STEWART et al v. HARGAN et al

Filing 1

COMPLAINT against ERIC HARGAN, DEMETRIOS L. KOUZOUKAS, BRIAN NEALE, THE CENTERS FOR MEDICARE AND MEDICAID SERVICES, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, SEEMA VERMA ( Filing fee $ 400 receipt number 0090-5300365) filed by KATELYN ALLEN, SHAWNA NICOLE MCCOMAS, GLASSIE MAE KASEY, RONNIE MAURICE STEWART, DAVID ROODE, WILLIAM BENNETT, LAKIN BRANHAM, MICHAEL WOODS, AMANDA SPEARS, SHEILA MARLENE PENNEY, QUENTON RADFORD, ALEXA HATCHER, SHANNA BALLINGER, KIMBERLY WITHERS, DAVE KOBERSMITH. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Summons, # 6 Summons, # 7 Summons, # 8 Summons, # 9 Summons, # 10 Civil Cover Sheet)(Perkins, Jane)

Exhibit B

Helping to Engage and Achieve Long Term Health

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Table of Contents
Section 1: Kentucky HEALTH Program Overview..................................................................................4
1.1 Historical Narrative and Rationale ..............................................................................................4
1.2 Program Summary.....................................................................................................................7
1.2.1 Employer Premium Assistance Program Overview .................................................................8
1.2.2 Kentucky HEALTH Overview .................................................................................................9
1.3 Purpose and Goals................................................................................................................... 14
1.4 Hypothesis.............................................................................................................................. 14
1.5 Demonstration Area and Timeframe......................................................................................... 14
1.6 Impact to Medicaid and CHIP ................................................................................................... 14
Section 2: Eligibility.......................................................................................................................... 15
2.1 Populations Eligible for Kentucky HEALTH ................................................................................. 15
2.2 Community Engagement and Employment Initiative ................................................................. 16
2.3 Projected Enrollment............................................................................................................... 19
2.4 Other Eligibility Policies............................................................................................................ 19
2.4.1. Coverage Effective Date & Retroactive Coverage................................................................ 19
2.4.2 Open Enrollment ............................................................................................................... 20
3 Kentucky HEALTH Benefits............................................................................................................. 21
3.1 Kentucky HEALTH Benefit Package ........................................................................................... 21
3.1.1 Section 1937 Alternative Benefit Plan ................................................................................. 21
3.1.2 Benefit Detail .................................................................................................................... 21
3.1.3 My Rewards Account Benefit ............................................................................................. 24
3.1.4 Educational Support .......................................................................................................... 24
3.2 Employer Premium Assistance Program.................................................................................... 25
3.3 Populations Exempt from Alternative Benefits Plans ................................................................. 26
3.3.1 Medically Frail .................................................................................................................. 26
3.3.2 Pregnant Women and Low-Income Families........................................................................ 27
4 Cost-Sharing .................................................................................................................................. 27
4.1 Member-Managed Healthcare Accounts................................................................................... 27
4.1.1 Deductible Account ........................................................................................................... 27
4.1.2 My Rewards Account......................................................................................................... 28
4.2 Member Required Contributions .............................................................................................. 31
4.2.1 Non-Payment Penalties ..................................................................................................... 32
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4.2.2. Early Re-Entry Opportunity ............................................................................................... 33
4.3 Cost-Sharing Exemption........................................................................................................... 34
5 Delivery System and Payment Rates for Services ............................................................................ 34
5.1 Delivery System Reforms ......................................................................................................... 35
5.1.1 Substance Use Disorder Delivery System Reform Pilot Program ............................................ 35
5.1.2 Chronic Disease Management............................................................................................ 36
5.1.3 Managed Care Reforms ..................................................................................................... 36
5.2 Managed Care Delivery System ................................................................................................ 38
5.3 Health Plan Choice .................................................................................................................. 38
5.4 Excluded services .................................................................................................................... 38
5.6 Fee-for-service ........................................................................................................................ 39
5.7 Capitated payments ................................................................................................................ 39
5.8 Quality.................................................................................................................................... 39
6 Implementation of Demonstration ................................................................................................ 39
6.1 Enrollment.............................................................................................................................. 40
6.2 Managed Care......................................................................................................................... 40
7 Demonstration Financing and Budget Neutrality ............................................................................ 40
8 List of Proposed Waivers and Expenditure Authorities ................................................................... 40
8.1 Title XIX Waivers ..................................................................................................................... 40
8.2 Costs Not Otherwise Matchable ............................................................................................... 41
9 Public Notice & Public Comment.................................................................................................... 42
9.1 Summary of Public Comments and State Response ................................................................... 43
9.2 Summary of Waiver Changes Following Public Comment ........................................................... 53
10 Demonstration Administration .................................................................................................... 56
ATTACHMENT I: Evaluation plan ................................................................................................... 57
ATTACHMENT II: Financing and Budget Neutrality Summary ......................................................... 66
ATTACHMENT III: Budget Neutrality Worksheets........................................................................... 70
ATTACHMENT IV: Public Notice .................................................................................................... 71

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Section 1: Kentucky HEALTH Program Overview
Kentucky HEALTH is the Commonwealth of Kentucky’s 1115 demonstration project focused on “Helping
to Engage and Achieve Long Term Health (HEALTH)”. The proposed demonstration project is part of an
overall initiative to transform the Kentucky Medicaid program to empower individuals to improve their
health and gain employer sponsored coverage or other commercial health insurance coverage, while
simultaneously ensuring the program's long-term fiscal sustainability. Only by helping members engage
in their healthcare and their communities, will the Commonwealth achieve long term improvements in
the health of its citizens and improved fiscal health for the Commonwealth and its Medicaid program.
To this end, the Commonwealth seeks a five-year Section 1115 waiver from the Centers for Medicare &
Medicaid Services (CMS) to implement and evaluate Kentucky HEALTH, a demonstration project
designed to provide dignity to individuals as they move towards self-reliability, accountability, and
ultimately independence from public assistance.
The program seeks to break the cycle of poverty through efforts on several fronts. First, the program
encourages members to improve their health by incentivizing preventive care, participation in disease
management programs, and healthy lifestyles. Second, the program embraces private market policies
and principles to familiarize members with commercial health insurance coverage to prepare them for
the commercial market. Third, the program focuses on addressing Kentucky's growing drug abuse
epidemic, which based on a recent Centers for Disease Control and Prevention (CDC) study determined
that nearly half of all counties in the Commonwealth are at risk for an HIV or hepatitis C outbreak.1 This
risk analysis was based in part on unemployment rates. Addressing employment goes hand in hand with
health, and therefore the program will also focus on engaging members in the community, either
through employment or preparing for employment, as well as volunteer activities. Further, in addition to
creating new requirements for members, the program also raises accountability for the healthcare
system by furthering the "Triple Aim" of improving the patient experience, improving population health,
and lowering costs.
While Kentucky HEALTH is uniquely designed for the specific challenges facing Kentucky, most of the
individual federal authorities necessary to implement this demonstration project have been previously
approved in other states. Through this waiver application, the Commonwealth is seeking the
opportunity to evaluate these new program components in Kentucky, with the goal of dramatically
improving member outcomes. The Kentucky HEALTH program, as outlined below, represents the terms
under which the Commonwealth will continue Medicaid expansion.

1.1 Historical Narrative and Rationale
In 2014, as part of the Affordable Care Act (ACA), the Commonwealth of Kentucky expanded its
Medicaid program to all newly eligible adults with income below 138% of the federal poverty level (FPL).
The expansion placed able-bodied adults into a program designed for disabled individuals, pregnant
women and children, and other vulnerable populations likely to be dependent on the State over the
long-term. As a result, Kentucky’s total Medicaid enrollment has increased dramatically—by April 2016,
more than 428,000 low-income non-disabled adults were enrolled in the Medicaid expansion program,
1

A. Campo-Flores & B. McKay, CDC Identifies Counties at Risk of HIV Outbreaks: Agency Lists Areas Prone
to HIV and Hepatitis C Spreading Among Inj ection-drug Users, W ALL STREET JOURNAL (June 3, 2016),
http://www.wsj.com/articles/cdc-identifies-counties-at-risk-of-hiv-outbreaks-1464912264.

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nearly one-third of the State’s total Medicaid program enrollment. 2 Further, due to expansion, the State
experienced significant increases in enrollment across all Medicaid eligibility categories. In fact, total
Kentucky Medicaid and Children’s Health Insurance Program (CHIP) enrollment increased 68% between
December 2013 (prior Medicaid expansion) and April 2016.3 Following this dramatic enrollment
increase, over 1.35 million Kentuckians (almost a third of the State’s entire population) are being served
by Medicaid.4 However, the expansion has yet to impact the health status of Kentuckians. For example,
during the first year following implementation, fewer than 10% of beneficiaries received an annual
wellness or physical exam.5
In addition, the Commonwealth faces many challenges. Kentucky’s rate of unemployment, nearly 6%,
and the poverty rate, approximately 19%, are both well above the national average, and workforce
participation rates and wages are below the national average and among the worst in the nation.6
These factors are known to impact rates of drug use as well as HIV rates. Over the past decade, the
number of Kentuckians who die from drug overdoses has steadily climbed to more than 1,200 each
year.7 Kentucky now ranks third highest in the nation for the number of drug related fatali ties.8 A June
2016 preliminary report from the Centers for Disease Control & Prevention (CDC) identified 220 counties
in the nation at risk for an HIV or hepatitis C outbreak, and 54 of the total at-risk counties were located
in Kentucky.9 Further, the State also has the seventh highest incarceration rate in the nation, far
outpacing the national average. 10
2

Total Monthly Medicaid and CHIP Enrollment: Timeframe Mar 2016, THE HENRY J. KAISER FAMILY
FOUNDATION, http://kff.org/health-reform/state-indicator/total-monthly-medicaid-and-chip-enrollment/ (last
visited June 6, 2016); Stephen P. Miller, Commissioner, Kentucky Department for Medicaid Services, Presentation
to the Kentucky Senate Health & Welfare Committee (April 11, 2016).
3 Kentucky Department for Medicaid Services, Comparison of December 2013 member enrollment and
April 2016 member enrollment (June 14, 2016) (on file with the State).
4 Stephen P. Miller, Commissioner, Kentucky Department for Medicaid Services, Presentation to the
Kentucky Senate Health & Welfare Committee (April 11, 2016).
5 In 2014, 33,233 individuals received an annual wellness or physical exam. Deloitte, Commonwealth of
Kentucky: Medicaid Expansion Report (2014), available at
http://jointhehealthjourney.com/images/uploads/channel -files/Kentucky_Medicaid_Expansion_OneYear_Study_FINAL.pdf
6 Economy at a Glance: Kentucky, UNITED STATES DEPARTMENT OF LABOR, BUREAU OF LABOR STATISTICS,
http://www.bls.gov/eag/eag.ky.htm (data extracted June 03, 2016); Quick Facts: Kentucky, UNITED STATES CENSUS
BUREAU, http://www.census.gov/quickfacts/table/PST045215/21 (last visited June 6, 2016). Kentucky ranks 45 th in
the nation for total percent of population age 16+ in civilian labor force, at 59.4%, and 47 th in the nation for
median household income, at $43,342. Id.
7
COMMONWEALTH OF KENTUCKY JUSTICE AND PUBLIC SAFETY CABINET, 2015 O VERDOSE FATALITY REPORT: KENTUCKY
O FFICE OF DRUG CONTROL POLICY (2015), available at http://odcp.ky.gov/Documents/2014%20ODCP%20Overdose%20Death%20Report%20final1.pdf.
8 Number of deaths due to drug injury of any intent (unintentional, suicide, homicide, or undetermined)
per 100,000 population. The 3-year average from 2011-2015 for Kentucky was 24 deaths, while the national
average was 13.5. Drug Deaths: United States, UNITED HEALTH FOUNDATION,
http://www.americashealthrankings.org/all/drugdeaths (last visited June 6, 2016).
9 A. Campo-Flores & B. McKay, CDC Identifies Counties at Risk of HIV Outbreaks: Agency Lists Areas Prone
to HIV and Hepatitis C Spreading Among Injection-drug Users, W ALL STREET JOURNAL (June 3, 2016),
http://www.wsj.com/articles/cdc-identifies-counties-at-risk-of-hiv-outbreaks-1464912264.
10 P RISON POLICY I NITIATIVE, http://www.prisonpolicy.org (last visited June 6, 2016).

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The Commonwealth also consistently ranks near the bottom of the nation in several key population
health metrics. For example, over 26% of Kentuckians smoke cigarettes (second highest rate in the
nation), 31.6% of adults in the Commonwealth are obese (twelfth highest rate in the nation), and the
number of infant deaths per 1,000 live births is 6.8 (seventeenth highest in the nation).11 In addition,
Kentucky has both the highest number of cancer deaths, as well as the highest number of preventable
hospitalizations, in the nation. 12 Further, Kentucky also faces significant health challenges related to high
rates of diabetes and heart disease, ranking 45th and 47th in the nation respectively.13 Despite these poor
health outcomes, Kentucky’s managed care organizations (MCOs) are only spending approximately 80%
of their total $530 per member per month capitation on direct healthcare spending, while the
remainder contributed to administrative costs and profit (which on average were the highest profit
margins in the nation for Medicaid managed care plans).14
In addition to poor health outcomes, the Medicaid program is financially unsustainable. To date, the
Commonwealth has only covered half the administrative cost of the expansion program and none of the
costs associated with the benefits provided to the expansion population. The remaining costs were
funded entirely by the federal government. However, over the next five years the federal share of the
cost of benefits provided to the expansion population will decline and the required State share will
increase. As such, the cost of these benefits to Kentucky taxpayers is estimated to increase from $74
million in 2017 to approximately $363 million by 2021, for a total of approximately $1.2 billion over the
next five years.15 These costs have the potential to challenge the overall state budget and could create
funding issues for other programs, such as education, pensions, and infrastructure, as well as also
jeopardize funding for the traditional Medicaid program that covers the aged, blind, disabled, pregnant
women and children.
When expansion was implemented there was no plan to finance the program long-term, and instead the
Kentucky expansion plan counted on increased State revenues. In 2013, prior to the implementation of
the Medicaid expansion program, the previous administration commissioned a study of the potential
impact of Medicaid expansion under the ACA on the State’s anticipated Medicaid population, its budget,

11

Smoking: Kentucky, UNITED HEALTH FOUNDATION, http://www.americashealthrankings.org/KY/Smoking/59
(last visited June 6, 2016); Adult Obesity in the United States, TRUST FOR AMERICA’S HEALTH AND THE ROBERT W OOD
JOHNSON FOUNDATION, http://stateofobesity.org/adult-obesity/ (last visited June 6, 2016); Infant Mortality: Kentucky,
UNITED HEALTH FOUNDATION, http://www.americashealthrankings.org/KY/IMR (last visited June 6, 2016).
12 AMERICA’S HEALTH RANKINGS, ANNUAL REPORT: KENTUCKY (2015), available at
http://cdnfiles.americashealthrankings.org/SiteFiles/StateProfiles/Kentucky-Health-Profile-2015.pdf.
13 Diabetes: Kentucky, UNITED HEALTH FOUNDATION, http://www.americashealthrankings.org/ALL/Diabetes
(last visited June 16, 2016); Heart Disease: Kentucky, UNITED HEALTH FOUNDATION,
http://www.americashealthrankings.org/IL/CHD (last visited June 16, 2016).
14 The average medical loss ratio for Kentucky’s five Medicaid MCOs was reported at 80.5%, below the
national average of 85.4%. JEREMY D. PALMER & CHRISTOPHER T. PETTIT, MILLIMAN, MEDICAID RISK-BASED MANAGED CARE:
ANALYSIS OF FINANCIAL RESULTS FOR 2015 (2016), available at
http://www.milliman.com/uploadedFiles/insight/2016/medicaid-risk-based-managed-care-analysis-2015.pdf.
15 Stephen P. Miller, Commissioner, Kentucky Department for Medicaid Services, Presentation to the
Kentucky Senate Health & Welfare Committee (April 11, 2016).

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and its economy. 16 The actual results of the implementation of Medicaid expansion differ dramatically
from the projections set forth in the original study. The reality is, the number of Kentuckians who have
enrolled in Medicaid expansion is more than double the number projected, while the number of new
jobs created and the economic impact from Medicaid expansion has been significantly lower than
forecasted.
Specifically, the 2013 study projected that 147,634 newly eligible members would enroll in the Medicaid
expansion program during the period from July 1, 2013 through June 30, 2014, and that number would
increase to 187,898 over the next six years. 17 In contrast to these projections, Kentucky’s Medicaid
expansion population currently exceeds 428,000. 18 In addition, the 2013 study claimed that Medicaid
expansion would add 40,000 jobs through June 30, 2021, and would have a positive economic impact of
$802.4 million through that same date. 19 Although difficult to quantify with any appreciable degree of
certainty, preliminary economic impact analysis would support a conclusion that the figures cited in the
2013 study were overly optimistic and not likely to be achieved by the cited date of June 30, 2021. The
reality is that Medicaid expansion does not pay for itself as envisioned by the prior administration, and
the Commonwealth of Kentucky cannot afford the cost of the Medicaid expansion program without this
demonstration waiver.
Kentucky HEALTH’s design saves taxpayer dollars, critical to ensuring the program’s long-term financial
viability. In total, Kentucky HEALTH is expected to save taxpayers over $2.2 billion dollars over the fiveyear waiver period. While changes to the existing Medicaid program are necessary for the fiscal
sustainability of Medicaid expansion, Kentucky HEALTH’s primary goal is to improve the health status of
Kentuckians and provide members with the tools to develop or enhance their job skills and achieve
economic security.

