New York Submits COVID-19 1115 Waiver Application

COVID-19 Update

On May 11, 2020, New York State submitted a COVID-19 1115 waiver application to the Centers for Medicare & Medicaid Services (CMS), leveraging the opportunity to respond to the COVID-19 public health emergency (PHE) as described in the March 22, 2020, State Medicaid Director letter and template application. The waiver request is designed to address the state’s immediate needs in addressing the COVID-19 crisis and help the state “deploy a statewide system of flexible hospital, ambulatory provider and member in-outreach capacity and fully mobilize this capacity now.” The state also intends this waiver to be a bridge to the future of the Medicaid Redesign Team (MRT) demonstration, transforming the role of the state’s Performing Provider Systems (PPSs) under its Delivery System Reform Incentive Payment (DSRIP) program to regional coordination hubs for the COVID-19 response, and seeks an extension of the current MRT demonstration for up to 12 months.

Under its COVID-19 1115 application, New York is seeking the ability to obtain federal Medicaid matching funds of up to $2.75 billion to be used for funding pools to address COVID-19, along with a number of other flexibilities to help it be more nimble in its COVID-19 response. If approved, the requests would be effective retroactive to March 1, 2020.

Which components of and on what timeline New York’s waiver request will be approved are significantly unclear. Many of New York’s waiver requests are more expansive than those that have been shared by CMS under its template application, and the projected cost of New York’s demonstration is more than twice that of the state with the next-highest cost. To date, CMS has not shown an appetite for approving more expansive requests. Current experience is limited, however; while over one-third of states have submitted applications for COVID-19 1115 demonstrations throughout the past two months, CMS has only approved one—Washington State’s waiver. Washington submitted its request on March 24 and received CMS approval on April 21. CMS only granted requests for Washington that were explicitly permitted under CMS’s template application and pended requests that were more expansive, such as for a Disaster Relief Fund, noting that “other federal resources may be available for these purposes, including under the recently approved Families First Coronavirus Relief Act and the Coronavirus Aid, Relief, and Economic Security Act.”

In addition, CMS has previously been reluctant to extend New York’s DSRIP program. In February 2020, CMS did not approve the state’s request to extend New York’s DSRIP for a year and expressed concerns about New York’s vision for the future of its 1115 demonstration based on budget neutrality concerns. In its new 1115 waiver application, New York is seeking to transition its DSRIP infrastructure toward new functions responding to COVID-19.

New York’s requests are described in detail below.

Funding Pools

New York’s waiver proposes three areas of investments designed to preserve essential safety net providers in response to developing immediate emergency response capacity. The $2.75 billion in proposed investments would flow through two funding pools: the Emergency Capacity Assurance Fund (ECAF) and the Regional Coordination and Emergency Deployment Fund (RCEDF).

Emergency Capacity Assurance Fund (ECAF): $1.85 billion

The ECAF would support two initiatives:

  • $1.2 billion for the Preserving the Safety Net program
  • $650 million for efforts surrounding rapid facility conversion in the state 

1. Preserving the Safety Net (PSN) ($1.2 billion)

The goal of the PSN initiative is to provide emergency capital funding to Medicaid providers affected by the PHE to protect against “degradation of access” to key healthcare services. Funding under the program would be made available through an application process to essential providers involved in or impacted by the emergency response to the COVID-19 PHE, including:

  • Primary care providers
  • Dental providers
  • Behavioral health home and community-based service providers
  • Ambulance and non-emergency medical transport providers
  • Article 36 licensed providers providing habilitation and home care services
  • Diagnostic and treatment centers
  • Hospitals
  • Nursing facilities
  • Article 16, 31 and 31 mental health or substance abuse treatment facilities

PSN funding would be time-limited, with authority expiring on the earlier of 60 days from the end of the PHE period or March 31, 2021. The state seeks flexibility from CMS to identify state and local financial commitments already made during the state’s COVID response that may qualify as a portion of its non-federal share. 

2. Rapid Facility Conversion (RFC) ($650 million)

RFC funds would be targeted toward building facility capacity to meet demand for treatment and quarantine. Funds would be used for identifying and conducting essential preparation for healthcare facilities, in addition to facilities that may be convertible in emergencies, such as hotels or convention centers.

Regional Coordination and Emergency Deployment Fund (RCEDF): $900 million1

The RCEDF seeks to enable the state’s 25 existing PPSs under the state’s DSRIP program to serve as regional coordination hubs for COVID-19 and future public health emergency responses. The state envisions that PPSs will “coordinate efforts across a continuum of care with existing PPS providers and community-based organizations (CBOs) leveraging existing contractual relationships and infrastructure to fill gaps in care needed to support emergency response, as well as service COVID-19 patients discharged into the community through new service delivery channels.” RCEDF funds would be distributed across four domains:

  • Regional coordination. Under this domain, funding would support administrative activities required for PPSs to serve in their new role as regional coordination hubs, such as paying for the development of clinical guidelines and workflows for coordination across the PPS network and monitoring service capacity across the network.
  • Deployment of telehealth and other technologies. Funding would assist PPSs and their network partners in building infrastructure for telehealth and other technology, including care management platforms, closed-looped referral systems for social services, and telework technologies for CBO employees.
  • Scaling promising practices that enhance care coordination, management and transitions. The RCEDF would provide support for “promising practices” that have been identified during DSRIP, focusing on those related to care coordination, management and transitions. The state aims for this funding to help beneficiaries with complex needs stay out of the hospital during the COVID-19 crisis.
  • Workforce redeployment and training. This funding would assist in paying for workforce redeployment and training necessitated for healthcare workers to serve in new capacities necessitated by COVID-19, such as those related to testing, vaccination or monitoring beneficiaries who return home after hospitalization for COVID-19.

