[Federal Register Volume 59, Number 186 (Tuesday, September 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23960]

[[Page Unknown]]

[Federal Register: September 27, 1994]


Office of the Secretary
Health Care Financing Administration
Administration for Children and Families


Medicaid Program; Demonstration Proposals Pursuant to Section 
1115(a) of the Social Security Act; Policies and Procedures

AGENCIES: Office of the Secretary, Health Care Financing Administration 
(HCFA), and Administration for Children and Families (ACF), HHS.

ACTION: Public Notice.


SUMMARY: This public notice informs interested parties of (1) the 
principles the Department of Health and Human Services ordinarily will 
consider when deciding whether to exercise its discretion to approve or 
disapprove demonstration projects under the authority in Section 
1115(a) of the Social Security Act, 42 U.S.C. Sec. 1315(a); (2) the 
kinds of procedures the Department would expect States to employ in 
involving the public in the development of proposed demonstration 
projects under Section 1115; and (3) the procedures the Department 
ordinarily will follow in reviewing demonstration proposals. The 
principles and procedures described in this public notice are being 
provided for the information of interested parties, and are not legally 
binding on the Department of Health and Human Services. This notice 
does not create any right or benefit, substantive or procedural, 
enforceable at law or equity, by any person or entity, against the 
United States, its agencies or instrumentalities, the States, or any 
other person.

FOR FURTHER INFORMATION CONTACT: Howard Rolston, Administration for 
Children and Families, Department of Health and Human Services, at 
(202) 401-9220.
    Thomas Kickham, Health Care Financing Administration, Department of 
Health and Human Services, at (410) 966-6503.


I. Introduction

Demonstration Proposals Pursuant to Section 1115 of the Social Security 
Act--General Policies and Procedures

    Under Section 1115, the Department of Health and Human Services is 
given latitude, subject to the requirements of the Social Security Act, 
to consider and approve research and demonstration proposals with a 
broad range of policy objectives. The Department desires to facilitate 
the testing of new policy approaches to social problems. Such 
demonstrations can provide valuable knowledge that will help lead to 
improvements in achieving the purposes of the Act. The Department also 
is committed to both a thorough and an expeditious review of State 
requests to conduct such demonstrations.
    In exercising her discretionary authority, the Secretary has 
developed a number of policies and procedures for reviewing proposals. 
In order to ensure a sound, expeditious and open decision-making 
process, the Department will be guided by the policies and procedures 
described in this statement in accepting and reviewing proposals 
submitted pursuant to section 1115.

II. General Considerations

    To facilitate the testing of new policy approaches to social 
problems the Department will--
     Work with States to develop research and demonstrations in 
areas consistent with the Department's policy goals;
     Consider proposals that test alternatives that diverge 
from that policy direction; and
     Consider, as a criterion for approval, a State's ability 
to implement the research or demonstration project.
    While the Department expects to review and accept a range of 
proposals, it may disapprove or limit proposals on policy grounds or 
because the proposal creates potential constitutional problems or 
violations of civil rights laws or equal protection requirements. The 
Department seeks proposals which preserve and enhance beneficiary 
access to quality services. Within this overall policy framework, the 
Department is prepared to--
     Grant waivers to test the same or related policy 
innovations in multiple States, (replication is a valid mechanism by 
which the effectiveness of policy changes can be assessed);
     Approve demonstration projects ranging in scale from 
reasonably small to state-wide or multi-state, and
     Consider joint Medicare-Medicaid demonstrations, such as 
those granted in the Program for All-Inclusive Care for the Elderly 
(PACE) and Social Health Maintenance Organization (SHMO) 
demonstrations, and Aid to Families with Dependent Children (AFDC)-
Medicaid waivers.