1.2 Program Summary
Kentucky HEALTH is an innovative, transformative healthcare program designed to not only stabilize the
program financially, but to also improve the health outcomes and overall quality of life for all members.
This demonstration waiver seeks to evaluate new policies and program elements designed to engage
members in their healthcare and provide the necessary education and tools required to achieve long
term health and an improved quality of life. Ultimately, Kentucky HEALTH seeks to: (1) improve the
health of members; (2) engage members in the community and prepare them for employment; and (3)
provide members the tools to successfully utilize commercial market health insurance and eventually
transition off Medicaid.

16

Deloitte, Commonwealth of Kentucky: Medicaid Expansion Report (2014), available at
http://jointhehealthjourney.com/images/uploads/channel -files/Kentucky_Medicaid_Expansion_OneYear_Study_FINAL.pdf
17 Deloitte, Commonwealth of Kentucky: Medicaid Expansion Report (2014), available at
http://jointhehealthjourney.com/images/uploads/channel -files/Kentucky_Medicaid_Expansion_OneYear_Study_FINAL.pdf
18 Stephen P. Miller, Commissioner, Kentucky Department for Medicaid Services, Presentation to the
Kentucky Senate Health & Welfare Committee (April 11, 2016).
19 Deloitte, Commonwealth of Kentucky: Medicaid Expansion Report (2014), available at
http://jointhehealthjourney.com/images/uploads/channel -files/Kentucky_Medicaid_Expansion_OneYear_Study_FINAL.pdf

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Kentucky HEALTH offers eligible individuals two pathways to coverage: (1) the employer premium
assistance program, which offers premium assistance to assist individuals in purchasing employersponsored health insurance coverage; and (2) the consumer driven health plan, which offers members a
high deductible health plan with commercial market benefits equivalent to the Kentucky State
Employees’ Health Plan while maintaining current mental health and substance use disorder benefits. In
addition, the program includes two member managed accounts, one to fund the deductible, and
another to fund enhanced healthcare benefits such as vision, dental, over the counter medications, and
gym memberships.

1.2.1 Employer Premium Assistance Program Overview
As part of the overall waiver effort to support and promote employment, eligible members who
currently have access to health insurance through their employer will have the option, and
ultimately the obligation, to enroll their family into their employer-sponsored health insurance
plan. Participation in the member’s employer-sponsored health insurance plan in lieu of
Kentucky HEALTH is optional during their first year of enrollment, and mandatory for members
in their second year of enrollment, provided the member has been with their employer at least
one year. In addition, to promote family coverage and keep parents in the same plan as their
children, the State will subsidize family-based employer coverage, so that children eligible for
the Kentucky Children’s Health Insurance Plan (KCHIP) may participate in the same health plan
as their parents.
The employer premium assistance program will subsidize the member’s employer plan by
paying the member an advance premium reimbursement payment to cover the costs of the
employee’s share of the premium. However, individuals eligible for the employer premium
assistance program will be required to also contribute a share of their monthly premium
amount equal to the monthly contribution amounts required of Kentucky HEALTH members, as
detailed in Section 4.2.
Once enrolled, the member will have full access to their employer-sponsored health plan
benefits and network providers. To ensure benefit parity, the employer premium assistance
program will also wrap-around benefits to ensure that members have access to all Kentucky
HEALTH benefits not otherwise reimbursed by their employer plan. Beneficiary out-of-pocket
expenses will also be covered. Eligible employer plans must be cost-effective for the State, as
further described in Section 3.2. The employer premium assistance program provides members
with greater choice of coverage and helps prevent crowd-out of private plans, while also
encouraging employment.

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1.2.2 Kentucky HEALTH Overview
Kentucky HEALTH will continue to be delivered through a managed care delivery system, but will
offer a new benefit package modeled after the Kentucky State Employees’ Health Plan.
However, current Medicaid benefits will be maintained for children, pregnant women, medically
frail individuals, and any individuals eligible for Medicaid prior to the passage of the Affordable
Care Act. Similar to the employer premium assistance program, Kentucky HEALTH promotes
family health coverage by also enrolling the Medicaid eligible children of Kentucky HEALTH
participating adults. Single family coverage not only streamlines eligibility processes for the
family and the State, it also reduces network and provider fragmentation between adults and
children, thus improving access to care. Although children will be included in this Section 1115
demonstration, all children participating in Kentucky HEALTH will maintain their current benefit
packages and will be exempt from all Kentucky HEALTH cost-sharing and plan structure changes.
Eligible Populations. Kentucky HEALTH targets the Medicaid expansion populations, specifically
adults with income up to 138% FPL. However, the State will also include children and all nondisabled adults currently covered under traditional Medicaid, including low-income parents and
caretakers eligible under Section 1931, individuals eligible for transitional medical assistance,
and pregnant women. Kentucky HEALTH will not include any of the following: former foster
youth up to age 26, individuals eligible for 1915(c) waivers, individual s on Medicaid due to a
disability, including those with an SSI determination, individuals over 65 years of age, and
individuals residing in an institution, such as a nursing facility.
Beneficiary Responsibility. Kentucky HEALTH will be structured as a consumer-driven, high
deductible health plan paired with two member controlled healthcare spending accounts, one
to cover deductible expenses and the other to accrue savings that can be used to purchase
enhanced benefits not covered in the base benefits. The plan will require that members pay a
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monthly premium amount in lieu of copayments, increasing on a sliding scale based on family
income, ranging from $1.00 per month up to a maximum of $15.00 per month. The monthly
premium will be applied on a family basis, and will not be separately charged to each Kentucky
HEALTH member in the household. Please refer to Section 4.2 for additional information
regarding member cost-sharing.
Deductible Account. Each member enrolled in Kentucky HEALTH, with the exception of
pregnant women and children, will be provided a deductible account, which will be used to fund
the health plan’s $1,000 deductible. The State will fully fund the deductible account to ensure
funds are available for the member to cover initial medical expenses for the deductible. The
deductible account exposes members to the cost of healthcare and encourages members to be
active consumers of healthcare by evaluating cost and quality as they seek care. Please refer to
Section 4.1.1 for additional detail regarding the deductible account.
Rewards Account. In addition to the deductible account, all Kentucky HEALTH members, with
the exception of children, will be provided a My Rewards Account. Members may use the
account to choose from an array of enhanced benefits not otherwise covered in the member’s
base benefit plan, such as dental benefits, vision services, over the counter medications, and
limited reimbursement for the purchase of a gym membership. While these benefits are not
required to be offered to beneficiaries under federal Medicaid law, these benefit enhancements
will be available through the My Rewards Account.
Members will be able to accrue funds in the My Rewards Account upon completion of specified
health-related or community engagement activities, such as participating in community service
or job training activities. Members will be able to utilize these funds to personalize their benefits
by selecting from certain enhanced benefit options, up to the accrued balance in their account.
To encourage appropriate healthcare utilization, account funds may also be withdrawn from the
My Rewards Account each time a member utilizes a hospital emergency department for a nonemergency medical condition or excessively misses healthcare appointments without
appropriate cancellation. In addition, the account will be utilized to further encourage
employment, as members who become employed and successfully transition to commercial
health insurance coverage for at least eighteen months will be eligible to receive the balance of
their My Rewards Account in cash, up to $500. Please refer to Section 4.1.2 for additional detail
regarding the My Rewards Account.
Together, the deductible account and the My Rewards Account empower individuals to be
active consumers of healthcare and make cost-conscious decisions, while simultaneously
providing incentives for members to improve their health and be active members of the
community.

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Commercial Market Policies. One of the primary goals of Kentucky HEALTH is to educate and
familiarize members with commercial market coverage, while creating safeguards to ease the
transition to commercial health insurance coverage. This is particularly important given the high
rate of movement between coverage options. One study estimated that approximately half of
adults with income below 200% FPL will move between Medicaid eligibility and Marketplace
coverage at least once a year, while 25% will move between the two programs more than
once.20 Policy alignment with commercial market policies is important to avoid beneficiary
confusion as members move between programs. Without similar policies, members are
unprepared to move to Marketplace or employer-sponsored coverage, and the drastically
differing policies have the potential to create a perverse incentive for individuals to remain on
Medicaid. Kentucky HEALTH is designed to help educate members about commercial market
policies so that members are prepared to eventually transition to commercial health insurance
coverage.
Kentucky HEALTH seeks to prepare individuals for commercial health insurance coverage by
aligning Medicaid and Marketplace policies in several areas. For example, similar to the standard
commercial market policies, Kentucky HEALTH will require monthly member premiums, and
benefits will start prospectively from the initial premium payment. Kentucky HEALTH also
creates disincentives for program non-compliance, similar to the private market. For example,
Kentucky HEALTH will establish a client-specific open enrollment period. Specifically, if an
individual is disenrolled from the program in accordance with current practice for failing to
comply with annual eligibility redetermination requirements, the individual will be required to

20

B. D. Sommers & S. Rosenbaum, Issues in Health Reform: How Changes in Eligibility May Move Millions
Back and Forth Between Medicaid and Insurance Exchanges, 30 HEALTH AFFAIRS 228 (2011).

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wait six months for a new open enrollment period. This policy will educate members of the
importance of meeting commercial market open enrollment deadlines, while also allowing
members to rejoin the program at any time prior to the six-month date by completing a financial
or health literacy course. Each Kentucky HEALTH program disincentive is paired with a critical
“on-ramp” to help support individuals to get back on the right path and successfully utilize the
Kentucky HEALTH program and access all of its benefits, resources, and tools.
Community Engagement and Employment. The cornerstone of the Kentucky HEALTH program
is the introduction of a community engagement and employment initiative aimed at increasing
workforce participation rates in Kentucky, which is critical to improving the health status of
Kentuckians. The recent study by the Centers for Disease Control identified counties at risk of an
HIV epidemic, in part based on county unemployment rates and other factors. Recognizing this
important connection between employment and healthy lifestyles, CMS has long supported
Medicaid employment initiatives. In fact, Section 1901 of the Social Security Act requires “for
the purpose of enabling each State, as far as practicable under the conditions in such State to
furnish (1) medical assistance on behalf of . . . individuals, whose income and resources are
insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other
services to help such families and individuals attain or retain capability for independence or selfcare. . . "21 In addition, CMS states on its website that “employment is a fundamental part of life
for people with and without disabilities.”22 Meaningful work and participating as a contributing
member of society is recognized as part of a healthy lifestyle and “essential to individual's
economic self-sufficiency, self-esteem and well-being.”23 CMS’s statements support scores of
extensive research that has long supported a strong link between community engagement and
health.24 In addition to its health benefits, research also indicates that community engagement
and volunteerism improves an individual’s employability. One study found that volunteering
increased the chances of employment by 51% among individuals without a high school diploma,
and by 55% among individuals living in rural areas. 25
Therefore, to assist with employment, Kentucky HEALTH will require that all able-bodied
working age adult members without dependents participate in the community engagement and
employment initiative to maintain enrollment. 26 Engagement activities include volunteer work,
21

Social Security Act §1901, 42 U.S.C. §1396-1 (2015).
Medicaid Employment Initiatives, CENTERS FOR MEDICARE AND MEDICAID SERVICES,
https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Delivery-Systems/GrantPrograms/Employment-Initiatives.html (last visited June 7, 2016).
23 Medicaid Employment Initiatives, CENTERS FOR MEDICARE AND MEDICAID SERVICES,
https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Delivery-Systems/GrantPrograms/Employment-Initiatives.html (last visited June 7, 2016).
24 Hergenrather K, Zeglin R, McGuire-Kuletz M, and Rhodes S. Employment as a Social Determinant of
Health: A Systematic Review of Longitudinal Studies Exploring the Relationship Between Employment Status and
Physical Health. Rehabilitation Research, Policy, and Education. 2015;29(25):2 -26.
25 C. SPERA ET AL ., CORPORATION FOR NATIONAL AND COMMUNITY SERVICE, O FFICE OF RESEARCH AND EVALUATION,
VOLUNTEERING AS A PATHWAY TO EMPLOYMENT: DOES VOLUNTEERING I NCREASE O DDS OF FINDING A JOB FOR THE O UT OF W ORK?
(2013), available at http://www.nationalservice.gov/sites/default/files/upload/employment_research_report.pdf.
26 For purposes of clarification, adults with dependents will only be exempt from the community
engagement and employment initiative if the individual has primary caretaking responsibilities fo r a dependent,
including a minor child or a disabled adult dependent.
22

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employment, caretaking, job training, or job search activities. Through a design that gradually
increases the requirement for community engagement, individuals increase their connections to
potential employment resources and opportunities available in their communities, as well as
increase their own self-confidence. While completion of community engagement and/or
employment activities is a program expectation for non-disabled working age adult members
without dependents, Kentucky HEALTH also offers corresponding incentives to further
encourage members to seek employment and successfully transition to commercial health
insurance coverage. Children, pregnant women, individuals determined medically frail, and
adults who are the primary caregiver of a dependent, including a minor child or a disabled adult
dependent, are exempt from the community engagement and employment initiative.
Ultimately, these efforts to improve Kentucky employment rates are critical to addressing the
drug abuse epidemic, reducing overall poverty, and sustaining the Medicaid program, as without
more robust workforce participation, the State will be unable to continue to financially sustain a
Medicaid program that is quickly including nearly one third of the entire State population.
Please refer to Section 2.2 for additional detail regarding Kentucky HEALTH’s community
engagement and employment initiative.
Substance Use Disorder. This waiver application also seeks delivery system improvements
aimed at addressing the drug abuse epidemic facing the State. Kentucky HEALTH will maintain
all current mental health and substance use disorder (SUD) benefits. However, this
demonstration project will greatly expand access to these robust services available to members
by requesting a waiver of the federal exclusion of institutions of mental disease (IMD) providers.
Please refer to Section 5.1.1 for additional detail regarding Kentucky HEALTH’s SUD initiative.
Chronic Disease Management. Kentucky faces a series of public health challenges. Not only
does the State have exceedingly high infant mortality, obesity, diabetes, heart disease, and
smoking rates, as a likely result, it ranks highest in the nation with respect to cancer deaths and
preventable hospital conditions. 27 While these health indicators are demonstrative of residents’
overall health status, they also lead to higher utilization of healthcare services and increased
healthcare expenditures, particularly among the State’s most vulnerable populations. As such,
this demonstration project will align various program components in support of the State’s
existing public health infrastructure and current efforts to improve chronic disease prevention
and management. In addition, the State will work with Kentucky’s Medicaid managed care
organizations to implement best practices from nationally recognized disease management
programs, such as the National Diabetes Prevention Program. Please refer to Section 5.1.2 for
additional information regarding the chronic disease management initiative.
Managed Care Reform. The creation of Kentucky HEALTH is just one piece of a larger
transformation aimed at strengthening the existing Medicaid program in the State. The State
27

Smoking: Kentucky, UNITED HEALTH FOUNDATION, http://www.americashealthrankings.org/KY/Smoking/59
(last visited June 6, 2016); Adult Obesity in the United States, TRUST FOR AMERICA’S HEALTH AND THE ROBERT W OOD
JOHNSON FOUNDATION, http://stateofobesity.org/adult-obesity/ (last visited June 6, 2016); Infant Mortality: Kentucky,
UNITED HEALTH FOUNDATION, http://www.americashealthrankings.org/KY/IMR (last visited June 6, 2016); AMERICA’S
HEALTH RANKINGS, ANNUAL REPORT: KENTUCKY (2015), available at
http://cdnfiles.americashealthrankings.org/SiteFiles/StateProfiles/Kentucky-Health-Profile-2015.pdf.

13

has already taken a critical look at its managed care contract rates, as Kentucky MCOs have the
highest profit margin of any state Medicaid program in the nation. 28 Prior to implementing
Kentucky HEALTH, the State will continue to align incentives across the delivery system by
introducing mechanisms to control spending, as well as payment incentives for providers and
MCOs to improve quality and align with member incentives. In addition, the Department for
Medicaid Services will continue to seek improvements and administrative efficiencies in the
existing Medicaid managed care program, such as uniform credentialing and formulary
alignment. Please refer to Section 5.1.3 for additional detail regarding managed care reforms.

1.3 Purpose and Goals
Kentucky HEALTH seeks to comprehensively transform Medicaid and accomplish the following goals:
1. Improve members’ health and help them be responsible for their health;
2. Encourage individuals to become active participants and consumers of healthcare who are
prepared to use commercial health insurance;
3. Empower people to seek employment and transition to commercial health insurance coverage;
4. Implement delivery system reforms to improve quality and outcomes; and
5. Ensure long-term fiscal sustainability.

1.4 Hypothesis
The State will extensively test and evaluate achievement of the above listed program goals throughout
the demonstration approval period. Please see Attachment I for the State’s proposed hypothesis and
preliminary evaluation plan.

1.5 Demonstration Area and Timeframe
The State seeks a five-year waiver approval period. Kentucky HEALTH will operate statewide, however,
some program components will be phased in. For example, changes to coverage of vision and dental
services will be delayed for three months past the initial program implementation date to allow
members a chance to accrue funds in their My Rewards Account. In addition, the community
engagement and employment initiative may be phased in by county. Please refer to Section 6 for
additional detail regarding program implementation.

