B-309734, Medicaid Demonstration Projects in Florida and Vermont Approved Under Section 1115 of the Social Security Act, July 24, 2007

B-309734 Jul 24, 2007 Jump To VIEW DECISION DOWNLOADS RELATED PAGES GAO CONTACTS Highlights In response to a congressional request, we are evaluating Medicaid demonstration projects in Florida and Vermont approved by the Department of Health and Human Services (HHS) under section 1115 of the Social Security Act (the act). During the course of our work, we identified several issues that raise concerns about the consistency of these demonstration projects with federal law. With respect to Florida, our concerns center on HHS's decision to waive requirements to provide covered benefits and limit cost sharing without addressing statutory limitations on its authority to do so. In the case of Vermont, HHS authorized the state to operate its own Medicaid managed care organization and, through this arrangement, to apply federal Medicaid matching funds to programs previously funded by the state. Given our concerns with these demonstration projects, discussed in detail below, we are bringing them to Congress's attention. We recommend that Congress reexamine these projects in light of our concerns and, where appropriate, either modify the terms of these projects or seek statutory authorization for them to continue in their current form. View Decision B-309734, Medicaid Demonstration Projects in Florida and Vermont Approved Under Section 1115 of the Social Security Act, July 24, 2007 B-309734 July 24, 2007 The Honorable Michael O. Leavitt Secretary of Health and Human Services Subject: Medicaid Demonstration Projects in Florida and Vermont Approved Under Section 1115 of the Social Security Act Dear Mr. Secretary: In response to a congressional request, we are evaluating Medicaid demonstration projects in Florida and Vermont approved by the Department of Health and Human Services (HHS) under section 1115 of the Social Security Act (the act).[1] During the course of our work, we identified several issues that raise concerns about the consistency of these demonstration projects with federal law.[2] With respect to Florida, our concerns center on HHS's decision to waive requirements to provide covered benefits and limit cost sharing without addressing statutory limitations on its authority to do so. In the case of Vermont, HHS authorized the state to operate its own Medicaid managed care organization and, through this arrangement, to apply federal Medicaid matching funds to programs previously funded by the state. Given our concerns with these demonstration projects, discussed in detail below, we are bringing them to your attention. We recommend that you reexamine these projects in light of our concerns and, where appropriate, either modify the terms of these projects or seek statutory authorization for them to continue in their current form. BACKGROUND Through the Medicaid program established by title XIX of the act, the federal government shares with states the expense of furnishing medical services to certain low-income individuals. States operate their Medicaid programs under HHS approved plans and must meet certain statutory requirements for covered services, eligibility, and beneficiary cost sharing, among other things.[3] Section 1115 of the act, however, authorizes HHS to waive compliance with certain federal statutory requirements, as well as to authorize costs that would not otherwise be included as Medicaid expenditures, –[i]n the case of any experimental, pilot, or demonstration project which, in the judgment of the Secretary, is likely to assist in promoting the objectives of [the Medicaid program].— [4] By its own terms, section 1115 provides HHS with broad discretion to approve state initiatives that depart from federal statutory requirements, subject to a determination that they are experimental in nature and likely to assist in promoting program objectives. Describing these limitations, one court emphasized that section 1115 was not enacted –to enable states to save money or to evade federal requirements, but to 'test out new ideas and ways of dealing with the problems'— programs were designed to address.[5] In October 2005, HHS approved Florida's 5-year demonstration project, Florida Medicaid Reform, to allow the state to give Medicaid beneficiaries more options with respect to their health care coverage.[6] Florida requires certain Medicaid beneficiaries to participate in the demonstration and enroll in designated managed care plans offered by organizations that compete for enrollees by designing customized benefit packages that may differ from the set of benefits covered under Florida's state plan.