To apply for RCEDF funds, each PPS would be required to submit a regional coordination plan to the state, outlining its planned activities and projected costs across the four priority domains. Fifty percent of approved awards would be made available to PPSs upon approval of their regional coordination plans, with the balance being made available as they achieve progress milestones.

As noted previously, CMS pended Washington State’s requests for additional funding, citing the need to evaluate funding from the federal stimulus packages that may be used to fulfill the state’s requests. We would expect similar considerations to be applied to New York’s requests.

MRT Waiver Extension

New York is requesting to extend its current 1115 waiver demonstration—the MRT waiver that authorizes mainstream managed care, managed long-term care, Health and Recovery Plans (HARPs), and facilitated enrollment among other foundational New York Medicaid program features—for a period of up to 12 months. This means the current 1115 demonstration would expire on March 31, 2022, at the latest, instead of March 31, 2021. By extending its demonstration, New York would be able to shift planning for its next waiver period until after the immediate COVID-19 crisis has receded. In addition, CMS budget neutrality guidance has changed since New York’s prior waiver renewal, and states now may only carry over savings from their last waiver period. By extending its waiver, New York would be able to shift its current spending baseline for budget neutrality purposes to a year later.

New York is part of a cohort of at least six other states with major 1115 waiver demonstrations set to expire in the next 18 months and the first to formally request an extension through the PHE 1115 demonstration opportunity. The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800), which has passed the House but not the Senate, also includes a provision that would extend 1115 waiver demonstrations expiring before February 28, 2021, to December 31, 2021, indicative that this issue is on the radar of federal policymakers and other stakeholders. CMS is likely weighing any determinations in this broader policy context.

Other Requests for Flexibility

New York is requesting additional flexibility to enable providers, managed care plans and CBOs to respond effectively during the crisis. These requests include:

  • Authority to suspend contract and program standards. Recognizing the difficulties in delivering services under the current emergency conditions, the state is requesting the authority to modify or suspend contract standards, program standards, cost sharing and reimbursement methodologies for State Plan services, 1915(c) waiver services and demonstration services without adhering to typical federal regulatory requirements for State Plan Amendment submission and approval processes and public notice. The waiver application does not provide additional specifics on the changes the state is looking to make, nor has CMS approved any such request to date.
  • Flexibility to create temporary hospital facilities. New York is seeking the ability to continue establishing temporary facilities to address capacity needs associated with the COVID-19 emergency and to claim federal Medicaid matching funds for inpatient and outpatient emergency department services delivered in these facilities. 
  • Waiver of the institutions for mental disease (IMD) exclusion.2 New York is requesting to waive the IMD exclusion to permit it to (1) claim Medicaid reimbursement for services provided to beneficiaries obtaining treatment in facilities that are temporarily IMDs during the PHE (e.g., because they increased their beds or are operating at an alternative setting); and (2) extend Medicaid reimbursement to existing IMDs during the PHE.
  • Waivers to enable the state to vary and target services based on population needs. New York is seeking broad waivers of Medicaid requirements for statewideness and amount, duration, and scope as permitted under CMS’s COVID-19 1115 template.
  • Waivers to permit flexibility in eligibility, delivery and payment for long-term services and supports (LTSS). New York is pursuing most of the LTSS-related flexibilities permitted by CMS in the COVID-19 1115 template, including those to allow for self-attestation or alternative verification of eligibility and/or level of care to qualify for LTSS status; to pay higher rates to home and community-based service providers; and to make retainer payments to habilitation and personal care providers.

Several of these requests are also broad and depart from CMS’s template application, raising questions about whether CMS is likely to approve them.

What’s Next

New York will be in discussion and negotiation with CMS on its waiver and other Medicaid disaster authorities it is seeking. CMS has at least 16 COVID-19 1115 waivers currently under review and will be weighing New York’s requests in the context of other states’ requests and other available federal resources and policy actions. 

1 New York estimated that approximately $625 million of approved federal funding had not been spent at the end of its DSRIP approval period (March 31, 2020). It is unclear whether New York intends to finance this fund using these dollars.

2 The IMD exclusion prohibits the use of federal Medicaid funds to pay for treatment delivered to individuals ages 21 through 64 residing in qualifying institutions with more than 16 beds.



pursuant to New York DR 2-101(f)

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