DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
7500 Security Boulevard, Mail Stop S2-26-12
Baltimore, Maryland  21244-1850

CtN1£RS FOR MlOIC\Rt & MlOIC\10 StRVICES
UNTER FOR MEDIC41D & CHIP SERVICES

Daniel Tsai
Assistant Secretary for MassHealth
Executive Office of Health and Human Services
One Ashburton Place, Room 1109
Boston , MA 02 108

MAY 2 3 2019

Dear Mr. Tsai:

Under section 1115 of the Social Security Act (the Act), the Secretary of Health and Human
Services (1-IHS) may approve any experimental, pilot, or demonstration project that, in the
jud gment of the Secretary, is likely to assist in promoting the obj ectives of certain Act programs including Medicaid.  Congress enacted section 1115 of the Act to ensure that federal  requirements did not "stand in the way of experimental projects designed to test out new ideas  and ways of dealing with the problems ofpublic welfare recipients." S. Rep. No. 87-15&9, at 19 (1962), as reprinted in 1962 U.S.C.C.A.N. 1943, 196 1. As relevant here, section 1115 of the Act allows the Secretary to waive compliance with the Medicaid program requirements of section 1902 of the Act, to the extent and for the period he finds necessary to carry out the demonstration project.  In addition, section 1115 of the Act allows the Secretary to pr ovide federal financial participation for demonstration costs that would not otherwise be considered as federally matchable expenditures und er section 1903 of the Act, to the extent and for the period prescribed by the Secretary.

For the reasons discussed below, the Centers for Medicare & Medicaid Services (CMS) is approving an amendment to Massachusetts' (Commonwea lth's) section 1115(a) Medicaid demonstration, entitled "MassHealth" (Project Number 11-W-00030/1), in accordance with section 1115(a) of the Act.  This amendment is effective from May 23, 2019, through June 30, 2022.

CMS's approval of this section 1115(a) demonstration is subject to the limitations specified in the attached waivers, expend iture authorities, Special Terms and Conditions (STCs), and any supplemental attachments defining the nature, character, and extent of federal involvement in
this projec t.  The state may deviate from the Medicaid state plan requirements only to the extent those requirements have been listed as waived or as not applicable to expenditures or individual s covered by expenditure authority.

Objectives of the Medicaid Program

As noted above, the Secretary may approve a demonstration project under section 1115 of the Act if, in his judgment , the project is likely to assist in promoting the objectives of title XIX.

The purposes of Medicaid include an authorization of appropriation of funds to "enabl[e] each State, as far as practicable under the conditions in such State, to furnish (I) medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care."  Act §1901. This provision makes clear that an important objective of the Medicaid program is to furnish medical assistance and other services to vulnerable populations.  But there is little intrinsic value in paying for services if those services are not advancing the health and wellness of the individual receiving them, or otherwise helping the individual attain independence.  Therefore, we believe an objective of the Medicaid program, in addition to furnishing services, is to advance the health and wellness needs of its beneficiaries, and that it is appropriate for the state to structure its demonstration project in a manner that prioritizes meeting those needs.

Section 1115 demonstration projects present an opportunity for states to experiment with reforms that go beyond just routine medical care and focus on interventions that drive better health outcomes and quality of life improvements, and that may increase beneficiaries' financial independence.  Such policies may include those designed to address certain health determinants and those that encourage beneficiaries to engage in health-promoting behaviors and to strengthen engagement by beneficiaries in their personal health care plans.  These tests will necessarily
mean a change to the status quo.  They may have associated administrative costs, particularly at
the initial stage, and section 1115 acknowledges that demonstrations may "result in an impact on eligibility, enrollment, benefits, cost-sharing, or financing" Act §1115(d)(l).  But in the long term they may create incentives and opportunities that help enable many beneficiaries to enjoy the numerous personal benefits that come with improved health and financial independence.

Section 1115 demonstration projects also provide an opportunity for states to test policies that ensure the fiscal sustainability of the Medicaid program, better "enabling each [s]tate, as far as practicable under the conditions in such [s]tate" to furnish medical assistance, Act §1901, while making it more practicable for states to furnish medical assistance to a broader range of persons  in need.  For instance, measures designed to improve health and wellness may reduce the volume of services consumed, as healthier, more engaged beneficiaries tend to consume fewer medical services and are generally less costly to cover.  Further, measures that have the effect of helping individuals secure employer-sponsored or other commercial coverage or otherwise transition from Medicaid eligibility may decrease the number of individuals who need financial assistance, including medical assistance, from the state.  Such measures may enable states to stretch their resources further and enhance their ability to provide medical assistance to a broader range of persons in need, including by expanding the services and populations they cover.'  By the same

1	States have considerable flexibility in the design of their Medicaid programs, within federal guidelines.  Certain benefits are mandatory under federal law, but many benefits may be provided at state option, such as prescription drug benefits, vision benefits, and dental benefits.  Similarly, states have considerable latitude to determine whom their Medicaid programs will cover.  Certain eligibility groups must be covered under a state's program, but many states opt to cover additional eligibility groups that are optional under the Medicaid statute.  The optional groups include a new, non-elderly adult population (ACA expansion population) that was added to the Act at section 1902(a)(10)(A)(i)(VIII) by the Patient Protection and Affordable Care Act (ACA).  Coverage of the ACA expansion population became optional as a result of the Supreme Court's decision in NFIB v. Sebe/ius, 567 U.S. 519 (2012).
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token, such measures may also preserve states' ability to continue to provide the optional services and coverage they already have in place.

