform, within a reasonable

period of time, relevant aspects of their demonstrations to the terms

of national health care reform legislation, including global budgeting

requirements, and to the terms of national welfare reform legislation.

VI. Timeliness and Administrative Complexity

The Department is committed to minimizing the administrative burden

on the States and to reducing the processing time for waiver requests.

In order to accomplish this the Department has adopted a number of

procedures, including--

Expanding pre-application consultation with States;

Setting, and sharing with applicants, a well-defined

schedule for each application, with established target dates for

processing and reaching a decision on the application;

Maintaining, to the extent feasible, a policy of one

consolidated request for further information;

Sharing proposed terms and conditions with applicants

before making final decisions;

Establishing concurrent, rather than sequential, review of

waivers by all relevant units of the Department and with other relevant

Departments and the Office of Management and Budget;

Expanding technical assistance activities to the States;

and

Developing multi-state waiver solicitations in areas of

priority concern, including integrated long-term care system

development, services for adolescents, and services in rural areas.

The Department will continue to follow and develop procedures, and

commit internal resources to reviewing demonstration proposals,

necessary for a sound and expeditious review process.

VII. State Notice Procedures

The Department recognizes that people who may be affected by a

demonstration project have a legitimate interest in learning about

proposed projects and having input into the decision-making process

prior to the time a proposal is submitted to the Department. A process

that facilitates public involvement and input promotes sound decision-

making.

There are many ways that States can provide for such input. In

order to allow for public input into the proposals, the Department

expects States to ordinarily follow one (or more if the State desires)

of the processes described in this section.

1. At any time prior to submitting a section 1115 demonstration

proposal to the Department of Health and Human Services, a State may

provide to the Department a written description of the process the

State will use for receipt of public input into the proposal prior to

its submission to the Department.

Within 15 days of receipt of such description, the Department will

notify the State whether the described process provides adequate

opportunity for public input. The Department will accept any process

that--

Includes the holding of one or more public hearings, at

which the most recent working proposal is described and made available

to the public, and time is provided during which comments can be

received; or

Uses a commission or other similar process, where meetings

are open to members of the public, in the development of the proposal;

or

Results from enactment of a proposal by the State

legislature prior to submission of the demonstration proposal, where

the outline of such proposal is contained in the legislative enactment;

or

Provides for formal notice and comment in accordance with

the State's administrative procedure act; provided that such notice

must be given at least 30 days prior to submission; or

Includes notice of the intent to submit a demonstration

proposal in newspapers of general circulation, and provides a mechanism

for receiving a copy of the working proposal and an opportunity, which

shall not be less than 30 days, to comment on the proposal; or,

Includes any other similar process for public input that

would afford an interested party the opportunity to learn about the

contents of the proposal, and to comment on its contents.

The State shall include in the demonstration proposal it submits to

the Department a statement (a narrative of several sentences) briefly

describing the process that it followed in implementing the process

previously presented to the Department. The Department may find a

proposal incomplete if the process has not been followed.

2. A State that has not followed the procedures described in

paragraph 1. must submit a description of the process that was used in

the State to obtain public input, at the time it submits its

demonstration proposal. The Department will notify the State if the

process was adequate within 15 days after the application is submitted,

applying the same criteria as in paragraph 1. If the process was not

adequate, the State can cure the inadequacy by--

Posting a notice in the newspaper of widest circulation in each

city with a population of 100,000 or more, or in the newspaper of

widest circulation in the State if there is no city with a population

of 100,000, indicating that a demonstration proposal has been

submitted. Such notice shall describe the major elements of the

proposed demonstration and any changes in benefits, payments,

eligibility, responsibilities, or provider selection requested in the

proposal. The notice shall indicate how interested persons can obtain

copies of the proposal and shall specify that written comments will be

accepted by the State for a period of thirty days. If a State follows

such a procedure, the State should respond to requests for copies of

the proposal within seven days. The State should maintain a record of

all comments received through this process.

All HHS commitments with respect to times for responding to

demonstration proposals shall be tolled until this process is

completed.

VIII. Federal Notice

The Department of Health and Human Services intends to publish a

monthly notice in the Federal Register of all new and pending proposals

submitted pursuant to section 1115. The notice will indicate that the

Department accepts written comments regarding all demonstration project

proposals.

The Department will maintain a list of organizations that have

requested notice that a demonstration proposal has been received and

will notify such organizations when a proposal is received.

IX. Comments

The Department will not approve or disapprove a proposal for at

least 30 days after the proposal has been received, in order to receive

and consider comments. The Department will attempt, if feasible, to

acknowledge receipt of all comments, but the Department will not

provide written responses to comments.

X. Findings

The Department will prepare a decision memorandum at the time a

demonstration proposal is granted or denied, discussing why the

Department granted or denied the proposal and how an approved

demonstration meets the criteria established by statute.

XI. Administrative Record

The Department will maintain an administrative record which will

generally consist of: the formal demonstration application from the

State; issue papers sent to the State and State responses; public and

Congressional comments sent to the Department and any Department

responses; the Department's decision memorandum regarding the granting

or denial of a proposal; and the final terms and conditions, and

waivers, sent to the State and the State acceptance of them.

XII. Sub-state Demonstrations

When a demonstration is to be implemented in only part of a State,

the State will be required to provide information on the likely

demographic composition of populations subject to and not subject to

the demonstration in the State. When relevant, the Department will

require that the evaluation component of a project address the impact

of the project on particular subgroups of the population.

XIII. Implementation Reviews

As part of the terms and conditions of any demonstration proposal

that is granted, the Department may require periodic evaluations of how

the project is being implemented. The Department will review, and when

appropriate investigate, documented complaints that a State is failing

to comply with requirements specified in the terms and conditions and

implementing waivers of any approved demonstration.

XIV. Legal Effect

This notice is intended to inform the public and the States

regarding procedures the Department ordinarily will follow in

exercising the Secretary's discretionary authority with respect to

State demonstration proposals under section 1115. This notice does not

create any right or benefit, substantive or procedural, enforceable at

law or equity, by any person or entity, against the United States, its

agencies or instrumentalities, the States, or any other person.

(Catalog of Federal Domestic Assistance Program, No. 93.779; Health

Financing Research, Demonstrations and Experiments.)

Dated: September 16, 1994.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: September 16, 1994.

Mary Jo Bane,

Assistant Secretary for Children and Families.

Dated: September 19, 1994.

Donna E. Shalala,

Secretary.

[FR Doc. 94-23960 Filed 9-26-94; 8:45 am]

BILLING CODE 4120-01-P