1.6 Impact to Medicaid and CHIP
The demonstration is part of the State’s overall effort to comprehensivel y transform Kentucky’s
Medicaid program. While most of the reforms introduced in this waiver target the expansion
population, several new program elements (as detailed in this waiver application) will be introduced to
the non-disabled traditional Medicaid population as well. Collectively, the Kentucky HEALTH reforms
aim to transform Medicaid from a program that passively provides healthcare coverage to one that
educates and empowers members to actively engage in their health.
In addition to eligibility, benefits, cost-sharing and delivery system reforms, each of which is described
more fully below, the demonstration will modify Medicaid and CHIP programs to allow families the
28

The average underwriting ratio (profit margin) for Kentucky’s five Medicaid MCOs was reported at
11.3%, significantly above the national average of 2.6% (3.3% for expansion states). JEREMY D. PALMER & CHRISTOPHER
T. PETTIT, MILLIMAN, MEDICAID RISK-BASED MANAGED CARE: ANALYSIS OF FINANCIAL RESULTS FOR 2015 (2016), available at
http://www.milliman.com/uploadedFiles/insight/2016/medicaid-risk-based-managed-care-analysis-2015.pdf.

14

opportunity to enroll in a family plan. This promotes integrated family healthcare by enrolling adults and
their KCHIP eligible children in Kentucky HEALTH or, if applicable, the parent’s employer-sponsored
health insurance plan through the employer premium assistance program. By providing family
coverage, Medicaid eligible families will be able to seek care within the same provider network and with
the same health plan, thus reducing administrative burdens and promoting better care integration for all
family members.

Section 2: Eligibility
Kentucky HEALTH is designed specifically for able-bodied, working age adults and their families.
Currently, the State has expanded Medicaid to cover this new adult group up to 138% FPL. This
expansion will be maintained only under this demonstration waiver. In addition, the State will seek to
transition all other non-disabled adult Medicaid recipients to the Kentucky HEALTH program, including
low-income parents and caretakers eligible under Section 1931, individuals eligible for transitional
medical assistance, and pregnant women. Finally, Kentucky HEALTH will seek to provide seamless
coverage for entire families through the inclusion of children covered under the KCHIP program.
Only individuals eligible for Medicaid on the basis of an eligibility group listed in Table 2.1(A) are subject
to the provisions of this waiver. Individuals eligible for 1915(c) waivers, such as Acquired Brain Injury
(ABI), Home and Community Based (HCB), Michelle P. (MPW), or the Supports for Community Living
(SCL), are excluded from this waiver. In addition, the waiver will also exclude (1) individuals eligible for
Medicaid on the basis of blindness or disability, including individuals eligible for Social Security Income
(SSI); (2) individuals over 65 years of age; and (3) individuals residing in an institution, such as a nursing
facility. Also, Kentucky HEALTH will not impact coverage for former foster children up to age 26, who
are also excluded from this waiver.

2.1 Populations Eligible for Kentucky HEALTH
Table 2.1(A): Kentucky HEALTH Eligibility Chart
Eligibility Group Name
Social Security Act and CFR Citations
Adult group
1902(a)(10)(A)(i)(VIII)
42 CFR 435.119
Parents and other
1902(a)(10)(A)(i)(I)
caretaker relatives
1931(b) and (d)
42 CFR 435.110

Transitional medical
assistance

Pregnant women
Newborn Children

408(a)(11)(A)
1931(c)(2)
1925
1902(a)(52)
42 CFR 435.116
1902(e)(4)
42 CFR 435.117

Income Level
0-138% FPL with a 5% income
disregard
Household
Standard
Size
1
$235
2
$291
3
$338
4
$419
5
$492
6
$556
7
$621
First 6 months: N/A
Additional 6 months: 0-185%
FPL
0-195% FPL
N/A – deemed status for
newborns whose mother is

15

Infants and Children Under
Age 19
Title XXI Separate CHIP
Program

1902(a)(10)(A)(i)(III), (IV), (VI), (VII)
1931(b) and (d)
42 CFR 435.118
Title XXI
42 CFR 457.310

enrolled in Medicaid on date of
birth
Ages 0-1: 0-195% FPL
Ages 1-18: 0-159% FPL
Ages 0-1: >195% - ≤213% FPL
Ages 1-18: >159% - ≤213% FPL

Table 2.1(B): Medicaid Populations Not Included In Kentucky HEALTH
1. Individuals qualifying for Medicaid on the basis of blindness.
2. Individuals qualifying for Medicaid on the basis of disability, including, but not limited to:
a. 1915 (c) waiver recipients;
b. Individuals determined eligible for Supplemental Security Income (SSI) on the basis of a
disability;
c. Medicaid buy-in program for working disabled adults.
3. Individuals qualifying for Medicaid on the basis of age.
4. Institutionalized individuals assessed a patient contribution towards the cost of care.
5. Individuals receiving Medicare.
6. Former foster care children up to age 26.

2.2 Community Engagement and Employment Initiative
Promotion of work through coverage of certain employment supports and vocational rehabilitation for
people with disabilities has been a longstanding policy within CMS. 29 Kentucky seeks to replicate those
priorities for able bodied individuals in the program through the community engagement and
employment initiative. As noted earlier, on its website, CMS recognizes that “employment is a
fundamental part of life for people with and without disabilities. Employment provides a sense of
purpose, how we contribute to our community and are associated with positive physical and mental
health benefits.”30 To this end, CMS policy allows states to provide supported employment benefits
through Home and Community Based Services.31 Ultimately, connecting Medicaid recipients to services
to help such “families and individuals attain or retain capability for independence or self -care” is one of
the fundamental purposes of the Medicaid program, as set forth in the Social Security Act. 32
In addition to health benefits, increasing engagement and employment may reduce poverty. The United
States Census Bureau determined that among adults aged 18-64 living in poverty, more than half
29

Medicaid Employment Initiatives, CENTERS FOR MEDICARE AND MEDICAID SERVICES,
https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Delivery-Systems/GrantPrograms/Employment-Initiatives.html (last visited June 13, 2016).
30 Medicaid Employment Initiatives, CENTERS FOR MEDICARE AND MEDICAID SERVICES,
https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Delivery-Systems/GrantPrograms/Employment-Initiatives.html (last visited June 13, 2016).
31 42 C.F.R. 440.180(c)(2)(iii) (2015); Medicaid Employment Initiatives, CENTERS FOR MEDICARE AND MEDICAID
SERVICES, https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Delivery-Systems/GrantPrograms/Employment-Initiatives.html (last visited June 13, 2016).
32 Social Security Act §1901, 42 U.S.C. §1396-1 (2015).

16

(approximately 61.7%) did not work at least one week in 2014.33 Government assistance programs can
only lessen the burdens of poverty—beneficiaries may only truly escape the bonds of generational
poverty and improve their quality of life through obtaining stable employment, as recently
demonstrated in Maine following its reinstated work requirement for able-bodied SNAP beneficiaries.
The initial evaluation tracked compliant members, non-compliant members that were removed from the
program, and members leaving the program due to increased income. The report concluded that
implementation of the work requirement rule led to a significant increase in total wages the following
year among all three groups, including the non-compliant group. 34
In addition to reducing poverty, an initiative to increase employment is imperative to address the drug
abuse epidemic facing the State. This complex health crisis requires a multi-faceted solution that not
only treats the health related consequences, but also addresses some of the underlying social root
causes of the epidemic, including low employment. Kentucky HEALTH seeks to connect beneficiaries
with critical vocational skills, job training, education and support to encourage self -sufficiency.
To this end, Kentucky HEALTH will offer several incentives and resources to support members in
becoming actively engaged in their communities, with the ultimate goal of empowering individuals and
providing them with the necessary tools to seek and obtain employment and transition to commercial
insurance coverage. Kentucky HEALTH’s community engagement and employment initiative will
incentivize members to steadily increase their community involvement and eventually develop the tools
and skills to seek and obtain lasting employment. The Kentucky Cabinet for Health and Family Services
will collaborate with the Cabinet for Education and Workforce Development to implement a graduated
system to ease new members into the community engagement participation requirement so that, after
the first year, all able-bodied working age adult Kentucky HEALTH members will be performing at least
twenty hours of community engagement or employment activities each week. Notwithstanding the
foregoing, children, pregnant women, individuals determined medically frail, and adults who are the
primary caregiver of a dependent (including a minor child or a disabled adult dependent) are exempt
from the community engagement and employment requirement. To clarify, caregivers for individuals
other than a dependent will not be exempt. However, those individuals providing caregiving services for
a non-dependent relative or other person with a chronic, disabling health condition will be permitted to
count those caregiving hours towards fulfilling the hour requirements of this section.
Table 2.2: Escalated Community Engagement & Employment Hours

Eligibility Period
1-3 months
4-6 months
6-9 months
9-12 months
12+ months

Required Engagement Hours
0 hours per week
5 hours per week
10 hours per week
15 hours per week
20 hours per week

33

CARMEN DENAVAS-W ALT & BERNADETTE D. PROCTOR, U.S. CENSUS BUREAU, CURRENT POPULATION REPORTS, PUB. NO.
P60-252, I NCOME AND POVERTY IN THE UNITED STATES: 2014 (2015), available at
https://www.census.gov/content/dam/Census/library/publications/2015/demo/p60 -252.pdf.
34 Letter from Paul Leparulo, Deputy Director, Main Office of Policy and Management, to Mary Mayhew,
Commissioner Main Department of Health and Human Services (April 19, 2016), available at
http://www.maine.gov/economist/econdemo/ABAWD%20analysis_final.pdf.

17

Beginning after three months of program eligibility, participation in the community engagement and
employment initiative will be a condition of eligibility for all able -bodied working age adult Kentucky
HEALTH members without dependents (including minor children or disabled adult dependents). Failure
to meet required engagement hours will result in a suspension of benefits until the member satisfies the
requirement for a full month. Kentucky HEALTH members who are full-time students or employed and
working at least 20 hours per week satisfy the requirements of this initiative and would not be impacted
by this change.
Qualifying community engagement and employment hours include a variety of activities beyond
standard employment and may include:










Job skills training;
Job search activities;
Education related to employment;
General education (i.e. GED, community college);
Vocational education/ training;
Subsidized or unsubsidized employment;
Community work experience;
Community service/ public service; and
Caregiving services for a non-dependent relative or other person with a chronic, disabling health
condition.

The requirements of the community engagement and employment initiative are not limited to volunteer
and employment related activities, but can also be met through investing in one’s education and job
training. It is well understood that increased education is directly associated with higher wages. In
Kentucky, there is a 33% difference in median annual earnings between individuals with and without
high school diplomas. 35 To encourage Kentucky HEALTH members to improve their educational
attainment, participation in the free General Educational Development (GED) certification exam prep
classes available in every county will count as a credit towards the community engagement and
employment initiative requirements. In addition, to respond to the recent 76% decrease in Kentucky
GED participation rates in the last year, this waiver will also seek to cover the out-of-pocket costs
associated with taking the GED exam, as described in more detail in Section 3.1.4.36
By encouraging impoverished individuals to engage more fully in their education, training, and
communities through completion of even five hours of community engagement and employment each
week, Kentucky HEALTH seeks to increase the employment rate and reduce the poverty level of
individuals participating in the program. However, to ensure appropriate resources are available and to
monitor the impact of this new requirement, the State may implement a regional or county based
rolling implementation of the community engagement and employment initiative.

35

KENTUCKY CENTER FOR ECONOMIC POLICY, FACING CHALLENGES WITH THE NEW GED TEST IN KENTUCKY (2015),
available at http://kypolicy.org/dash/wp-content/uploads/2015/12/2015-KY-GED-Report3.pdf.
36 Id.

18

2.3 Projected Enrollment
Projected enrollment in Kentucky HEALTH is based on calendar year 2015 member enrollment data of
the eligibility groups that will transition to the waiver. The projections for the future demonstration
years consider the impact of the new program features contained within this waiver. Further, Kentucky
HEALTH does not propose to apply any enrollment limits on the number of individuals that may enroll in
the program.

Table 2.3: Kentucky HEALTH Projected Enrollment by Eligibility Group
Eligibility
Group

DY 1

Children

532,250

549,917

568,187

587,000

606,500

133,333

130,417

127,583

124,833

122,083

489,000

477,583

466,333

455,417

444,750

Non-Expansion
Adults
Expansion
Group

Project Enrollment by Demonstration Year (DY)
DY 2
DY3
DY4

DY 5

Note: Values shown have been rounded and represent average monthly enrollment.

2.4 Other Eligibility Policies
One of the primary goals of the Kentucky HEALTH program is to encourage individuals to become active
consumers of healthcare who are prepared to use commercial health insurance. As such, Kentucky
HEALTH will implement key commercial market and Marketplace policies in order to introduce these
critical concepts to Kentucky HEALTH members. Notwithstanding the foregoing, children, pregnant
women, and individuals determined medically frail will be excluded from many of these commercial
market reforms.

2.4.1. Coverage Effective Date & Retroactive Coverage
Similar to the commercial market, members (excluding children and pregnant women) will be
required to make their first month’s required premium payment prior to the start of benefits.
Individuals will have sixty days from the date of their eligibility determination to pay the
premium payment. Once an individual pays the premium, benefits will begin the first day of the
month in which the payment was received. In order to provide individuals with the opportunity
to begin coverage as expeditiously as possible, the State will develop a process by which
applicants (not yet determined eligible for Kentucky HEALTH) will be permitted to make an
initial premium pre-payment in order to expedite coverage. Once determined eligible, benefits
would begin effective the first day of the month in which the pre-payment was made, which
could be as early as the first day of the month in which the application was submitted.
Despite the pre-payment option, all initial premium contributions must be made within sixty
calendar days from the date of the initial invoice. Individuals who do not pay the initial premium
payment within the sixty-day payment period will be subject to the penalties detailed in Section
4.2.1. Accordingly, individuals with income above 100% FPL will not be e nrolled in the program
and will be required to reapply should they wish to participate in the program. Whereas,
individuals at or below 100% FPL who fail to pay the initial premium will be enrolled effective
the first day of the month in which the sixty-day payment period expired. However, once
enrolled, these individuals will be required to pay Medicaid allowable copayments for all
19

services in the first six months of enrollment and will not have access to a My Rewards Account,
the enhanced benefits available through the account, or the potential $500 reward available to
members after leaving Medicaid.
In addition, the State will not provide retroactive coverage and benefits to newly enrolled
individuals, except for pregnant women and children. Instead, consistent with the commercial
market and federal Marketplace policies, coverage and benefits will only begin after the
member’s initial premium payment is made. Eliminating Medicaid retroactivity encourages
individuals to obtain and maintain health insurance coverage, even when the individual is
healthy. In addition, due to Medicaid expansion and the availability of tax credits, affordable
healthcare coverage options have been available for two years to Kentuckians who have
complied with the individual mandate, eliminating the need for retroactive coverage. However,
to provide the opportunity for expedited enrollment for individuals in a time of need, the State
will minimize the potential impact of this policy revision through the expansion of presumptive
eligibility sites to include county health departments and qualifying safety net providers, such as
community mental health centers, federally qualified health centers, and rural health centers.

2.4.2 Open Enrollment
Consistent with private market health plans, Kentucky HEALTH will implement a modified
member-specific annual open enrollment period (with exceptions for certain vulnerable
populations, including pregnant women and children) to help familiarize Kentucky HEALTH
members with this commercial market policy. All Kentucky HEALTH members will be required to
complete the annual redetermination process within a specific timeframe to avoid coverage
gaps. The open enrollment period will vary for each member depending on when they enrolled
in the program, and will begin approximately three months prior to the expiration of their
twelve-month benefit period. Individuals that do not complete the re-enrollment process prior
to the expiration of their twelve-month benefit period will be disenrolled from the program.
Following disenrollment, individuals will have an additional three-month period in which to
submit their redetermination paperwork to be reenrolled in Kentucky HEALTH. However, after
the expiration of the six-month redetermination period (including three months prior to
coverage expiration and three months following), individuals will be required to wait six months
until their next open enrollment period before being permitted to re -enroll in the program. This
open enrollment policy will not apply to pregnant women, children, and individuals determined
medically frail. In addition, the State will create certain exceptions for individuals who
experienced a change in circumstances preventing completion of redetermination, such as
gaining and subsequently losing commercial health insurance coverage or moving out of state
and having returned.
Compared to Kentucky HEALTH’s six-month period, individuals on the Marketplace who miss the
open enrollment period are generally required to wait up to nine months prior to re-enrolling in
coverage, with limited exceptions. By comparison, all Kentucky HEALTH eligible individuals will
be provided the opportunity for early re-entry at any time prior to their next open enrollment
period by completing a financial or health literacy course. Once the course is completed, the
member may re-enroll in Kentucky HEALTH at any time and pay their first month’s premium
contribution to begin coverage.
20

3 Kentucky HEALTH Benefits
Kentucky HEALTH seeks to provide its members with a commercial health insurance experience in order
to better prepare members to transition to commercial health insurance coverage. Consistent with this
goal, Kentucky HEALTH will provide a benefit package consistent with the commercial market for the
expansion population. The Kentucky HEALTH benefit plan for the expansion population will be
equivalent to the Kentucky State Employees’ Health Plan, which provides a comprehensive commercial
insurance benefit package. All current mental health and SUD services will be preserved. Additional
benefits such as dental services, vision services, and over the counter medications will be provided via
the member’s My Rewards Account. Further, consistent with the goal of offering a commercial market
experience, the State will not provide coverage for non-emergency medical transportation (NEMT) to
the newly eligible adult group, and will seek a waiver of this non-commercial benefit.
Children, pregnant women, medically frail individuals, and any individuals eligible for Medicaid prior to
the passage of the Affordable Care Act will be eligible to receive Medicaid State Plan benefits. There will
be no changes to the current State Plan benefits. The eligibility groups listed in Table 3.1 below receiving
State Plan benefits will continue to receive non-emergency transportation, as well as access to covered
vision and dental services, in accordance with the State Plan rather than through the My Rewards
Account. In addition, all children receiving services through the waiver will continue to receive all early
and periodic screening, diagnostic, and treatment (EPSDT) services.

