Manatt Health Analyzes HAO Initiative

State Health and Value Strategies (SHVS), a program supported by the Robert Wood Johnson Foundation, has released an issue brief developed by Manatt Health examining the Healthy Adult Opportunity (HAO) guidance, reviewing the key features, and highlighting considerations for states.

The brief provides Manatt Health’s analysis of the key features of the capped funding demonstrations, including populations and services that may be covered, details about the financing models, and effect on eligibility and enrollment. The brief also examines how the HAO initiative will impact premiums and cost-sharing, and how differences in the delivery system (e.g., managed care) might impact state decision making. The brief also includes a section detailing CMS’ planned oversight strategy for HAO demonstrations.  

 The brief lists several “Key Considerations for States: 

  • Loss of Federal Funds. Manatt describes the shift of financial risk to the states as particularly great under the model described in the HAO guidance, “given that the caps are designed to constrain the growth in Medicaid spending.”
  • Limited New Flexibilities. The brief lists various forms of program flexibility that states may request, some of which have not previously been approved, including access to “shared savings,” some of which may be spent on services outside of Medicaid; eliminating hospital presumptive eligibility; implementing a closed prescription drug formulary for populations beyond the ACA expansion group; proposing alternative approaches to complying with federal standards for access and managed care oversight; and modifying certain program elements during the demonstration without the need for federal approval.
  • Risks for Medicaid Beneficiaries and Other Stakeholders. Manatt warns that “States that experiment with altering Medicaid program standards may end up reducing beneficiaries’ access to care, constricting provider reimbursement to unsustainable levels, or squeezing managed care capitation rates to an extent that makes it unfeasible for plans to meet their obligations.”
  • Quality and Monitoring Obligations. The brief points out that a capped funding demonstration “comes with monitoring and reporting obligations that go beyond the typical 1115 demonstration requirements.”
  • Administrative Challenges. According to Manatt, “a capped funding demonstration that departs substantially from the state’s existing Medicaid coverage model will mean that the state is essentially running a new, separate program alongside existing coverage for other populations (such as children and disabled or elderly adults).”
  • Litigation Risk. Manatt warns that states can “expect legal challenges to any approved demonstration that includes capped federal funding.”

FMI: The brief is available at