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July 2, 2012

Medicaid Redesign Waiver

This Legal Alert describes New York State's plan to request a Medicaid waiver from the federal government. New York anticipates that it will save significant Medicaid dollars due to implementation of its Medicaid Redesign Team (MRT) programs; it proposes to use some of those dollars for reinvestment in other health care reform initiatives.

Ordinarily, savings generated by a State's Medicaid program are shared proportionally by the governmental sources that provide Medicaid funding: federal, state and (in New York) local. However, under an approved federal 1115 Medicaid waiver (named for the section of the Social Security Act that authorizes such waivers), a state may engage in activities that are not ordinarily reimbursable under Medicaid as long as the activities are generally seen to be consistent with the overall goals of the Medicaid program and are, at worst, cost neutral to the federal government.

New York believes that its MRT initiatives (such as the Medicaid Global Spending Cap, the phase-out of traditional fee-for-service Medicaid, and the heightened investment in Health Homes and Patient Centered Medical Homes) will save the federal government as much as $18.3 billion in the next five years. It proposes to use as much as $10 billion of those federal savings for investment in various health care reform programs, including:

Primary Care Expansion – In anticipation of as many as one million newly insured New Yorkers as a result of implementation of the Affordable Care Act, funds will be used to provide capital funding to allow health care providers to expand and modernize primary care facilities.

Health Home Development – 1115 savings will be used to assist health homes in attaining long-term sustainability, including help with capital costs, health information technology, and recruitment and training of effective care managers.

New Care Models – In addition to health homes, other models such as Accountable Care Organizations, telehealth initiatives and hospital/nursing home partnerships will receive investments.

Public Hospital Care for the Uninsured – Although the number of uninsureds should decrease dramatically under federal health care reform, some uninsured will remain. The State plans to develop a "pre-emergency" primary care model for those uninsured patients who suffer from chronic conditions that, if left untreated, will likely result in emergency hospital treatment.

Medicaid Supportive Housing – Persons without access to adequate housing are more likely to end up in an institutional health care setting as their health deteriorates. Housing costs are not usually eligible for Medicaid funding. Under the 1115 waiver, New York proposes to improve long term health care and reduce institutional care costs by funding supportive housing, particularly in conjunction with health home care management.

Hospital Investments – New York proposes to invest some of its health care savings in safety net hospital capital cost stabilization and in transitioning some inpatient beds to outpatient care models.

Workforce Training – As more people obtain health insurance, additional professional personnel are going to be needed to provide health care, especially primary health care, long term care and care coordination. Funds will be used to invest in teaching facilities and in programs such as Doctors Across New York, which aims to increase health care service availability in medically underserved areas.

The New York State Department of Health has already held a series of public forums to get stakeholder input into the waiver development process. However, it is encouraging all interested parties to stay updated on the process and to provide it with ideas as to which projects are most deserving of 1115 savings reinvestments. It has created a Medicaid Redesign Team LISTSERV as one way to stay engaged. Interested parties can sign up for the LISTSERV, and access additional waiver materials at:

Hiscock & Barclay, LLP has significant experience in health care delivery and payment design and Medicaid policies. Please contact Gregor Macmillan at (518) 429-4234 or, or Melissa M. Zambri at (518) 429-4229 or, Chair of the Firm's Health Care & Human Services Practice Area, to discuss the impact of these regulations and required compliance.


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