3.1 Kentucky HEALTH Benefit Package
Table 3.1: Benefit Package Chart
Eligibility Group
Benefit Package
Adult Group
Kentucky HEALTH Alternative Benefit Plan
Section 1931
TMA
Pregnant Women
Kentucky State Plan
Newborn Children
Children under 19
CHIP

3.1.1 Section 1937 Alternative Benefit Plan
The alternative benefit plan (ABP) coverage provided to the new adult group will be based on
the current State Employees’ Health Plan, which is a consumer-driven health plan administered
by Anthem Blue Cross and Blue Shield of Kentucky, Inc. In accordance with this waiver request,
the State will modify and update its ABP to benchmark benefits to the Kentucky State
Employees’ Plan for the expansion population.

3.1.2 Benefit Detail
Kentucky HEALTH benefits for the expansion population will be aligned with the commercial
market State Employees’ Health Plan. All current mental health and SUD services will be
maintained for all populations. A high level summary of the covered benefits in each of the ten
essential health benefit categories is provided below, and includes benefits that may differ from
the Kentucky Medicaid State Plan in amount, duration, or scope.

21

The chart below details only the benefits for the new adult group. Benefits will remain
consistent with the existing State Plan for all children, pregnant women, medically frail, and
other traditional low-income (non-expansion) Medicaid populations transitioning to Kentucky
HEALTH. Additional details regarding the ABP benefits will be included in the State’s ABP
Medicaid State Plan amendments.
Table 3.1.2(A): Benefits Provided*

Benefit

Description of Amount, Duration and Scope

Outpatient Services (Ambulatory Patient Services)
Physician Services Coverage for office visits and physician services,
specialists may require prior authorization.
Outpatient
Coverage for outpatient hospital and clinic services.
Hospital Services
Prior authorization is required for some services.
Rural Health Clinic Same limitations when provided by the rural health
Services
clinic as when provided by the usual ambulatory care
provider.
Home Health Care Limited to 60 visits per year. Prior authorization
requirements may apply.
Telehealth

Chiropractic
Podiatry

Complies with Kentucky benefit mandate to not
exclude a service from coverage solely because the
service is provided through telehealth.
Limited to 1 visit per day and 26 visits per covered
person per benefit year.
Covered but limited to medically necessary care i.e.
diabetes care.

Emergency Services
Emergency
Transportation to an emergency department for
Transportation
medical emergencies.
Emergency
Covers emergency physicians and facilities.
Services
Hospitalization
Inpatient Hospital Covered.
Services
Inpatient Physician Covered.
Services
Maternity and newborn care
Prenatal and
Covered.
postpartum care
Delivery and
Covered.
inpatient
maternity services
Nurse-midwife
Covered.
services
Expanded Services Services for pregnant women are covered at the level
for Pregnant
of the Kentucky State Plan.
Women –
22

Reference
Mandatory 1905(a)(5)
Mandatory 1905(a)(2)
Mandatory 1905(a)(2)

Mandatory for certain
individuals 1905(a)(7)
Kentucky Benefit
Mandate
Optional 1905(a)(6)
Optional 1905(a)(6)

Optional 1905(a)(29),
42 CFR 440.170(e)
Optional 1905(a)(29),
42 CFR 440.170(e)
Mandatory
1905(a)(1))
Mandatory 1905(a)(5)

Mandatory 1905(a)(5)
Mandatory 1905(a)(1

Mandatory
1905(a)(17)
Optional 1902(e)(5)

Benefit

Description of Amount, Duration and Scope

Additional
pregnancy-related
and postpartum
services for a 60day period after
the pregnancy
ends
Mental health services and addiction treatment
Inpatient mental
Includes behavioral health services.
health and
addiction
treatment
Outpatient mental Includes behavioral health services.
health and
addiction
treatment
Prescription drugs
Prescribed Drugs
Covered.
Rehabilitative and habilitative services and devices
Physical Therapy
30 visits per calendar year limit.
Occupational
30 visits per calendar year limit.
Therapy
Services for
30 visits per calendar year limit.
individuals with
speech, hearing
and language
disorders
Cardiac
30 visits per calendar year limit.
Rehabilitation
Skilled Nursing
Limited to 30 days per benefit period.
Facility
Laboratory services
Laboratory and X- Some imaging services require a prior authorization.
Ray Services
Preventive services
Preventive
“A” and “B” services recommended by the United
Services
States Preventive Services Task Force, including
recommended smoking cessation services; Advisory
Committee for Immunization Practices (ACIP)
recommended vaccines; preventive care and screening
for infants, children, and adults recommended by
HRSA’s Bright Futures program/project; and additional
preventive services for women recommended by the
Institute of Medicine (IOM).
Weight Loss
Limited to telephonic and online health coaching.
programs
23

Reference

Mandatory 1905(a)(1)

Mandatory
1905(a)(2),
Mandatory 1905(a)(5)

Optional 1905(a)(12)
Optional 1905(a)(11)
Optional 1905(a)(11)
Optional 1905(a)(11)

Optional 1905(a)(11)
Mandatory 1905(a)(4)

Mandatory 1905(a)(3)

Optional 1905(a)(13)

Optional 1905(a)(13)

Benefit

Description of Amount, Duration and Scope

Reference

Pediatric services
EPSDT

Limited to children under 21 years of age; Prior
Mandatory 1905(a)(4)
Authorization required for orthodontia. Provided in
accordance with benefits documented in the State
Plan.
* Prior Authorization Requirements may apply to benefits in accordance with standard industry practice.
Table 3.1.2(B): Benefits Not Provided

Benefit
Private Duty
Nursing
Non-Emergency
Medical
Transportation
Hearing Exams
Hearing Aids

Description of Amount, Duration and Scope
Not Covered.
Not Covered. Waiver requested.

Not covered except for coverage provided via EPSDT benefit
for those under age 21.
Not Covered except for coverage provided via EPSDT benefit
for those under age 21.

Reference
Optional
1905(a)(8)
Optional
1905(a)(29)
Optional
1905(a)(13)
Optional
1905(a)(29)

3.1.3 My Rewards Account Benefit
Kentucky HEALTH carves out vision and dental services for the new adult group; however, this
benefit change will occur three months following the initial program implementation date of the
program to allow members additional time to accrue funds in their My Rewards Account, as
these benefits are only provided through this account. Additional optional benefits, including
over the counter medications and gym membership, can also be accessed via this account. The
My Rewards Account provides a benefit incentive program for individuals that meet health and
community engagement goals as discussed in Section 4.1.2.
Table 3.1.3: My Rewards Account Vision and Dental Carve-out and Additional Benefits

Additional services available through My Rewards Account
Vision Services
Dental Services

Over the counter
medications
Gym memberships

Benefits available as a carve-out for the adult group
using their My Rewards Account. These services will be
provided in accordance with the State Plan for all other
Kentucky HEALTH populations.
Benefits available for adults eligible for the waiver
through their My Rewards Account.

Optional 1905(a)(6)
Optional 1905(a)(10)

Optional 1905(a)(12)
1115

3.1.4 Educational Support
Educational attainment is a predictive indicator of health and economic security. However,
Kentucky ranks 46th in the nation for percentage of adults 25 or older with a high school diploma

24

or equivalency. 37 In addition, GED certification attainment rates in Kentucky have declined
dramatically in recent years, by more than 76%.38 Recognizing that costs may be a significant
barrier to GED attainment, Kentucky HEALTH will seek to cover the costs of the member’s out of
pocket expenses associated with completion of the GED exam for any adult Kentucky HEALTH
member without a high school diploma. This benefit will be available to the expansion adult
group, as well as other adults on Kentucky HEALTH receiving State Plan benefits, as described in
Table 3.1 above.

3.2 Employer Premium Assistance Program
The State currently operates a small Health Insurance Premium Payment (HIPP) program providing
premium assistance to eligible individuals with access to employer-sponsored insurance (ESI). The
Kentucky HEALTH employer premium assistance program builds upon this existing program, which will
be modified to include all Kentucky HEALTH eligible members through the introduction of family
coverage, mandatory participation for members with ESI participating in Kentucky HEALTH longer than
one year, and member cost-sharing requirements aligned with Kentucky HEALTH premium
contributions.
Eligible employer plans must be cost-effective for the State. The State will ensure that the employersponsored plan is cost-effective in accordance with the current methodology for HIPP established in the
State Plan. Specifically, a plan will be determined cost-effective when the cost of paying the premiums,
coinsurance, deductibles and other cost-sharing obligations, as well as additional administrative costs is
estimated to be less than the amount paid for the member’s participation in the standard Kentucky
HEALTH program. Once determined eligible, the employer premium assistance program will subsidize
the member’s cost-effective employer plan by paying the member an advance premium reimbursement
payment to cover the costs of the employee’s share of the premium before it is deducted from the
employee’s paycheck in accordance with the employer’s standard practice. The State will implement a
system to ensure members are maintaining coverage before monthly payments are made. Like all other
Kentucky HEALTH members, individuals enrolled in their employer-sponsored health plan will be
required to pay a sliding scale monthly premium payment based on family income consistent with the
amounts established in Section 4.2. The advanced reimbursement payment from the State will deduct
the individual’s required premium contribution.
Once enrolled, the member will have full access to their employer-sponsored health plan benefits and
network providers. The Kentucky HEALTH program will act as a secondary payer to the employer plan.
Therefore, members will not be subject to additional cost-sharing beyond the flat rate monthly premium
required by the State. In addition, the program will wrap-around benefits applicable to their eligibility
group to ensure that members have access to all Kentucky HEALTH benefits (and, if applicable, KCHIP
specific benefits) not otherwise reimbursed by their employer plan. In addition, the employer premium
assistance program will cover all cost-sharing, including copayments and deductibles, required by the

37

Approximately 83.5% of Kentuckians 25 years of age and ol der have completed high school or high
school equivalency. U.S. CENSUS BUREAU, Educational Attainment, 2010-2014 American Community Survey 5 Year
Estimates, available at:
http://factfinder.census.gov/faces/tableservices/jsf/pages/p roductview.xhtml?pid =ACS_14_5YR_S1501&src=pt
38 KENTUCKY CENTER FOR ECONOMIC POLICY, FACING CHALLENGES WITH THE NEW GED TEST IN
KENTUCKY (2015), available at http://kypolicy.org/dash/wp-content/uploads/2015/12/2015-KY-GED-Report3.pdf.

25

employer plan, such that the member will not be exposed to any cost-sharing in excess of their required
monthly premium contribution.
As an additional benefit, individuals enrolled in the employer premium assistance program will also be
provided a My Rewards Account, as described in more detail in Section 4.1.2. Individuals in the employer
premium assistance program will have the opportunity to earn incentive dollars for the completion of
community engagement or health related activities. Members may use the account to purchase
enhanced benefits not otherwise covered in the base Kentucky HEALTH benefit package, and therefore
will not be wrapped around their employer plan. For example, members enrolled in the employer
premium assistance program may use the account to purchase over the counter medication or a
membership to a gym.

3.3 Populations Exempt from Alternative Benefits Plans
3.3.1 Medically Frail
Individuals in the expansion population who meet the definition of medically frail will be
enrolled in Kentucky HEALTH. In accordance with 42 CFR §440.315(f), a person will be
determined medically frail if the individual has a disabling mental disorder (including serious
mental illness), chronic SUD, serious and complex medical condition, or a physical, intellectual or
developmental disability that significantly impairs their ability to perform one or more activities
of daily living. For example, medically frail conditions may include, but are not limited to active
cancer, aplastic anemia, blood clotting disorders, chronic alcohol or substance abuse, and
mental illness, including major depression or bipolar disorder. In addition, individuals otherwise
eligible for Kentucky HEALTH who are either receiving hospice care, diagnosed with HIV/AIDs, or
eligible for Social Security Disability Insurance (SSDI) will automatically be determined medically
frail upon verification of the qualifying condition, and will not be subject to the assessment
process described below.
Generally, individuals will be identified as potentially medically frail in several ways: (i) member
self-identification to the MCO; (ii) provider identification and referral to MCO; and (iii) MCO
identification of high-risk individuals through a standardized state approved health risk
assessment and available claims data. Once identified, individuals not otherwise qualifying
under one of the automatic medically frail categories will be reviewed and assessed for
medically frail. While the MCO will collect the necessary information to complete the
assessment, the approval process will be based on objective criteria established by the State.
This process will evaluate the severity of the member’s health conditions and assign a risk score
based on objective criteria, such as specific underwriting guidelines. Individuals with qualifying
conditions and scores would be determined medically frail. While this medically frail assessment
and determination process will rely primarily on available claims data, new members or newly
diagnosed individuals without significant claims history of their health condition will also have
the opportunity to submit additional information for consideration. Individuals will have the
ability to appeal the medically frail determination in accordance with standard grievance and
appeals processes.
Medically frail individuals will receive State plan benefits, which include non-emergency
transportation. In addition, medically frail individuals will be exempt from copayments under
the Kentucky HEALTH waiver, as detailed in Section 4.2.1.
26

3.3.2 Pregnant Women and Low-Income Families
The following populations covered by Kentucky HEALTH are exempt from the benchmark
equivalent benefit package and will be provided the standard Medicaid State Plan benefits,
including non-emergency transportation (NEMT) coverage:




Pregnant women;
Children under age 19; and
Parents and caretaker relatives eligible pursuant to Section 1931.

In addition, all children enrolled in Kentucky HEALTH or the employer premium assistance
program will continue to be provided full EPSDT benefits.

4 Cost-Sharing
The cost-sharing structure of Kentucky HEALTH differs from the existing State Plan, which currently
imposes copayments for services. In lieu of these copayments, Kentucky HEALTH requires all members
(except pregnant women, children, and medically frail) to contribute to the cost of their healthcare
coverage through the payment of monthly premiums, as detailed in Section 4.2.39 While Kentucky
HEALTH encourages members to make upfront monthly premium contributions to prepare for
commercial market coverage policies, individuals at or below 100% FPL may elect to not make their
required premium payments and, instead, continue to be charged copayments for services. The overall
Kentucky HEALTH cost-sharing structure is designed to introduce members to critical commercial market
features, including making timely monthly premiums, tracking deductibles, and managing a healthcare
account.

4.1 Member-Managed Healthcare Accounts
Kentucky HEALTH will be structured as a consumer-driven, high deductible health plan. Members will
be provided two member managed healthcare spending accounts, one to cover deductible expenses
and the other (the My Rewards Account) to accrue savings and earned incentive dollars to purchase
optional enhanced benefits. The accounts will work together, creating incentives for members to obtain
preventive care, participate in disease management programs, and prudently manage their spending
from both accounts. In addition, member oversight and control of the accounts will provide beneficiaries
the skills and training to help prepare them to eventually manage health savings accounts or flexible
spending accounts available in the private market.
Pregnant women and children enrolled in Kentucky HEALTH will not be required to make monthly
premium contributions, nor will their benefit plans include a deductible. Therefore, these covered
populations will not be provided a deductible account. However, pregnant women are eligible to earn
incentive dollars and utilize the My Rewards Account.

4.1.1 Deductible Account
Similar to most commercial health products and those offered in the Marketplace, Kentucky
HEALTH will include a $1,000 deductible that applies to all non-preventive healthcare services.
However, each member will be provided a fully funded deductible account equal to $1,000,
39

Pregnant women and children are exempt from a ll cost-sharing requirements of the waiver. However, while
medically frail members are not subject to cost-sharing as a condition of participation, monthly premiums will be
required for medically frail members to obtain the benefits of the My Rewards Account.

27

which will be immediately available to cover the initial medical expenses for the deductible.
Members will receive monthly account statements detailing the cost of each service utilized
during the month and the overall account balance so the member may learn about the cost of
healthcare services and begin to actively manage the account and their healthcare utilization.
To further encourage this effort, the deductible account will provide financial incentives to
prudently manage the State funds in the account. At the end of the benefit period, members
who have a balance remaining in their deductible account may transfer 50% of the total
remaining balance to their My Rewards Account to purchase enhanced benefits. The deductible
account exposes members to the cost of healthcare and encourages them to act as consumers
of healthcare by evaluating cost and quality as they seek care.

