CMS Launches Healthy Adult Opportunity Demonstration Initiative

The Centers for Medicare and Medicaid Services (CMS) has launched the Healthy Adult Opportunity (HAO) optional demonstration initiative designed to give states tools to design innovative health coverage programs tailored to the unique needs of adult beneficiaries, while holding states accountable for results and maintaining strong protections for the most at-risk populations. Specifically, the HAO provides states an opportunity to meet the needs of adult beneficiaries under age 65 who aren’t eligible on the basis of a disability or their need for long-term care and for whom Medicaid coverage is optional. Other low-income adults, children, pregnant women, elderly adults and people with disabilities will not be directly affected.

“Vulnerable populations deserve better care. Data shows that barely half of adults on the Medicaid program report getting the care they need,” said CMS Administrator Seema Verma. “This opportunity is designed to promote the program’s objectives while furthering its sustainability for current and future beneficiaries, and achieving better health outcomes by increasing the accountability for delivering results. We’ve built in strong protections for our most vulnerable beneficiaries, and included opportunities for states to earn savings that have to be reinvested in strengthening the program so that it can remain a lifeline for our most vulnerable.”

For the first time, participating states will have more negotiating power to manage drug costs by adopting a formulary similar to those provided in the commercial market, with special protections for individuals with HIV and behavioral health conditions. In exchange for increased flexibility offered through the HAO, states must accept increased accountability for the program’s results.

The HAO also provides the opportunity for a full array of flexibilities that CMS has historically provided through section 1115 demonstrations, including flexibilities to waive requirements like retroactive coverage periods and the ability to engage beneficiaries through nominal premiums and cost-sharing. Subject to comprehensive expectations for minimum standards for approval of an HAO demonstration, states will also have the opportunity to customize the benefit package for those covered and make needed program adjustments in real-time without lengthy federal bureaucratic negotiations or interference.