Our demonstration authority under section 1115 of the Act allows us to offer states more flexibility to experiment with different ways of improving health outcomes and strengthening the financial independence of beneficiaries.  Demonstration projects that seek to improve beneficiary health and financial independence improve the well-being of Medicaid beneficiaries and, at the same time, allow states to maintain the long-term fiscal sustainability of their Medicaid programs and to provide more medical services to more Medicaid beneficiaries.  Accordingly, such demonstration projects advance the objectives of the Medicaid program.

Extent and Scope ofthe Demonstration Amendment

In June 2018, CMS approved an amendment to the demonstration that included an expenditure authority to extend eligibility for MassHealth Standard, MassHealth CommonHealth, MassHealth CarePius, MassHealth Family Assistance, and MassHealth Limited benefits for certain individuals who would be eligible for such benefits but for the receipt of a state veteran annuity or the inclusion of such annuity in the household income.

In this amendment, CMS is approving the Commonwealth's request to treat the state veteran annuity as non-countable income in making calculations related to the post-eligibility treatment of income (PETI) rules and calculations related to cost-sharing.

Elements of Amendment Request CMS is Not Approving

CMS is not approving any other requests in this amendment approval.  For a more detailed discussion of other requests included in the Commonwealth's amendment application, please see the June 27,2018 MassHealth amendment approval letter.

Determination that the demonstration project is likely to assist in promoting Medicaid's objectives

In its consideration of the Commonwealth's proposed demonstration amendment, CMS examined whether the demonstration was likely to assist in improving health outcomes, addressing health determinants that influence health outcomes, incentivizing beneficiaries to engage in their own health care and achieve better health outcomes, and better enabling Massachusetts, "as far as practicable under the conditions in" the Commonwealth, to furnish medical assistance, per section 1901 of the Act.  CMS has determined the demonstration is likely to promote Medicaid objectives, and the waiver and expenditure authorities sought are necessary and appropriate to carry out the demonstration.

Accordingly, several months after the NFIB decision was issued, CMS informed the states that they "have flexibility to start or stop the expansion." CMS, Frequently Asked Questions on Exchanges, Market Reforms, and Medicaid at II (Dec. 10, 2012).  In addition to expanding Medicaid coverage by covering optional eligibility groups and benefits beyond what the Medicaid statute requires, many states also choose to cover benefits beyond what is authorized by statute by using expenditure authority under section 1115(a)(2) of the Act.  For example, recently, many states have been relying on this authority to expand the scope of services they offer to address substance use disorders beyond what the statute explicitly authorizes.

Approval of this amendment would prevent recipients of the state veteran annuity income and those in their households from bearing additional cost-sharing and applying the amount ofthe state annuity income towards the cost of their care under the PETI rules because of the state veteran annuity.  Thus, this amendment would help beneficiaries maintain access to services and thus is likely to assist in improving health outcomes.

Consideration of Public Comments

To increase the transparency of demonstration projects, section 1115(d)(!) and (2) of the Act direct the Secretary to issue regulations providing for two periods of public comment on a state's application for a section 1115 project that would result in an impact on eligibility, enrollment, benefits, cost-sharing, or financing. The first comment period occurs at the state level before submission of the section 1115 application and the second occurs at the federal level after the application is received by the Secretary.

Section 1115(d)(2)(A) and (C) of the Act further specify that comment periods should be "sufficient to ensure a meaningful level of public input," but the statute imposes no additional requirement on the states or the Secretary to address those comments, as might otherwise be required under a general rulemaking. Accordingly, the implementing regulations issued in 2012 provide that CMS will review and consider all comments received by the deadline, but will not provide written responses to public comments.2

CMS and Massachusetts did not receive any public comments during their respective comment periods regarding the Commonwealth's request to treat the state veteran annuity as non­ countable income in making calculations related to the post-eligibility treatment of income (PETI) rules and calculations related to cost-sharing.

Other Information

CMS' approval of this demonstration is conditioned upon compliance with the enclosed list of waiver and expenditure authorities and the STCs defining the nature, character and extent of anticipated federal involvement in the project.  The award is subject to our receiving your written acknowledgement of the award and acceptance of these STCs within 30 days of the date of this letter. Your project officer for this demonstration is Mr. Eli Greenfield.  He is available to answer any questions concerning your demonstration project.  Mr. Greenfield's contact information is as follows:

Centers for Medicare & Medicaid Services Center for Medicaid & CHIP Services
Mail Stop: S2-25-26
7500 Security Boulevard
Baltimore, MD  21244-1850

2	42 CFR § 431.416(d)(2); see also Medicaid Program; Review and Approval Process for Section 1115 Demonstrations; Application, Review, and Reporting Process for Waivers for State Innovation; Final Rules, 77 Fed. Reg.  11678, 11685 (Feb. 27, 2012) (final rule).
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Telephone: (410) 786-6157
E-mail: Eli.Greenfield@cms.hhs.gov

Official communications regarding this demonstration should be sent simultaneously to Mr. Greenfield and Mr. Francis McCullough, Director, in our Division of Medicaid Field Operations East Office.  Mr. McCullough's contact information is as follows:

Centers for Medicare & Medicaid Services JFK Federal Building
Room 2325
Boston, MA  02203
E-mail: Francis.Mccullough@cms.hhs.gov

If you have any questions regarding this approval, please contact Mrs. Judith Cash, Director, State Demonstrations Group, Center for Medicaid & CHIP Services at (410) 786-9686.

Sincerely,

Chris Traylor
Deputy Administrator and Director Enclosures
cc: Francis McCullough, Director, Division of Medicaid Field Operations East Julie McCarthy, Division of Medicaid Field Operations East