Page 10

Page 10

especially as CMS anticipates that they might result in overall reductions in future Medicaid program costs, based on robust academic-level research, but predicting these downstream effects on overall Medicaid program costs is extremely difficult. To ensure that treating HRSN expenditures as hypothetical does not have a significant negative fiscal impact on Medicaid, CMS is applying a budget neutrality ceiling to HRSN services expenditures and an additional sub-ceiling to HRSN infrastructure expenditures, and is referring to these expenditures collectively as the “Supplemental HRSN Aggregate Ceiling (SHAC)” expenditures in the STCs. The SHAC differs from the usual limit CMS places on hypothetical expenditures (the “supplemental test” discussed above) in several respects. The expenditures subject to the SHAC are narrowly defined to reflect only expenditures associated with services that research indicates are likely to have certain positive downstream effects. The upper limit on the SHAC is based on a range of estimates of the likely cost of these expenditures over a 5-year period, and is set at a mid-point in that range, but in no case can it exceed 3 percent of the state’s total computable Medicaid spending. The sub-ceiling for infrastructure costs cannot exceed 15 percent of total HRSN expenditure authority. And, if the state exceeds these limits, it will not be permitted to offset the additional costs with savings from the rest of the demonstration. However, unspent HRSN infrastructure authority can be applied to HRSN services in the same demonstration year.

Midcourse Correction

CMS has also updated its approach to mid-course corrections to budget neutrality calculations in this demonstration approval to provide flexibility and stability for the state over the life of a demonstration. This update identifies, in the STCs, a list of circumstances under which a state’s baseline may be adjusted based on actual expenditure data to accommodate circumstances that are either out of the state’s control (for example, if expensive new drugs that the state is required to cover enter the market); and/or the effect is not a condition or consequence of the demonstration (for example, unexpected costs due to a public health emergency); and/or the new expenditure (while not a new demonstration-covered service or population that would require the state to propose an amendment to the demonstration) is likely to further strengthen access to care (for example, a legislated increase in provider rates). CMS also explains in the STCs what data and other information the state should submit to support a potentially approvable request for an adjustment. CMS considers this a more rational, transparent, and standardized approach to permitting budget neutrality modifications during the course of a demonstration.

Monitoring and Evaluation

Consistent with CMS’s requirements for section 1115 demonstrations, and as provided in the demonstration’s STCs, the state is required to conduct systematic monitoring and robust evaluation of the demonstration, per applicable CMS guidance and technical assistance. The state must develop a Monitoring Protocol to incorporate how it will monitor the demonstration components, including relevant metrics data as well as narrative details describing progress with implementing the demonstration. In addition, the state is required to conduct an independent Mid-Point Assessment of the reentry demonstration initiative, as provided in the STCs, to support identifying risks and vulnerabilities and subsequent mitigation strategies.