New York State and Federal Government Reach Deal on MRT Waiver

February 18, 2014 | Health Services

After months of negotiation, Governor Andrew Cuomo announced on February 13th that New York State has reached an agreement in principle for the Medicaid redesign waiver the Cuomo administration had long-sought. The waiver will allow the state to reinvest $8 billion of federal savings generated by the State back into programs designed to improve health care in New York.

Negotiations between Governor Cuomo and the Federal government have been ongoing since 2012, when the Governor requested $10 billion to reinvest in New York State healthcare. The Medicaid “1115 waiver” is a requirement to gain federal approval to re-invest savings that have been generated for federal health care programs through state Medicaid services back into those services to create additional savings. For New York, savings were generated through the MRT, which created a blueprint to reduce Medicaid spending in New Work by $2.2 billion in the 2011-12 fiscal year. The Medicaid Redesign Team (“MRT”) required the waiver be approved in order to reinvest that savings over the next five years to implement additional potentially cost-saving programs.

Talks reached a head earlier this year when Governor Cuomo called on Secretary Kathleen Sebelius, head of the Department of Health and Human Services (“HHS”) and the individual who is ultimately responsible for approving the waiver, to approve the waiver in his State of the State speech. HHS responded to Governor Cuomo’s critical remarks with a letter signed by Secretary Sebelius, in which she included along with her signature comments that a deal might be close at hand. Secretary Sebelius followed up the letter with a phone call on February 13th to inform Governor Cuomo that the Federal government was prepared to approve the negotiated deal pending approval by both sides.

The main sticking point of the negotiations appeared to be the Cuomo administration’s desire to use some of the waiver money to help struggling hospitals, especially in Brooklyn. HHS had insisted that the money be re-invested in Medicaid programs, and not used for capital for struggling hospitals. While the details of the agreement have not been publically released as of yet, the Governor’s office issued a press release stating, in part, that the waiver “is clearly the biggest step forward towards a positive conclusion in our communities, particularly in Brooklyn, that have suffered from diminishing health care services.” The Governor’s aides have said that the waiver money will help struggling hospitals change and survive. These statements strongly indicate that an agreement has been reached to use at least some of the waiver to address the capital needs of struggling hospitals in New York.

The Governor’s recently-released budget provides for $1.2 billion in health care capital costs, perhaps giving an indication of how some of the waiver will be used to assist hospitals. Recent statements from the Governor’s office and indications before the waiver’s approval had indicated that the capital support to struggling hospitals would be used to transform the hospitals into urgent and primary care centers, in part to alleviate the strain of the rapidly rising number of New York residents with health insurance.

While capital costs may have been the most significant negotiating point for the waiver, it is not the only issue the waiver is designed to address. Money from the waiver will go to a host of MRT initiatives, including the incorporation of mental and behavioral health into Medicaid managed care, incorporating quality standards and care management into all Medicaid services, and implementing other cost-saving quality-based concepts proposed by the MRT.

The details of the waiver have yet to be publically released, and it is still pending final approval by both New York and the federal government. Alerts will follow with additional information on the waiver as it becomes available. If you have any questions or concerns about the impact of the waiver, please contact the authors.        

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