4.1.2 My Rewards Account
All Kentucky HEALTH and employer premium assistance program members, with the exception
of children, will be provided a My Rewards Account, which may be used to access benefits not
covered in the base benefit plan. In addition to the balances carried over from the Kentucky
HEALTH deductible account each year, the My Rewards Account will also contain incentive
dollars that members may earn by completing specified activities. Qualifying activities are
designed to improve member health (i.e. disease management class) or to increase community
engagement (i.e. volunteer work, public service opportunities, or job search and training
activities). In addition, adult Kentucky HEALTH members without a high school diploma will also
be rewarded for improving their employability through obtaining a GED. To remove potential
cost barriers for taking the exam, Kentucky HEALTH will cover the costs for the out-of-pocket
expenses associated with completing the GED exam as a program benefit.
Some activities can be accomplished immediately upon enrollment to quickly bolster the My
Rewards Account, such as completion of a new member health risk and/or an employment
28

assessment within the first quarter following plan enrollment. In addition, each reward activity
type will be capped so a member must complete different activities in order to receive
additional funds in the reward account. Also, for purposes of clarification, community
engagement activities listed in the chart below will only qualify for reward activity dollars for
hours completed in excess of the minimum requirements established for the community
engagement and employment initiative, detailed in Section 2.2. For example, individuals who
complete work search activities as part of their program eligibility requirements will not be
eligible to receive credits to their My Rewards Account for the same work search activities. My
Rewards Account credits will only be provided for community engagement activities in exce ss of
the minimum amount required to maintain eligibility.
Incentive activities may include any of the activities detailed in the table below, which will be
further refined prior to program implementation.40 In addition to the general activities below,
pregnant women will be able to obtain reward dollars for completion of activities important to
promoting healthy babies, such as completion of prenatal care visits.
Table 4.1.2(A): My Rewards Account Earned Incentive Activities
Community Engagement Activities
Health Incentive Activities
Activity
Earned $*
Activity
Earned $*
Register with Career
$150 (oneComplete health risk assessment
$25 (1st
Center and complete job
time only)
with MCO
quarter, limit
needs assessment
one per year)
Participate in qualifying
$10 per event Complete diabetes,
$50 per
community service activity (max $50 per cardiovascular, or other chronic
course
(including caretaking
year)
disease management, or weight
services)**
management course
Complete job skills
$25 per
No inappropriate ER Visits Within $20 per year
training or training with
course (max 12 months
career coach
$50 per year)
Complete job search
$10 per
Sign non-smoking pledge &
$50 per
activities
month
participate in smoking cessation
course
activity
Employment-related
$25 per
Sign drug-free pledge &
$50 per
education or GED-prep
course (max participate in drug addiction
activity
classes
$50 per year) counseling services
Passing the GED exam
$50 (one-time Complete well-child, preventive
$10 per
only)
dental exam, or vision screening
activity (max
for dependent child.
$40 per year)
In addition to the community engagement and health incentives reward activities, the My
Rewards Account will also incentivize appropriate healthcare utilization, including appropriate

40

*Amounts and listed activities are for illustrative purposes only and may be adjusted.
** Qualifying caregiving services include those provided for a non-dependent relative or other person
with a chronic, disabling health condition.

29

use of hospital emergency departments as well as keeping scheduled appointments for
healthcare services.
Kentucky HEALTH encourages all members to seek care in the most appropriate setting possible,
including avoiding the use of hospital emergency departments (one of the most costly settings)
except in the case of a true emergency. In 2015, nearly 125,000 Medicaid managed care
enrollees utilized a hospital emergency room for a non-urgent condition.41 Therefore, consistent
with the plan structure, the Kentucky HEALTH emergency room utilization policy relies on
complementing incentives and disincentives. To encourage appropriate emergency room
utilization, members will be eligible for a $20 financial contribution to the ir My Rewards Account
for each year in which the member avoids unnecessary emergency room services and seeks
appropriate alternative providers for care. In addition, Kentucky HEALTH will simultaneously
discourage inappropriate emergency room utilization by deducting funds from the member’s
My Rewards Account for each inappropriate emergency room visit. The amount of the penalty
will escalate in accordance with the table below for each subsequent unnecessary emergency
room visit. The State will also ensure that hospitals comply with 42 CFR 447.54(d) in educating
members about appropriate alternative settings.
Table 4.1.2(B): Escalated My Reward Account Penalty for Inappropriate ER Utilization

Inappropriate ER Visit
Visit
nd Visit
2
3rd Visit or More
1st

Account Deduction
$20
$50
$75

In addition, the State will consider developing a similar complementing incentive and
disincentive feature related to excessive missed healthcare appointments, whereby members
may earn reward dollars for keeping all scheduled appointments in the benefit period, or, in the
alternative, lose dollars from the account for each healthcare appointment missed without
adequate cancellation or good cause. The proposed My Rewards Account penalty amounts are
not member copayments and do not utilize member out-of-pocket funds.
Members maintain the My Rewards Account as long as they are enrolled in the program and
continue to make their required monthly premium contributions. Each year the full balance of
the My Rewards Account will roll-over to the subsequent year to be used for the purchase of
qualifying enhanced benefits. In addition, as an incentive and reward for members to obtain
employment, the balance of the My Rewards Account will be transferable to reward members
who are successful in finding a path to long-term stable employment and independence from
public assistance. Specifically, former members who are able to maintain stable employment
and remain commercially insured without Medicaid for at least eighteen months may apply to
receive the balance remaining in their My Rewards Account, up to $500.

41

Kentucky Department for Medicaid Services, CY 2015 Non-Emergent ER Visits (May 26, 2016) (on file
with the State).

30

This reward opportunity not only provides an additional work incentive compl ementing
Kentucky HEALTH community engagement and employment initiative requirements, it also
provides members an incentive to accumulate earned incentives dollars in the account and to
prudently manage those funds. Members that leave the program but transition back to
Kentucky HEALTH prior to eighteen months will have their My Rewards Account reactivated at
its ending balance and will be able to access the full balance of their account for the purchase of
enhanced services.
Ultimately, the two member managed accounts coordinate incentives to drive member behavior in
positive ways. The deductible account incentivizes the member to prudently manage the account by
obtaining preventive care and seeking price transparency in order to maximize roll-over amounts.
Similarly, the My Rewards Account encourages members to actively participate in healthy behaviors,
such as participation in disease management courses. In addition, the member is incentivized to
carefully manage the My Rewards Account to maximize the potential cash-out reward. Fundamentally,
through these many layered incentives, Kentucky HEALTH empowers members to become active
members in their healthcare.

4.2 Member Required Contributions
As a condition of eligibility, all Kentucky HEALTH members, with the exception of medically frail
individuals, pregnant women, and children, will be required to make sliding scale flat rate monthly
premium payments based on family income. The payment rates are affordable and established to be
less than 2% of household income across each income threshold payment band. As these amounts are
established based on household income, the premium payment applies towards all Kentucky HEALTH
members in the household, such that premiums will not be collected on a per person basis. As long as
the required monthly premiums are paid, Kentucky HEALTH will not require additional cost-sharing for
services. Except for medically frail members who are exempt, copayments for healthcare services will
only be charged for Kentucky HEALTH enrolled adults with income below 100% FPL who fail to pay their
required premiums.
Table 4.2(A): Kentucky HEALTH Sliding Scale Premium Contribution Amounts
Federal Poverty Level
Premium Payment
Under 25% FPL
$1.00 per month
25-50% FPL
$4.00 per month
51-100% FPL
$8.00 per month
101-138% FPL
$15.00 per month
Consistent with the goal of encouraging community engagement, the State will permit third parties to
pay required premium payments on behalf of a member. Non-profit organizations, provider groups, and
other third parties may assist members in their monthly premium responsibilities. However, these
premium payments are critical to member engagement, as studies have shown that making regular
monthly premiums may actually lead to better health outcomes for members. In Indiana, where
Medicaid eligible adults are required to pay monthly premiums equal to 2% of income, members making

31

contributions had higher satisfaction rates, higher primary and preventative care utilization, higher drug
adherence, and lower emergency room use than those who did not.42
In addition, Kentucky HEALTH is intended to be a temporary stepping stone for able-bodied low-income
adults. It seeks to encourage employment and assist individuals as they move from dependence on
public assistance to independence. To avoid “coverage cliffs” and help prepare members to transition to
Marketplace coverage, individuals with income greater than 100% FPL will be subject to gradually
increasing premium contributions beginning in the member’s third year of enrollment. The cost-sharing
will increase incrementally by 50% of the original base premium amount each year the individual
remains on Kentucky HEALTH, in accordance with the table below. The escalating payment rates
continue to be affordable, and even at the maximum premium amount of $37.50, the payment
represents less than 4% of income (below Medicaid’s 5% of income maximum allowable cost-sharing
amount). The increasing premium requirement will also be applied to individuals enrolled in employer
premium assistance program receiving premium assistance to participate in their employer-sponsored
health plan. Ultimately, the increased cost-sharing requirements bring the premium amounts more in
line with the premiums required in the Marketplace, and discourages Medicaid dependency by
preparing individuals for the costs associated with commercial or Marketplace coverage.
Table 4.2(B): Sliding Scale Increased Premium Amounts for Individuals Over 100% FPL
Year 1-2
Year 3
Year 4
Year 5+
FPL
Premium
Premium
Premium
Premium
101-138% FPL
$15.00
$22.50
$30.00
$37.50

4.2.1 Non-Payment Penalties
Members will be provided a 60-day grace period to make their required monthly premium
payment. Similar to commercial plans, Kentucky HEALTH will impose consequences for noncompliance in order to help educate members about standard commercial market policies.
Therefore, individuals who do not elect to pay a required premium payment within sixty
calendar days from the due date will face a six-month non-payment penalty. The non-payment
penalty varies based on whether the member has income above or below federal poverty in
accordance with the table below. However, recognizing that Kentucky HEALTH is intended to
educate and ease individuals into commercial market policies, members will have the
opportunity to end their non-payment penalty period sooner than six months, as detailed below
in Section 4.2.2.
Table 4.2.1: Non-Payment Penalty
Member FPL
Non-Payment Penalty
Above 100%  Disenrolled from Kentucky HEALTH
FPL
 Re-enrollment waiting period of six months
At or below
100% FPL





State Plan copayments required for all services
$25 is deducted from the My Rewards Account
My Rewards Account is suspended

42

Early Re-Entry Option



Pay past debt;
Pay premium for
reinstatement
month; and

THE LEWIN GROUP, I NDIANA HEALTHY I NDIANA PLAN 2.0 I NTERIM EVALUATION REPORT (2016), available at
http://www.in.gov/fssa/hip/files/Lewin_IN%20HIP%202%200%20Interim%20Evaluation%20Report_FINAL.pdf.

32

Medically
Frail






Pregnant
Women and
Children

o Not able to use funds in account
o Not able to accrue funds in account
No impact to eligibility
My Rewards Account is suspended
o Not able to use funds in account
o Not able to accrue funds in account
No impact to eligibility
No copayments required

Not applicable. Exempt from all cost-sharing
requirements.



Participate in
financial or health
literacy course

Not applicable

Members with annual income above 100% FPL, who are not medically frail or otherwise exempt
from cost-sharing, will be disenrolled from Kentucky HEALTH for non-payment following the
sixty-day grace period. Further, consistent with the commercial market, members terminated
from Kentucky HEALTH due to non-payment will be required to wait six months to re-enroll,
unless they meet the criteria for early re-entry as detailed below in Section 4.2.2. This policy
helps prepare individuals for Marketplace policies, which suspend claims payment after thirtyday payment delinquency, terminate coverage after ninety days, and prevent reenrollment until
the next annual open enrollment period.
Individuals who are determined medically frail in accordance with Section 3.3.1 are not subject
to disenrollment due to non-payment of premium, even if income is greater than 100% FPL. In
addition, medically frail individuals are exempt from the imposition of copayments following
non-payment of premium, however, access to the member’s My Rewards Account will continue
to be conditioned on payment of premiums.
Individuals below the FPL that choose not to make payments will not lose coverage. However, in
lieu of disenrollment, individuals with annual income at or below 100% FPL will be subject to a
six-month non-payment penalty period in which they will be subject to copayments. Required
copayments during the member’s non-payment penalty period will be equal to the current
copayments scheduled in the Kentucky Medicaid State Plan, which range from $3.00 for
physician office visits and up to $50.00 for hospital inpatient services. A detailed copayment
schedule is set forth in 907 Kentucky Administrative Regulations 1:604. In addition to
copayments, $25.00 will be deducted from the member’s My Rewards Account, and the account
will be suspended for six months, thus prohibiting access to the enhanced benefits. During this
period, the account is effectively “frozen” and members will not be permitted to use the
account or earn additional contributions to the account. The potentially increased cost-sharing
along with the reduced benefits create an incentive for members to make consistent monthly
premium payments to maintain health insurance coverage, while also maintaining a safety net
for individuals who are below the FPL or medically frail.

4.2.2. Early Re-Entry Opportunity
While the penalties above are created to encourage compliance, Kentucky HEALTH ensures that
members have opportunities to return to full benefits at any time. All members in a non33

payment penalty period will be provided the opportunity to re-enter the standard program with
full access to their plan and the My Rewards Account benefits prior to the expiration of the sixmonth non-payment penalty period. Early re-entry requires the individual to pay outstanding
premium payments and complete a financial or health literacy course. Specifically, the individual
would be required to pay a one-time payment equal to three months of premium contributions.
This re-entry premium amount would effectively cover the two months of debt in which the
member received healthcare coverage during the 60-day grace period prior to the effective date
of the non-payment penalty, as well as the advance premium payment required to restart
coverage.
In addition to the re-entry payment, individuals seeking early re-entry will be required to attend
a financial or health literacy course. The financial literacy course will educate members on the
basics of money management to assist individuals in increasing income, paying debt, and
achieving financial stability, while the health literacy course will educate members on
enrollment policies, managing healthcare expenditures, and appropriate use of healthcare
services. Completion of a course is voluntary but will allow members to regain eligibility prior to
the end of the six-month non-payment penalty period.

4.3 Cost-Sharing Exemption
Pregnant women and children will be exempt from all cost-sharing required under the waiver. In
addition, medically frail members will not be required to pay premiums as a condition of participation in
Kentucky HEALTH. However, premium payment will be a condition to access the member’s My Reward
Account. In the event of non-payment, all medically frail members will be exempt from the imposition of
copayments. In addition, Kentucky HEALTH covers several other populations exempt from alternative
benefit plan (ABP) enrollment, and these populations will be subject to modified cost-sharing as detailed
in the table below.
Table 4.3: Cost-Sharing for Exempt Populations
Applicable
Children
Pregnant Women
Policies
Premiums
No premiums
No premiums
Copayments
Consistent with
No copayments
current State Plan
Deductible
No
No
Account
My Rewards
No
Yes
Account
Non-Payment Not applicable
Not applicable
Penalty

Section 1931
Parents
Yes
Copayments only if
fail to pay premium
Yes

Medically
Frail
Optional
No copayments
Yes

Yes

Yes

Copayments and
Suspension of My
Rewards Account

Suspension of My
Rewards Account

5 Delivery System and Payment Rates for Services
Consistent with the current Medicaid expansion program, Kentucky HEALTH will continue to be
operated through a managed care delivery system. In addition to the new requirements for members,
Kentucky HEALTH will also increase accountability of the healthcare system by adding new payment
34

incentives aimed at furthering the “Triple Aim” of improving the patient experience, improving
population health, and lowering costs.

5.1 Delivery System Reforms
The creation of the Kentucky HEALTH program is just one part of an overall Medicaid transformation
initiative being undertaken by the State to improve quality, access, efficiency and value in healthcare.
Through this demonstration project, Kentucky will make significant delivery system reforms to improve
quality and outcomes, including efforts related to substance use disorders, chronic disease
management, and general managed care reforms. Further, to support each of these delivery system
initiatives, the State will continue to strengthen its data collection efforts. The State will implement an
initiative to improve data collection, including appropriate interoperability of data, and ensure that data
driven decisions are aligned with overall goals to further improve quality and outcomes across the
delivery system.

5.1.1 Substance Use Disorder Delivery System Reform Pilot Program
A report from the Substance Abuse and Mental Health Services Association (SAMHSA) estimated
the prevalence of SUD among Medicaid eligible adults at 21%.43 Applied to Kentucky’s expansion
population, it is estimated that nearly 90,000 newly enrolled Kentuckians may have a SUD
requiring treatment. In 2014 with the expansion of Medicaid, Kentucky greatly expanded
coverage to mental health and SUD treatment options, allowing Medicaid recipients to receive
coverage for the full spectrum of inpatient and outpatient SUD services. However, coverage of
benefits means little without access to providers.
Federal law generally prohibits federal financial participation for medically necessary Medicaid
services provided to adults aged 21 through 64 in certain facilities that meet the federal
definition of an institution for mental disease (IMD), specifically, free-standing psychiatric
hospitals with more than 16 beds. In Kentucky, there are 26 qualified mental health facilities
capable of providing covered mental health and SUD services to Medicaid recipients with SUD,
however, they are prohibited from doing so due to the IMD exclusion. Instead, individuals in
need of mental health or SUD inpatient services must either travel long distances out of their
communities to access services and/or experience long wait times for a bed to open, putting the
individual at risk of experiencing a crisis and ending up in either the crimi nal justice system or
high-cost hospital emergency departments.
Kentucky currently faces a drug abuse epidemic, and access to the Medicaid program’s
comprehensive mental health and SUD benefits is critical. In July 2015, CMS issued a letter
indicating a willingness to offer states a waiver of the IMD exclusion, provided the State also
develops broad based reforms regarding the provision of SUD se rvices to Medicaid recipients.
The State will explore this opportunity through pilot programs in ten to twenty select high-risk
counties. Counties will be identified based on the recent CDC HIV/hepatitis C outbreak study

43

SUBSTANCE ABUSE AND MENTAL HEALTH SERVICES ADMINISTRATION, BEHAVIORAL HEALTH TREATMENT NEEDS
ASSESSMENT TOOLKIT FOR STATES, PUB. NO. SMA13-4757 (2013), available at
https://store.samhsa.gov/shin/content/SMA13-4757/SMA13-4757.pdf.