III. Duration

    The complex range of policy issues, design methodologies, and 
unanticipated events inherent in any research or demonstration makes it 
very difficult to establish a single Department policy on the duration 
of 1115 waivers. However, the Department is committed, through 
negotiations with State applicants, to--
     Approve waivers of at least sufficient duration to give 
new policy approaches a fair test. The duration of waiver approval 
should be congruent with the magnitude and complexity of the project 
(for example, large-scale statewide reform programs will typically 
require waivers of five years);
     Provide reasonable time for the preparation of meaningful 
evaluation results prior to the conclusion of the demonstration; and
     Recognize that new approaches often involve considerable 
start-up time and allowance for implementation delays.
    The Department is also committed, when successful demonstrations 
provide an appropriate basis, to working with State governments to seek 
permanent statutory changes incorporating those results. In such cases, 
consideration will be given to a reasonable extension of existing 

IV. Evaluation

    As with the duration of waivers, the complex range of policy 
issues, design methodologies, and unanticipated events also makes it 
very difficult to establish a single Department policy on evaluation. 
This Department is committed to a policy of meaningful evaluations 
using a broad range of appropriate evaluation strategies (including 
true experimental, quasi- experimental, and qualitative designs) and 
will be flexible and project-specific in the application of evaluation 
techniques. This policy will be most evident with health care waivers. 
Within-site randomized design is the preferred approach for most AFDC 
waivers. The Department will consider alternative evaluation designs 
when such designs are methodologically comparable. The Department is 
also eager to ensure that the evaluation process be as unintrusive as 
possible to the beneficiaries in terms of implementing and operating 
the policy approach to be demonstrated, while ensuring that critical 
lessons are learned from the demonstration.

V. Cost Neutrality

    The Department's fiduciary obligations in a period of extreme 
budgetary stringency require maintenance of the principle of cost 
neutrality, but the Department believes it should be possible to apply 
that principle flexibly.
     The Department will assess cost neutrality over the life 
of a demonstration project, not on a year-by-year basis, since many 
demonstrations involve making ``up-front'' investments in order to 
achieve out-year savings.
     The Department recognizes the difficulty of making 
appropriate baseline projections of Medicaid expenditures, and is open 
to development of a new methodology in that regard.
     In assessing budget neutrality, the Department will not 
rule out consideration of other cost neutral arrangements proposed by 
     States may be required to conform, within a reasonable 
period of time, relevant aspects of their demonstrations to the terms 
of national health care reform legislation, including global budgeting 
requirements, and to the terms of national welfare reform legislation.

VI. Timeliness and Administrative Complexity

    The Department is committed to minimizing the administrative burden 
on the States and to reducing the processing time for waiver requests. 
In order to accomplish this the Department has adopted a number of 
procedures, including--
     Expanding pre-application consultation with States;
     Setting, and sharing with applicants, a well-defined 
schedule for each application, with established target dates for 
processing and reaching a decision on the application;
     Maintaining, to the extent feasible, a policy of one 
consolidated request for further information;
     Sharing proposed terms and conditions with applicants 
before making final decisions;
     Establishing concurrent, rather than sequential, review of 
waivers by all relevant units of the Department and with other relevant 
Departments and the Office of Management and Budget;
     Expanding technical assistance activities to the States; 
     Developing multi-state waiver solicitations in areas of 
priority concern, including integrated long-term care system 
development, services for adolescents, and services in rural areas.
    The Department will continue to follow and develop procedures, and 
commit internal resources to reviewing demonstration proposals, 
necessary for a sound and expeditious review process.

