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The evolving state of innovation: Are 1332 waivers leading the way?

The word “innovation” is commonly used these days in reference to consumer and technology trends, retail, business, and even health care. One place you may not immediately think of innovation is in reference to government – especially when it comes to legislation and policy.

However, our state governments have always been incubators of innovation. And, beginning in 2016, they have a new set of tools to develop new models in health care. A trailing, wildcard provision of the Affordable Care Act (ACA) is now beginning to get a great deal of attention: Section 1332 state innovation waivers. Originally envisioned as a way for states to achieve ACA coverage goals by pursuing alternative approaches that might better suit their specific state health care market needs, the waiver provision came about during congressional negotiations on the ACA.

As explained in a recent Deloitte report, State health coverage innovation and Section 1332 waivers, through the 1332 waiver program – perhaps in conjunction with Medicaid waivers under Section 1115 – states have numerous options for revamping their current approaches to providing health coverage to individuals and families.

2-25 my take

While the 1332 waiver is a new vehicle for innovation, states are also increasingly leveraging Section 1115 waivers and managed care programs to innovate Medicaid programs. Neither managed care nor the 1115 waiver are new tools for states. Thirty-nine states operate 1115 waivers, and about half of all Medicaid members receive coverage through managed care. What is new is that states are expanding how they use these tools to drive innovation and enhance transparency, quality and access, all while managing costs. For example, several states are using 1115 waivers to push provider-based quality incentive programs and revamping their managed care programs to measure and improve health outcomes, create new risk models and incentive programs, and effectively manage state expenditures.

Waiver programs not only give states the funding, policy innovation, and, in fact, impetus to reconsider their access and coverage equation, but they may also be looked at as a way for parties that traditionally disagree to compromise on fundamental aspects of the ACA. Newt Gingrich and Tom Daschle illuminated this argument in an op-ed published in The Washington Post recently, explaining that states could look to the 1332 waivers as a vehicle to reach a bipartisan agreement on key components of the ACA. Further, they explain that the waivers are flexible enough to accomplish goals of both sides, while continuing to expand coverage, decrease costs, and improve quality.1 And this is true – these waivers could allow states to emphasize the market characteristics that are unique to that state.

Many states are formulating plans and beginning discussions around what considerations they need to make to move forward with a waiver. However, this is complicated by the approaching presidential election. Beginning in 2017, an administration other than the Obama Administration will have stewardship over the ACA and its various provisions, including Section 1332 waivers. Despite this uncertainty, many states are embracing the opportunity and moving forward with a careful approach, monitoring regulations and guidance, and beginning discussions with their stakeholders.

For states that are interested in exploring a Section 1332 waiver, there is a lot of work to be done and many technological and operational factors to navigate. States that begin this process now will be better poised to take innovation into their own hands and take advantage of the opportunity that lies before them.

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Author bio

Mark, a vice chairman of Deloitte, leads our US Public Sector practice which provides consulting, advisory, audit, and tax services to government and higher education clients nationally. Mark has more than 25 years’ experience in the US, United Kingdom, Australia, and New Zealand across a range of complex and often high-profile strategy, business operations, digital transformation, and large-scale technology implementation projects.