35

described in Section 1, the State’s existing Shaping Our Appalachian Region (SOAR) initiative, 44
and public input received during the demonstration waiver public notice and comment period.
The pilot program will seek to increase access to mental health and SUD services through a
waiver of the IMD exclusion to allow federal financial participation for covered services provided
to Medicaid eligible adults ages 21 through 64 residing in an IMD for short-term residential stays
of up to thirty days. The pilot programs are intended to evaluate the impact of increased access
to treatment in IMD’s. The State will work with CMS in the design of the pilot project, examining
the current mental health and SUD delivery system for best practice improvements related to
standards of care, inclusion of recommended SUD as well as HIV quality indicators, care
coordination between levels and settings of care, and strategies to address prescription drug
abuse and opioid use disorder.
In addition, Kentucky intends to align standards of care for SUD treatment with the national best
practice criteria set forth by the American Society of Addiction Medicine in the pilot counties. To
further improve the quality and consistent delivery of these services, the State will also require
certain SUD treatment providers to become accredited.

5.1.2 Chronic Disease Management
Several Kentucky HEALTH program components have been designed to support existing
statewide efforts to improve chronic disease prevention and management. For example, the
Kentucky HEALTH My Rewards Account, described in Section 4.1.2, will incentivize members to
participate in a variety of health activities including health risk assessments, chronic disease or
weight management courses, and smoking cessation programs, many of which are already
offered through State and local health departments across Kentucky.
The State will also explore encouraging, through its contracts, MCO participation in existing
initiatives designed to drive public health outcomes and focused on Kentucky Department for
Public Health (DPH) key priorities, which currently include, but are not limited to, diabetes,
obesity, cardiovascular disease, lung cancer, and substance use disorder. State-based programs
include, but are not limited to, the Kentucky Diabetes Prevention and Control Program and the
Kentucky Tobacco Prevention and Cessation Program.
In addition, the State will continue participation in existing federal programs, such as the
National Diabetes Prevention Program (DPP), a Centers for Disease Control and Prevention
(CDC)-supported program aimed at preventing or delaying type two diabetes for at-risk
individuals. The DPP consists of a series of group counseling sessions focused on nutrition and
physical activity targeted to individuals that meet specific at-risk diagnostic criteria, including
body mass index greater than 24 and elevated blood sugar levels within pre -diabetic range. The
DPP has been evaluated and shown effective at preventing the development of type 2 diabetes
by the National Institutes of Health and the CDC.

5.1.3 Managed Care Reforms
All of the populations that will transition to Kentucky HEALTH currently receive medical benefits
through an MCO. Kentucky HEALTH will continue to provide services through the current MCOs.
44

The SOAR initiative seeks to expand job creation, enhance regional opportunity, innovation, and
identity, improve the quality of life, and support all those working to achieve these goals in Appalachian Kentucky.

36

However, in order to implement the programmatic changes resulting from this Section 1115
demonstration project, the State will update existing managed care contracts. While the State
has already taken a critical look at its managed care rates, it will continue to make several
additional contract reforms to reduce the inflated managed care profits which are nearly five
times the national average.45 The contracts will be further revised to control the rate of growth
and trends, ensure that the MCOs are spending more of their capitation on medical benefits,
and incorporate other contract efficiencies to ensure value. In addition, MCOs will no longer be
able to waive copayments.
In addition, the Kentucky HEALTH contract revisions will seek to further the “Triple Aim” of
improving the patient experience, population health goals, and lowering costs. First, this waiver
will add initiatives to the managed care program consistent with industry standards and aligned
with CMS quality payment guidelines. The MCOs will be contractually required to develop
innovative provider contracting strategies aimed at transitioning from a reimbursement model
that rewards providers solely based on volume, to a model that aligns payment incentives with
quality performance and outcomes. Through this initiative each MCO will be required to ensure
a meaningful portion of its total Medicaid population is participating in a purchasing
arrangement that aims to achieve improvements in population health outcomes and decrease
total costs of care for the participating population.
In addition, the State will introduce new MCO payment incentives for quality performance and
outcomes for both the MCOs and providers participating in Kentucky HEALTH. The MCOs
operating Kentucky HEALTH will be subject to a quality withhold, in which a portion of the
capitation payment is withheld and eligible to be paid to the MCO following achievement of
specified quality health outcomes. The outcome measures will be designed to align with the
overall Kentucky HEALTH program goals, such as increasing the number of members who
receive preventive services, reduced smoking rates, and demonstrated improvement in health
of members participating in disease management programs (e.g., diabetes programs).
MCOs will also be required to implement a provider bonus program, in which providers may
earn a quality bonus from the MCO. The bonus will be aligned to encourage provider
participation and support of the same member health activities incentivized by the My Rewards
Account. By ensuring that the MCO, provider, and member incentives are aligned, Kentucky
HEALTH seeks to make a measurable impact on member health over the course of the five-year
demonstration period. Further, the State will pursue several additional managed care system
reform measures aimed at improving the efficiency and responsiveness of the current managed
care delivery system. For example, on the enrollee level, the State will look to implement
strategies to improve MCO call center performance. For providers, the State will include MCO
contract provisions aimed at aligning processes and establishing consistencies in administrative

45

The average underwriting ratio (profit margin) for Kentucky’s five Medicaid MCOs was reported at
11.3%, significantly above the national average of 2.6% (3.3% for expansion states). JEREMY D. PALMER & CHRISTOPHER
T. PETTIT, MILLIMAN, MEDICAID RISK-BASED MANAGED CARE: ANALYSIS OF FINANCIAL RESULTS FOR 2015 (2016), available at
http://www.milliman.com/uploadedFiles/insight/2016/medicaid-risk-based-managed-care-analysis-2015.pdf.

37

requirements across the contracted MCOs, such as formulary alignment efforts and uniform
credentialing processes.

5.2 Managed Care Delivery System
Kentucky HEALTH will utilize a statewide mandatory managed care delivery system for all populations
covered under this demonstration waiver. Only eligible members participating in the employer premium
assistance program will be exempted from mandatory managed care enrollment under this
demonstration.
Table 5.2: Managed Care Enrollment Table
Eligibility Group
Managed Care Enrollment
New adult population
Parents and other caretaker relatives
Transitional medical assistance
Pregnant women
Mandatory
Newborn Children
Infants and Children Under Age 19
Title XXI Separate CHIP Program

Note

Freedom of Choice
Waiver Requested

The State currently contracts with MCOs previously selected through a competitive procurement
process. The State intends to renegotiate and amend the existing contracts to implement Kentucky
HEALTH. Therefore, since Kentucky HEALTH will be built off of the State’s well-established statewide
managed care program, the Kentucky HEALTH managed care implementation will not be phased in, but
will rather roll-out on a statewide basis. The MCOs operating in the State are compliant with provider
network adequacy standards. However, prior to the implementation of Kentucky HEALTH, the State will
conduct readiness review to ensure operational readiness for Kentucky HEALTH.

5.3 Health Plan Choice
Consistent with current processes, Kentucky HEALTH applicants will be able to select one of the MCOs
operating statewide at the time they apply. If a member does not actively choose an MCO, the individual
will be auto-assigned to a health plan. The member will be provided the opportunity to select a new
MCO until such time that the individual makes their first premium contribution. However, once the
individual is fully enrolled and begins coverage under Kentucky HEALTH, the member must remain with
the selected MCO for the duration of the member’s twelve-month benefit period. The State will seek a
waiver of the ninety-day managed care choice period in order to mirror commercial market policies,
which do not permit health plan selection changes outside of annual open enrollment periods.
Notwithstanding the foregoing, Kentucky HEALTH members will be permitted to change MCOs at any
time during the benefit period due to one of the “for cause” reasons described in 42 CFR 438.56(d)(2) ,
such as poor quality of care.

5.4 Excluded services
All Kentucky HEALTH covered services will be provided through a managed care delivery system, except
for long-term care services. Consistent with the current processes, the MCO will not be responsible for a
member’s nursing facility costs during the first thirty days; however, if a member is admitted to a
nursing facility, the MCO will be required to cover the costs of any health services provided to the
member while the member resides in the nursing facility, for up to thirty days, until the individual is
38

disenrolled from the MCO. In addition, all covered benefits that will be wrapped around an employer
premium assistance program member’s employer-sponsored health plan will be excluded from
managed care, and will be reimbursed on a fee-for-service basis.

5.6 Fee-for-service
The only covered services that will be provided under fee for services are benefits that are wrapped
around employer-sponsored health insurance for individuals enrolled in the employer premium
assistance program. Member premiums for such individuals will be paid to the employer, and services
not covered by the employer plan will be paid on a fee for service basis to the rendering provider. Such
payments will not deviate from State Plan provider payment rates. In addition, the State may carve out
the services provided through the My Rewards Account from managed care, and reimburse on a fee-forservice basis.

5.7 Capitated payments
As the State updates the contracts with the existing MCOs, the State will also adjust the capitation rates
to reflect program changes resulting from this demonstration program. All risk-based capitation rates
will be developed based on federal regulations and actuarial standards of practice, as well as reflect the
historical experience of all populations with eligibility under this program. The capitation rate
development process will not deviate from the payments and contracting requirements under 42 CFR
428.

5.8 Quality
All quality initiatives and quality related payments will be detailed in the Scope of Work with the MCOs,
as well as the State’s quality strategy. Quality related withhold incentives will be included in the updated
MCO contracts, as described in Section 5.1.2 of this demonstration application. In addition, all MCOs will
continue to be required to submit Consumer Assessment of Healthcare Providers and Systems (CAHPS)
data. Further, MCOs will be required to report on additional quality measures and data targeted by the
State and required for the evaluation of the Kentucky HEALTH waiver.

6 Implementation of Demonstration
The State will implement the Kentucky HEALTH program on a statewide basis on or about six months
post-approval, however, this date may vary depending on the approval date from CMS. Notwithstanding
the foregoing, the Kentucky HEALTH community engagement and employment initiative may be phased
in on a county basis. Prior to implementation and enforcement of the initiative, each county will be
assessed to ensure adequate resources are available to members residing in the county seeking to fulfill
the community engagement, job training, and employment hour requirements. Further, staggered
implementation of this new demonstration initiative will allow for measured review of the policy impact.
In addition, the changes to the current vision and dental coverage will be implemented three months
after the Kentucky HEALTH waiver is implemented. This three month delay will provide members the
opportunity to maintain existing vision and dental coverage while accumulating available funds in their
My Rewards Account. During this time, the State will work with various provider and stakeholder groups
as well as the MCOs to aggressively communicate and educate members about the My Rewards Account
and changes to the benefits.
Implementation of Kentucky HEALTH will require the State to amend existing managed care contracts,
modify systems and other operational procedures, and conduct readiness review with the various State
39

vendors. In addition to these tasks, the State will also have to amend the State Plan, amend the ABP,
develop State, MCO and member education materials, and prepare to transition existing members.

6.1 Enrollment
Due to the significant enrollment in the State’s Medicaid program following the implementation of
Medicaid expansion, the State anticipates that most eligible individuals already have Medicaid coverage,
and will transition to Kentucky HEALTH from their existing Medicaid coverage. However, the State will
initiate an effort to educate members about changes and will partner with stakeholder groups
throughout the implementation process to ensure all potential members are notified of upcoming
program changes.
The State will begin targeting formal communication and education activities to enrollees and
stakeholders beginning at least ninety days prior to the anticipated implementation date. All current
Medicaid populations transitioning to Kentucky HEALTH will be notified in writing at least sixty days
prior to the implementation of changes to their benefits. At this time, members will also be notified of
their new required monthly premium amount. Upon the implementation date, all covered populations
will transition to coverage under Kentucky HEALTH, and will be provided their initial premium invoice,
which will be due no later than sixty days from the date of implementation. The State and MCOs will be
trained and prepared to assist members with questions regarding program changes, premium
requirements, and methods of making payments. Efforts will be made to allow for use of a variety of
payment methods, including money order, personal check, credit card, bank debit card, prepaid debit
card, and cash. During the initial transition, the MCOs will make outbound calls to all transitioning
members who are at risk of missing the initial payment date to encourage and assist them in making a
contribution.

6.2 Managed Care
Kentucky HEALTH will utilize existing MCOs to provide benefits to Kentucky HEALTH enrollees. The State
will not conduct procurement action prior to implementation, but will rather amend current contracts
and conduct readiness review with the MCOs prior to final implementation of Kentucky HEALTH.
However, current managed care contracts will expire during the course of the five-year demonstration
and the State will conduct re-procurement activities as necessary.

7 Demonstration Financing and Budget Neutrality
A detailed financing and budget neutrality narrative is attached as Attachment II to this demonstration
waiver application, and the detailed budget neutrality worksheet template prepared by Milliman Inc. is
attached as Attachment III.

8 List of Proposed Waivers and Expenditure Authorities
8.1 Title XIX Waivers
Below is a list of proposed waivers necessary to implement Kentucky HEALTH:
1. Eligibility: Section 1902(a)(10)(A)
 To the extent necessary to enable Kentucky to not provide medical coverage until the first
day of the month in which the Kentucky HEALTH member pays their first premium payment,

40



or for members below 100% FPL who fail to make an initial premium payment, the first day
of the month following the expiration of the sixty-day payment period.
To the extent necessary to enable Kentucky to require Kentucky HEALTH members, as a
condition of eligibility, to complete specified community engagement hours.

2. Retroactive Eligibility: Section 1902(a)(34)
 To the extent necessary to enable Kentucky to not provide medical coverage for any month
prior to the month in which the member finalized enrollment in Kentucky HEALTH.
3. Cost-Sharing: Section 1902(a)(14) insofar as it incorporates 1916 and 1916A
 To the extent necessary to enable Kentucky to require monthly premium payments not to
exceed 5% of income, but no less than $1.00 per month, for all Kentucky HEALTH members.
4. Amount, Duration, and Scope: Section 1902(a)(10)(B)
 To the extent necessary to enable Kentucky to vary cost-sharing requirements, such that
premium contribution amounts increase each year for members with income above 100%
FPL who remain on Kentucky HEALTH, not to exceed 5% of income, and to charge
copayments in lieu of premiums for individuals at or below 100% FPL who fail to make their
premium payment within the sixty-day payment period.
 To the extent necessary to allow Kentucky HEALTH members who continue to pay premium
contributions to use their My Rewards Account to purchase specified enhanced benefits not
otherwise available in the base Kentucky HEALTH benefit package.
 To the extent necessary to enable Kentucky to allow individuals to receive the benefits
provided through their employer-sponsored plan.
5. Reasonable Promptness: Section 1902(a)(3)/Section 1902(a)(8)
 To the extent necessary to enable Kentucky to delay benefits, such that benefits do not
begin until a member makes a premium contribution, or until the expiration of a sixty-day
payment period for members below 100% FPL who fail to make a premium contribution.
 To the extent necessary to enable Kentucky to prohibit re-enrollment for up to six months
for Kentucky HEALTH members above 100% FPL who are disenrolled for failure to make
their required premium contributions within sixty days of the due date.
 To the extent necessary to enable Kentucky to implement an open enrollment period fo r
Kentucky HEALTH, such that members who are disenrolled for failure to complete the
redetermination process will be required to wait until their next open enrollment period to
re-enroll (up to six months).
6. Freedom of Choice: Section 1902(a)(23)
 To the extent necessary to enable Kentucky to restrict the freedom of choice of providers
for demonstration eligibility groups.
7. Non-Emergency Transportation: Section 1902(a)(4) insofar as it incorporates 42 CFR 431.53
 To the extent necessary to relieve Kentucky of the requirement to assure non-emergency
medical transportation to and from medical providers for Kentucky HEALTH members.

8.2 Costs Not Otherwise Matchable
The State requests that expenditures related to providing services in an IMD, in participating pilot
project counties, as well as costs associated with providing GED testing fees as a covered benefit for
41

Kentucky HEALTH enrolled adults without a high school diploma, be regarded as expenditures under the
State’s Medicaid Title XIX State Plan.