VII. State Notice Procedures

    The Department recognizes that people who may be affected by a 
demonstration project have a legitimate interest in learning about 
proposed projects and having input into the decision-making process 
prior to the time a proposal is submitted to the Department. A process 
that facilitates public involvement and input promotes sound decision-
    There are many ways that States can provide for such input. In 
order to allow for public input into the proposals, the Department 
expects States to ordinarily follow one (or more if the State desires) 
of the processes described in this section.
    1. At any time prior to submitting a section 1115 demonstration 
proposal to the Department of Health and Human Services, a State may 
provide to the Department a written description of the process the 
State will use for receipt of public input into the proposal prior to 
its submission to the Department.
    Within 15 days of receipt of such description, the Department will 
notify the State whether the described process provides adequate 
opportunity for public input. The Department will accept any process 
     Includes the holding of one or more public hearings, at 
which the most recent working proposal is described and made available 
to the public, and time is provided during which comments can be 
received; or
     Uses a commission or other similar process, where meetings 
are open to members of the public, in the development of the proposal; 
     Results from enactment of a proposal by the State 
legislature prior to submission of the demonstration proposal, where 
the outline of such proposal is contained in the legislative enactment; 
     Provides for formal notice and comment in accordance with 
the State's administrative procedure act; provided that such notice 
must be given at least 30 days prior to submission; or
     Includes notice of the intent to submit a demonstration 
proposal in newspapers of general circulation, and provides a mechanism 
for receiving a copy of the working proposal and an opportunity, which 
shall not be less than 30 days, to comment on the proposal; or,
     Includes any other similar process for public input that 
would afford an interested party the opportunity to learn about the 
contents of the proposal, and to comment on its contents.
    The State shall include in the demonstration proposal it submits to 
the Department a statement (a narrative of several sentences) briefly 
describing the process that it followed in implementing the process 
previously presented to the Department. The Department may find a 
proposal incomplete if the process has not been followed.
    2. A State that has not followed the procedures described in 
paragraph 1. must submit a description of the process that was used in 
the State to obtain public input, at the time it submits its 
demonstration proposal. The Department will notify the State if the 
process was adequate within 15 days after the application is submitted, 
applying the same criteria as in paragraph 1. If the process was not 
adequate, the State can cure the inadequacy by--
    Posting a notice in the newspaper of widest circulation in each 
city with a population of 100,000 or more, or in the newspaper of 
widest circulation in the State if there is no city with a population 
of 100,000, indicating that a demonstration proposal has been 
submitted. Such notice shall describe the major elements of the 
proposed demonstration and any changes in benefits, payments, 
eligibility, responsibilities, or provider selection requested in the 
proposal. The notice shall indicate how interested persons can obtain 
copies of the proposal and shall specify that written comments will be 
accepted by the State for a period of thirty days. If a State follows 
such a procedure, the State should respond to requests for copies of 
the proposal within seven days. The State should maintain a record of 
all comments received through this process.
    All HHS commitments with respect to times for responding to 
demonstration proposals shall be tolled until this process is 

VIII. Federal Notice

    The Department of Health and Human Services intends to publish a 
monthly notice in the Federal Register of all new and pending proposals 
submitted pursuant to section 1115. The notice will indicate that the 
Department accepts written comments regarding all demonstration project 
    The Department will maintain a list of organizations that have 
requested notice that a demonstration proposal has been received and 
will notify such organizations when a proposal is received.

IX. Comments

    The Department will not approve or disapprove a proposal for at 
least 30 days after the proposal has been received, in order to receive 
and consider comments. The Department will attempt, if feasible, to 
acknowledge receipt of all comments, but the Department will not 
provide written responses to comments.

X. Findings

    The Department will prepare a decision memorandum at the time a 
demonstration proposal is granted or denied, discussing why the 
Department granted or denied the proposal and how an approved 
demonstration meets the criteria established by statute.

XI. Administrative Record

    The Department will maintain an administrative record which will 
generally consist of: the formal demonstration application from the 
State; issue papers sent to the State and State responses; public and 
Congressional comments sent to the Department and any Department 
responses; the Department's decision memorandum regarding the granting 
or denial of a proposal; and the final terms and conditions, and 
waivers, sent to the State and the State acceptance of them.

XII. Sub-state Demonstrations

    When a demonstration is to be implemented in only part of a State, 
the State will be required to provide information on the likely 
demographic composition of populations subject to and not subject to 
the demonstration in the State. When relevant, the Department will 
require that the evaluation component of a project address the impact 
of the project on particular subgroups of the population.

XIII. Implementation Reviews

    As part of the terms and conditions of any demonstration proposal 
that is granted, the Department may require periodic evaluations of how 
the project is being implemented. The Department will review, and when 
appropriate investigate, documented complaints that a State is failing 
to comply with requirements specified in the terms and conditions and 
implementing waivers of any approved demonstration.

XIV. Legal Effect

    This notice is intended to inform the public and the States 
regarding procedures the Department ordinarily will follow in 
exercising the Secretary's discretionary authority with respect to 
State demonstration proposals under section 1115. This notice does not 
create any right or benefit, substantive or procedural, enforceable at 
law or equity, by any person or entity, against the United States, its 
agencies or instrumentalities, the States, or any other person.

(Catalog of Federal Domestic Assistance Program, No. 93.779; Health 
Financing Research, Demonstrations and Experiments.)

    Dated: September 16, 1994.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: September 16, 1994.
Mary Jo Bane,
Assistant Secretary for Children and Families.
    Dated: September 19, 1994.
Donna E. Shalala,
[FR Doc. 94-23960 Filed 9-26-94; 8:45 am]