9 Public Notice & Public Comment
Kentucky Department for Medicaid Services provided the public the opportunity to review and provide
input on this §1115 demonstration waiver in accordance with the requirements set forth at 42 CFR
§431.408. Governor Bevin publically announced the Kentucky HEALTH waiver application on June 22,
2016. Public notice was also provided the same day to formally open the 30-day public comment period,
which ended at 5:00 p.m. on July 22, 2016. However, in response to the volume of comments that were
submitted on the final day of the comment period, including afte r the 5:00 p.m. deadline, the State
extended the comment period through 11:59 p.m. on August 14, 2016. The extension allowed for the
numerous comments that came in after the official deadline to be incorporated, as well as allowed any
individual who was unable to comment previously the opportunity to do so.
A copy of the full public notice that announced the three public hearings is included in Attachment IV of
this waiver application. The notice was posted on the Cabinet for Health and Family Services website at
the web address of the Section 1115 waiver program’s homepage: http://chfs.ky.gov/kentuckyhealth. In
addition, the formal public notice was also published in newspapers in the Commonwealth which serve
a population of at least 50,000 (which included more areas than the minimum threshold required under
the federal regulation). Electronic copies of all documents related to the Kentucky HEALTH waiver
application were also available on the above listed waiver website throughout the comment period.
Although federal regulations only require two public hearings, the Commonwealth held three formal
public hearings in geographically distinct areas of the state during the public comment period. In
accordance with the notice, three public hearings were held on the following dates and locations as
scheduled and publicized: (1) June 28, 2016 in Bowling Green, Kentucky; (2) June 29, 2016 at the
Advisory Council for Medical Assistance (MAC) Special Meeting in Frankfort, Kentucky; and (3) July 6,
2016 in Hazard, Kentucky. In addition, although federal regulations do not require telephonic and/or
web conference capabilities be made available if at least two public hearings were held in geographically
distinct areas of the state, a toll-free conference call line was made available for the June 28th hearing,
and live internet streaming was available for both the June 28th and July 6th hearing dates. All of the
public hearings followed the same format, beginning with an overview of the Kentucky HEALTH waiver
proposal, a brief question and answer session, followed by the collection of formal public comments. A
court reporter transcribed and entered into the public record all verbal comments presented during
each of the public hearings.
On June 29, 2016, a special Medicaid Advisory Committee (MAC) meeting was held to provide an
overview of the waiver to the committee members and receive comments from the public. Prior to
taking public comment at this meeting, committee members were provided the opportunity to raise
questions or concerns about the waiver. The questions raised spanned a variety of topics and were
primarily technical in nature. For example, committee members sought clarification on how CHIP
children will be impacted, what requirements are in place for the community engagement program, how
the My Rewards Account will function, medically frail premium requirements, MCO contract term
questions and how many individuals will be impacted by the waiver. They also posed questions about
the benefit package and how the SUD program will operate. Representatives from the State provided
clarification to the questions.
42

In addition to the MAC meeting, the Kentucky HEALTH waiver was also presented to several public
legislative committee hearings throughout the course of the public comment period. Specifically, the
waiver was presented to the Interim Joint Committee on Health and Welfare on July 20, the Interim
Joint Committee on Appropriations and Revenue on July 23, and the Budget Review Subcommittee on
Human Resources on August 1. Each of these legislative hearings was open to the public, and m embers
of the legislative committees were able to ask questions and comment on the waiver.
Following both the initial public comment period as well as the extension thereof, all comments were
cataloged, summarized, and organized. In total, the State received 1,428 public comments during the
entire public comment period, including 1,342 unduplicated written comments, and 86 verbal
testimonies at the three public hearings. In addition to these, several organizations gathered input and
statements from their constituencies which were synthesized within the organization’s overall
submission. The below summary combines the testimony offered at the public hearings as well as the
formal comments received by the State via mail and email.

9.1 Summary of Public Comments and State Response
A significant portion of the public comments targeted the waiver proposal as a whole. These comments
shared either general support of the waiver initiative or general opposition to any changes to the
existing Medicaid expansion program, without offering substantive comments on any particular aspect
of the proposal. However, the majority of comments received were robust and touched on a broad
range of topics that generally fell into the following categories:


Changes to benefits;



Premiums and cost sharing;



Community engagement and employment initiative;



My Rewards Account and the proposed changes to vision and dental coverage;



Incentive and disincentive structure of Kentucky HEALTH (i.e. non-payment penalties);



Medically frail;



Employer-sponsored insurance (ESI) premium assistance program;



Managed care and implementation of the waiver program; and



Substance use disorder (SUD) waiver pilot project.

The frequency with which each of these topics were raised within the comments is listed below in Table
9.1. Further, each topic area theme is summarized and discussed in more detail below.

43

Table 9.1 Public Comment by Waiver Topic Area

1. Changes to Covered Benefits
a. Summary of Comments: Over 40% of the total comments received during the public
comment period (or roughly 595 comments) were specific to the proposed state plan
amendment, primarily the elimination of allergy testing. Generally, commenters encouraged
continued coverage of allergy testing, and shared personal anecdotes of how they had
personally benefitted from the service. Other commenters noted that allergy testing is a
critical component of diagnosis, establishing appropriate treatment plans, and educating
patients about potential triggers to avoid. Several of the allergy and asthma providers and
interest groups cited high rates of allergies and asthma in the Commonwealth, and provided
detailed evidence that allergy testing and treatment is a highly effective and cost efficient
benefit for the Medicaid program. Further, several commenters suggested that appropriate
allergy testing and treatment can increase productivity and reduce missed days of school
and work, therefore, supporting the overall goals of the Kentucky HEALTH waiver.
A relatively few number of comments were received related to proposed changes to nonemergency medical transportation and retroactivity, which received 57 comments (4% of
total comments) and 41 comments (3% of total comments) respectively. Half of the
comments received on these topics were from impacted providers and advocacy groups,
many of which expressed concern with the potential negative economic impact these
44

changes would have on providers through missed appointments and uncompensated care.
In addition, many commenters expressed concern about the potential impact that lack of
NEMT services would have on access to care, particularly on the State’s more vulnerable
clients living in rural areas.
Ultimately, the overwhelming majority of comments received during the public comment
period were related to proposed changes in allergy testing services. Most of the benefit
related comments were submitted by impacted provider groups and their patients. Several
commenters supported efforts to make Kentucky HEALTH benefits equal to the Kentucky
State Employees’ Health Plan, as well as efforts to maintain the current robust Medicaid
mental health and substance use disorder benefits.
b. State Response: Based on the overwhelming public response and significant evidence
provided related to the cost effectiveness of the allergy testing benefit, the State will not
pursue a state plan amendment to remove the additional benefits added in 2014, including
allergy testing and private duty nursing.
In regards to comments related to non-emergency medical transportation, the Division of
Medicaid Services data indicates that utilization for this benefit among expansion adults has
been extremely low. From June 2014 through June 2015, the expansion adult population of
more than 400,000 individuals utilized less than 140,000 non-emergency trips.46 In addition,
data from Iowa and Indiana, two states currently operating Medicaid expansion programs
without NEMT benefits, indicates that members have not experienced any meaningful
obstruction of member access to care. In fact, two independent evaluation surveys of
Indiana members found that those without NEMT benefits missed fewer appointments than
members with NEMT benefits (whether those benefits were provided by the State or as an
enhancement through MCOs). 47 Due to this research as well as the under-utilization of this
benefit among the expansion population in Kentucky, no changes were made to the waiver
resulting from these comments, and the State will continue to seek a waiver of the NEMT
benefit for the adult expansion group only. However, for purposes of clarification, NEMT will
remain a covered service for the more vulnerable populations participating in Kentucky
HEALTH, including children, pregnant women, medically frail individuals, and any individuals
eligible for Medicaid prior to the passage of the Affordable Care Act.
In addition, the State has opted not to modify the waiver related to retroactive coverage.
One of the main goals of Kentucky HEALTH is to “encourage individuals to become active
participants and consumers of healthcare who are prepared to use commercial health
insurance.” A waiver of retroactive eligibility is consistent with this goal, as commercial
market coverage begins after payment of a premium. In addition, Medicaid expansion has
been in effect since 2014, therefore, most individuals are already covered, eliminating the

46

Kentucky Department for Medicaid Services, Non-Emergency Medical Transportation Utilization of
Adult Expansion Population from June 2014 through May 2015 (May 23, 2016) (on file with the State).
47 Indiana NEMT Waiver Amendment Request to the Healthy Indiana Plan (HIP) 2.0 Medicaid Section 1115
Demonstration Waiver (2016) available at:
http://in.gov/fssa/hip/files/Indiana%20HIP%202.0%20NEMT%20Waiver%20Amendment%20Request%20 %2008%2001%2016.pdf

45

need for retroactive coverage—as demonstrated by the relatively few comments on this
policy (approximately 2%). Further, retroactivity has been widely waived by CMS in other
states. However, in recognition of the concerns in the provider community, the Kentucky
HEALTH waiver proposed to expand the presumptive eligibility program to allow more
providers the opportunity to facilitate expedited enrollment for their uninsured patients in a
time of need. This policy should address the few concerns related to increased
uncompensated care.
2. Premiums and Other Cost Sharing
a. Summary of Comments: Approximately 16% of all comments received (or 224 comments)
addressed member cost-sharing components of the waiver. The State received several
supportive comments, with even one Medicaid recipient indicating they would be willing to
pay more for coverage. Several individuals indicated that the collection of even one dollar
helps members engage in their own care as well as appropriately manage uti lization and
cost. In contrast, many commenters expressed general concern related to the affordability
of the cost-sharing provisions for this population. Several commenters suggested there was
no evidence that charging premiums would increase patient engagement. In addition,
several stakeholder groups cited various studies indicating that any form of cost-sharing
would negatively impact access to care and reduce coverage. In addition, several
commenters opposed increasing premiums for individuals with income greater than the
poverty level.
Other commenters focused on potential logistical difficulties that many low income
individuals would face in making regular premium payments, particularly those individuals
with mental disorders and those without a checking account or stable address. These
concerns were most pronounced in regards to individuals determined medically frail. Many
advocates and other stakeholders expressed concern with applying any form of cost-sharing
(premiums or copayments) to the medically frail population. While many supported
exempting these individuals from disenrollment for failing to pay premiums, many
commenters requested the policy go further and simply exempt individuals determined
medically frail from all cost-sharing obligations. These commenters noted that individuals
who miss premiums will instead be subject to copayments which may be very expensive for
medically frail individuals with extensive health care needs, which could lead to
pharmaceutical noncompliance and other reductions in utilization.
State Response: In regards to concerns about copayments, all Medicaid copayments are
subject to the federal maximum cost-sharing limit equal to 5% of income. CMS regulations
allow states to charge copayments up to this limit without a waiver. However, stakeholder
feedback expressed support for predictable, lower premiums as an alternative to standard
Medicaid copayments up to 5% of income, as low-income working families are better able
to budget for the expense. CMS has recently approved several similar 1115 waivers that
implemented premium requirements equal to 2% of income. The flat rate premium
amounts proposed in this waiver are all equal to or less than 2% of income, while the
increasing premium amounts for individuals with income over 100% FPL never exceed the
CMS threshold of 5% of income. Therefore, the cost-sharing provisions in the waiver are
consistent with federal regulations and current CMS policy.
46

In addition, the studies cited by a few commenters were not specific to the new adult group
category. Recent data from Indiana’s Healthy Indiana Plan (HIP), also a Section 1115 waiver,
indicated that premiums equal to 2% of income are affordable. 48 Approximately 87% of HIP
members reported they would pay more than 2% of income premiums to remain enrolled in
the program and that affordability was not an issue for people that left the program. 49 Only
5% of people surveyed who left the program indicated they did so for affordability
reasons.50 In addition, individuals who made regular payments had better outcomes, higher
satisfaction, higher primary and preventive care, higher drug adherence, and lower ER use. 51
The State will not seek changes to the premium amounts set forth in the original waiver
draft.
While there were a relatively small number of comments (approximately 16%) related to
cost-sharing and premiums, the State has adjusted the plan based on a few
recommendations. A couple of commenters suggested that the State implement family caps
on premium requirements, such that the monthly premium equal to 2% of household
income was not charged individually to all adults in the household. Based on this feedback,
the Kentucky HEALTH waiver has been updated to clarify that premiums will be charged on a
household basis rather than an individual basis. For example, for a married couple with
household income equal to 75% FPL, the couple would be required to pay only $8.00 per
month (rather than $16.00 per month).
In regards to the collection of premium payments, the State will ensure a variety of payment
collection methods are available, including cash, money order, personal che cks, credit card
or debit card (including prepaid Visa debit cards). The Kentucky HEALTH program will seek to
provide ample opportunity for members to make a premium payment in a method most
convenient to their situation.
Finally, based on the comments received, the waiver has been updated to exempt medically
frail individuals from the imposition of both premiums and copayments. The waiver was
updated to allow medically frail members to choose to make premiums in order to maintain
access to the My Rewards Account, however, in the event of non-payment of premium, such
individuals will not be disenrolled and will not be subject to copayments for services.
3. Community Engagement & Employment Initiative
a. Summary of Comments: Relatively few comments (168, or approximately 12% of the total
comments) addressed the community engagement and employment initiative. Several
commenters supported the idea of requiring individuals who are able to work or volunteer
for their tax funded benefit, noting that the majority of Americans also have to work to
obtain employer sponsored health coverage. Of the individuals opposed to the imposition of
the community engagement and employment initiative, many had questions about who
would be subject to the requirements, as well as what types of activities would satisfy the
48

The Lewin Group, Indiana Healthy Indiana Plan 2.0 Interim Evaluation Report (2016), available at:
http://www.in.gov/fssa/hip/files/Lewin_IN%20HIP%202%200%20Interim%20Evaluation%20Report_FINAL.pdf
49 Id.
50 Id.
51 Id.

47

requirements. Specifically, several individuals expressed concern that Kentucky HEALTH
would increase burdens on low-income working families that are already struggling and
would have little time for extra-curricular activities, such as community service. Further,
several advocacy groups, including the AARP, requested that the exemption for caretakers
of a dependent child be expanded to include other forms of caretaking activities. In
addition, several organizations posed very detailed operational questions related to the
implementation of this initiative.
b. State Response: With respect to comments concerned about the increased burden on lowincome working families, the proposed waiver as originally drafted indicated that
employment satisfies the requirement. However, the waiver has been updated to provide
further emphasis that the community engagement and employment initiative would not
impact working families. Specifically, individuals who are already working more than 20
hours per week will meet the requirement of the initiative, and will not be required to
perform community service or other job training activities as a condition of continued
enrollment. This point is clarified in Section 2.3 of the waiver.
In regards to caretakers, the State recognizes the value and critical role of the countless
Kentuckians who serve as caretakers for aging or disabled individuals. Therefore, i n
response, the waiver will be amended in two ways. First, the community engagement and
employment exemption will be expanded to exempt not only primary caregivers of a
dependent minor child, but also primary caregivers of a disabled adult dependent. Secondly,
caregiving activities for non-dependents, such as caregiving services provided to elderly
parents, will be counted as a qualifying activity for the community engagement and
employment initiative.
4. My Rewards Account and Changes to Vision and Dental Coverage
a. Summary of Comments: Slightly over 200 comments (approximately 14%) were submitted
in regards to the proposed changes to vision and dental coverage. Many commenters
expressed concern over the elimination of dental and vision services, as well as con cern that
the My Rewards Account limits access to care through the requirement to complete reward
activities in order to purchase benefits. In addition, some raised concerns over the
perception that vision and dental benefits were classified in the same category as a gym
membership. However, several commenters wrote in support of the My Rewards Account
structure and related benefit change, indicating that asking a person to participate in
beneficial activities in exchange for vision and dental services promotes ownership and
teaches responsibility.
A significant portion of comments related to vision and dental coverage were from impacted
providers and their professional organizations. Dentists and other oral health professionals
expressed concern that reduction in access to dental services would lead to increased
emergency room visits and increased opioid use due to tooth pain. Similarly, many
optometrists opposed removing vision screenings from the base benefit package , since
these preventive visits often lead to early detection of other chronic diseases. Overall, the
provider communities advocated for inclusion of vision and dental in the base benefit
package, as cost effective methods of addressing the overall health of the member.
48

Further, several commenters indicated concern that the change in dental and vision
coverage for adults could negatively impact utilization of these services for children
resulting from potential misunderstanding that the parents and children have different
covered benefits. In addition, a few commenters indicated that, as currently structured, it
would be impossible for a person to accumulate enough funds to pay for basic dental and
vision services. These individuals urged inclusion of additional and more inclusive
opportunities to earn rewards. In addition, several individuals recommended that coverage
for eyeglasses and contacts be added to the My Rewards Account.
b. State Response: Many of the comments indicated a misunderstanding of the waiver and
additional clarifying language has been added. The Kentucky HEALTH program will continue
to cover all of the vision and dental services currently covered in Medicaid. It does not
propose to “eliminate” or add new coverage, but rather transition existing vision and dental
services (both considered optional Medicaid services under federal law) to the My Rewards
Account. Vision and dental benefits will be maintained in the standard benefits for children,
pregnant women, medically frail individuals, and any individuals eligible for Medicaid prior
to the passage of the Affordable Care Act.
The My Rewards Account is structured to give participants flexibility and ownership of their
own benefits and healthcare spending. The State recognizes that some members may only
need one dental cleaning and vision screening in a year. Rather than a one -size-fits-all
approach, the My Rewards Account creates flexibility and tailors benefits to the individual,
allowing the participant to make choices about how to spend additional funds, which may
be on a gym membership or additional dental work. It is up to the individual to deci de what
benefit they value most and use of the account is flexible base d on individual needs.
In responding to the comments, the State will delay the implementation of this benefit
change by three months, to allow current members additional time to accumulate dollars in
their My Rewards Account. In addition, the State is committed to ensuring that the structure
of the account provides meaningful access to covered vision and dental benefits. The table
of qualifying activities provided in the waiver is illustrative, but not definitive, and several
additional opportunities will be made available for achievement of rewards. For example,
parents will also be able to earn dollars in their My Rewards Account for obtaining prenatal
and/or preventive care for their children, including recommended well-child visits, dental
cleanings, and vision screenings. This will serve to educate and encourage parents to utilize
the full array of children’s preventive services.
In addition, Kentucky HEALTH will also seek to encourage members to complete their GED
not only by rewarding members who pass the exam with a My Rewards Account incentive,
but also by helping to pay for the out of pocket costs associated with taking the exam. The
State will seek a waiver to pay for this service as part of the Medicaid package in order to
further promote independence. Section 4.1.2 of the waiver has been updated to reflect
these additions.

49

5. Incentive & Disincentive Program Structure
a. Summary of Comments: Another set of commenters (approximately 10%) discussed various
aspects of the incentive and disincentive structure of the Kentucky HEALTH waiver proposal.
Several comments were received praising the use of incentives to drive healthy behaviors,
as well as rewarding members for taking educational classes, health assessments, and
engaging in their community. In addition, numerous commenters expressed concern about
the non-payment penalty provisions of the waiver, particularly the impact of the six month
disenrollment period for individuals with income greater than 100% FPL. Specifically,
commenters are concerned that this policy will increase emergency room utilization and
uncompensated care during coverage gaps. In addition, several providers, particularly
substance use disorder (SUD) providers, stated that a disenrollment penalty would disrupt
continuity of care, which is particularly important for individuals in active mental health and
SUD treatment programs. In addition, a few commenters opposed the emergency room
penalty, and noted that the non-emergency use of a hospital emergency department
penalty is much higher than the $8.00 federally allowable copayment amount.
b. State Response: The intent of the penalties is not punitive in nature, but rather is intended
to familiarize members with the requirements of private insurance to help make their
eventual transition easier. Further, the disenrollment non-payment penalty does not apply
to individuals with income below the poverty line or individuals determined medically frail,
which would include those individuals actively participating in SUD treatment programs.
Further, Indiana’s Healthy Indiana Plan waiver also includes a similar six month nonpayment disenrollment period for individuals with income greater than 100% FPL. According
to program data, less than 6% of the individuals (2,677) were disenrolled for non-payment,
and the majority (56%) were able to obtain health insurance during this six month period. 52
While the Kentucky waiver contains similar disincentives to encourage key behaviors, it is
also designed to create a way for individuals to minimize or eliminate the penalty. As
drafted, the waiver provides disenrolled members the opportunity to take a financial or
health literacy class, as well as pay owed premiums for the months they received coverage
but did not pay, in order to regain coverage prior to the expiration of the six month
disenrollment period.
In regards to the non-emergency use of hospitals emergency department penalty, the
penalty is not an actual member copayment and does not use member out-of-pocket funds.
Instead, it reduces reward dollars from the My Rewards Account that were gained through
positive behavior, which may also include reward contributions for avoiding inappropriate
emergency room use. In addition, the Emergency Medical Treatment and Active Labor Act
(EMTALA) regulations at 42 CFR §489.24, which sets special responsibilities for hospitals in
emergency cases, including definitions of emergency conditions, will apply and members
may not be refused treatment.

52

The Lewin Group, Indiana Healthy Indiana Plan 2.0 Interim Evaluation Report (2016), available at:
http://www.in.gov/fssa/hip/files/Lewin_IN%20HIP%202%200%20Interim%20Evaluation%20Report_FINAL.pdf

50

6. Medically Frail
a. Summary of Comments: Approximately 4% of comments (or 58 comments) were received
specific to medically frail. Many of the commenters sought additional detail regarding the
state-specific definition of “medically frail.” Several commenters asked that certain
populations be explicitly identified and included in the definition, including those receiving
Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI). In
addition, the American Academy of HIV medicine specifically recommended that individuals
with HIV be automatically considered medically frail due to the critical importance of
medication adherence and continuity of care. Further, several commenters also requested
additional information regarding the medically frail determination process.
b. State Response: The State concurs with the commenters that providing a clear, concise, and
objective definition of medically frail will be critical to ensuring that the most vulnerable
members participating in Kentucky HEALTH are quickly and appropriately identified. In
response to several comments received about the urgency in quickly identifying specific
segments of the medically frail population, the State will modify the waiver to create
specific populations that automatically will be considered medically frail, including (1)
individuals in hospice care, (2) individuals living with HIV/ AIDS, and (3) individuals receiving
SSDI.
The waiver also has been updated to provide additional clarification that individuals with SSI
are not included under the Kentucky HEALTH waiver and will retain traditional disabi lity
Medicaid benefits. By contrast, individuals otherwise eligible for Kentucky HEALTH who also
receive SSDI will be automatically determined medically frail under this waiver program.
Further, in response to the requests that additional detail be provide d regarding the
medically frail determination process, Section 3.2 of the waiver was modified to provide
additional detail about the process, as well as the role of the MCOs in providing information
to the State for medically frail determinations.
7. ESI Premium Assistance
a. Summary of Comments: Only 27 comments (approximately 2% of the total received)
expressed concerns that employer sponsored insurance (ESI) is too expensive and
individuals will not qualify for the employer premium assistance program due to their parttime employment status. Two comments were received requesting input from stakeholders,
including MCOs, in the design and operationalization of the program.
b. State Response: As stated in Section 3.2 of the original waiver proposal, individuals eligible
for the employer premium assistance program will not be subject to out-of-pocket expenses
in excess of the Kentucky HEALTH required premiums. Additionally, enrollment in ESI will
only be required to the extent an individual qualifies and the employer plan is cost-effective
to the State. Therefore, no changes were made to the waiver in response to comments
received, as the concerns raised were due to a misinterpretation of the program
requirements.

51

8. Managed Care and Implementation Concerns
a. Summary of Comments: Many commenters discussed the implementation of Kentucky
HEALTH, including comments about changes to managed care (34 comments or 2%) and the
administration of the plan more generally (128 comments or approximately 9% of the total
comments). Several commenters indicated that they appreciated the proposed MCO
reforms contained within Kentucky HEALTH and indicated they have struggled with the
administrative burden of working with multiple MCOs. These commenters encouraged
reducing the number of MCOs in future contracting. In addition, many commenters also
explicitly supported efforts to implement a single formulary, consistent prior authorization
processes and standardized forms, as well as uniform credentialing. More generally, a
number of comments were received that expressed various concerns with perceived
administrative complexities built into the program that will impact the Commonwealth, the
MCOs and their members, as well as increase overall program costs. In addition, a few
commenters were concerned that the program would be too difficult for members to
understand and navigate.
b. State Response: No additional revisions to the waiver were made resulting from these
comments, except that the State removed specific references to “five” MCOs, as the state is
making a number of reforms to its contracting and cannot affirmatively state that the
program will continue to be administered by five MCOs for the duration of the waiver. The
State intends to build on existing infrastructure within the SNAP program to operationalize
the community engagement initiative and will explore existing technology solutions to track
engagement. Ultimately, the investment in developing the workforce in the Commonwealth
is important for not only to reduce unemployment, but also to improve health outcomes. As
detailed in the waiver, there is a known link between health and employment, and CMS
states it is “essential to individual's economic self-sufficiency, self-esteem and well-being.”53
Kentucky HEALTH aims to work across the various Cabinets in the Commonwealth to
leverage existing health and employment-related programs and focus efforts on assisting
Kentucky HEALTH members achieve improved health and self-sufficiency. The State intends
to partner with stakeholder groups and initiate a strong communications effort to educate
members about changes to the program throughout the implementation process to ensure
all members and potential members are notified of upcoming program changes.
9. SUD Pilot Project
a. Summary of Comments: Nearly all of the 103 comments received related to the proposed
SUD pilot project were supportive. Commenters described the devastating impact of
addiction and commended the State for addressing this issue and increasing access to
critical services through the proposed pilot project. Many commenters took the opportunity
to ask questions related to the specific details of the program, and provided detailed
suggestions for the design of the pilot project. Suggestions included specific quality
measures to study, provider qualifications for telehealth and partial hospitalization
53

Medicaid Employment Initiatives, CENTERS FOR MEDICARE AND MEDICAID SERVICES,
https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Delivery-Systems/GrantPrograms/Employment-Initiatives.html (last visited June 7, 2016).

52

programs and expansion of the IMD waiver on a statewide basis. Commenters also
requested specific counties be included in the pilot project and provided suggested criteria
for determining which counties to include.
b. State Response: The State will utilize the comments received in the development of the
operational components of the SUD pilot project. Additionally, regarding expansion of the
IMD exclusion, the State intends to permit MCOs to utilize IMDs for up to fifteen (15) days
as an in-lieu of service, as available under 42 CFR §438.6(e). In accordance with these new
federal regulations, this will be accomplished through the MCO contracting and rate setting
process and does not require a modification to the waiver proposal. Further information on
this change will be provided at a later time. By contrast to the 15 day IMD stay permitted
under the new managed care rule, the IMD waiver sought for the SUD pilot project would
allow Medicaid to reimburse for IMD stays up to 30 days in length.
10. Questions and Misconceptions
a. Summary of Comments: During the public comment process, many individuals took the
opportunity to ask specific questions related to the program generally, including how it will
impact specific individuals, details regarding how it will be operationalized and which
vendors will be utilized. Also, several comments were based on misunderstandings of
various aspects of the waiver. For example, several comments were received related to
perceived reductions in the coverage of smoking cessation benefits or perceived elimination
of hearing aid coverage. In addition, others were concerned about estimated reductions in
enrollment of children over the 5 year demonstration period.
b. State Response: To clarify, in regards to the smoking cessation benefit, there are no changes
to benefits related to the coverage of smoking cessation counseling and medication. The
State will continue to cover all services (including smoking cessation services) given an "A"
or "B" from the United States Preventive Services Task Force (USPSTF), at no cost to the
recipient. All preventive services are covered by the managed care organization outside of
the member’s deductible account.
Many of the questions asked specific operational questions that will be helpful in the future
as the State works to operationalize and further refine the program. In addition, the State
plans to use the comments to develop member and stakeholder communication material
prior to implementation. However, as these types of questions did not provide specific
feedback on the waiver, no modifications were made to the waiver as a result.
In addition, the enrollment figures for children contained in the initial waiver draft were
mistakenly transposed with the enrollment numbers for expansion adults in the table on
Page 18 of the waiver. The correct enrollment figures were available on Page 3 of
Attachment III. To clarify, the State does not anticipate that enrollment for children will
decrease, rather it may actually increase under the waiver.

9.2 Summary of Waiver Changes Following Public Comment
The State appreciates the massive public response to its 30-day request for public comments. Due to the
robust and thoughtful input, the State took additional time to thoroughly review and give due
consideration to each comment. While the broad themes are summarized and discussed above, each
53

comment received during the public comment period helps inform not only the development of the
waiver, but also future discussions with CMS, the design of the program evaluation, member
communication strategies, and other operational considerations. In addition, the State has chosen to
directly respond to a number of significant concerns and specific recommendations suggested during
this process, and has made changes and modifications to the waiver as a direct result of public input.
These changes were discussed above and are also summarized in the below table:

Section

Description of Change

Page #

Kentucky Health
Overview
(Section 1.2.2)

Several updates and clarifications were added to the program overview
section, including:
 Clarified that benefits will not change for children, pregnant
women, medically frail, and adults eligible for Medicaid before
expansion.
 Listed eligibility groups excluded from waiver.
 Added language that premiums will only be applied on a family
basis.
 Clarified that members may choose how to use the My Rewards
Account benefits.
 Added language about Medicaid policy goals in support of services
to support independence.
 Added caretaking as community engagement & employment
activity, and clarified list of exempt individuals.

Pages
9, 10,
12, &
13

The implementation of changes to the dental and vision benefit will be
delayed by three months to allow members time to accrue funds in the
My Rewards Account.

Page
14

Clarification was added to explain that this waiver primarily only
impacts “non-disabled” individuals in traditional Medicaid populations.

Page
14

Demonstration
Area and
Timeframe
(Section 1.5)
Impact to
Medicaid and
Chip
(Section 1.6)



Eligibility
(Sections 2 and
2.1)

Community
Employment &
Engagement
(Section 2.2)

Added description and chart describing groups excluded from the
waiver:
o Former foster children up to age 26;
o Individuals on a 1915(c) waiver;
o Individuals in an institution; and
o Individuals eligible for Medicaid on the bases of age,
blindness, or disability, including individuals eligible for
social security income (SSI).
 Made technical correction to listed income levels for Section 1931
parents and caretakers in Table 2.1(A)
Several revisions and clarifications were made to this section, including:
 Added language about Medicaid policy goals in support of services
to support independence.
 Extended community engagement & employment exemption for
primary caretakers of minor children as well as disabled adult
dependents.

54

Pages
15-16

Pages
16-18





Projected
Enrollment
(Section 2.3)

Clarified that students or individuals employed more than 20 hours
a week meet the requirements of this section, and no additional
community engagement activities are required to maintain
benefits.
Added “caregiving services for a family member or other person
with a chronic, disabling health condition” as a qualifying activity.
Added clarification around education component of the initiative,
and added GED benefit.

Made a technical correction to the enrollment chart.

Made changes to proposed benefit changes as follows:
 Allergy Testing: Removed proposed amendment to the Medicaid
Kentucky
State Plan, as allergy testing and private duty nursing will continue
HEALTH Benefits
to be covered services.
(Sections 3 &
 Smoking Cessation: Clarified that current smoking cessation
3.1.2)
benefits will continue to be covered as an “A” and “B” service
recommended by the United States Preventive Services Task Force.
My Rewards
The dental and vision benefit change will be delayed by three months to
Account Benefit
allow members time to accrue funds in the My Rewards Account.
(Section 3.1.3)
Educational
Added GED testing costs as an additional covered benefit for Kentucky
Support
HEALTH members.
(Section 3.1.4)
Clarified the definition and process
 Certain populations will be determined automatically medically
frail, including individuals receiving hospice care, persons with
Medically Frail
HIV/AIDS, and individuals receiving SSDI.
(Section 3.3.1)
 Added additional detail regarding the medically frail identification,
determination and appeal process.
 Medically frail individuals will be exempt from copayments.
Clarified and added the following:
 Added description of educational support benefit
 Community engagement related activities will only qualify for a
reward deposit if in excess of hours required to maintain coverage
as set forth in Section 2.2.
My Rewards
 Expanded the reward activity chart to include caretaking
Account
responsibilities, passing the GED, and completion of child
(Section 4.1.2)
preventive services.
 Clarified that the inappropriate emergency room penalty is not a
member copayment.
 Added an incentive and disincentive option for excessive missed
healthcare appointments
Member
Clarified and added the following:
Required
 Added an explanation that premiums will be paid on a household
Contributions
basis rather than per person.
(Section 4.2)
55

Page
19

Pages
21 &
23

Page
24
Pages
24 &
25

Page
26

Pages
28-30

Pages
31-33



Cost-Sharing
Exemption
(Section 4.3)
SUD Pilot
Program
(Section 5.1.1)
Managed Care
Reforms
(Section 5.1.3)
Fee for Service
(Section 5.6)
Implementation
(Section 6)
Costs Not
Otherwise
Matchable
(Section 8.2)
Evaluation Plan
(Attachment I)
Financing &
Budget
Neutrality
Summary
(Attachment II)

Added an exemption for medically frail from the imposition of
premiums and copayments.
 Included study results supporting positive impact premium
payment has on member health outcomes.
Clarified that medically frail members will be exempt from the
imposition of premiums and copayments. However, premiums are still
required to maintain the member’s My Rewards Account.

Page
34

Added that the pilot project will include measurement of specific
recommended SUD and HIV quality indicators.

Page
35

Removed references to 5 MCOS, as the State is not committed to
maintaining this number of MCOs in the future.

Page
38

Clarified that the State may carve out the services provided through the
My Rewards Account from managed care.
The implementation of changes to the dental and vision benefit will be
delayed by three months to allow members time to accrue funds in the
My Rewards Account.

Page
38

Added a request that GED testing fees be regarded as a Medicaid
expenditure.

Page
41

Added a new evaluation metric related to measuring GED participation
rates.
 Eliminated reference to removal of private duty nursing.
 Added GED certification fees for expansion and non-expansion
adults as a covered benefit.
 Clarified premiums will be collected on a household basis.
 Made allowance for a three month delay in changes to the vision
and dental benefit in the first year of the waiver.

Page
61

Page
39

Pages
67 &
68

Other than the changes noted above, the content of this application is identical to the copy of the
application initially posted on the Cabinet for Health and Family Services website on June 22, 2016.

10 Demonstration Administration
Name and Title: Stephen P. Miller, Commissioner, Department for Medicaid Services
Telephone Number: 502-564-4321 Ext. 2016
Email Address: [e-mail]

56

ATTACHMENT I: Evaluation plan
The table below presents an overview of a preliminary plan for how the State may evaluate the
Kentucky HEALTH program. This evaluation plan is subject to change and will be further defined to
reflect operational details as the program is implemented.
#
Hypothesis
Methodology
Data Sources and Metrics
Goal 1: Improve member’s health and help them be responsible for their health
1.1 Kentucky HEALTH policies will
Track and compare heath
Claims data:
promote member use of
service utilization rates
 Primary care encounters;
preventive and primary care.
between current Kentucky  Specialist care
HEALTH members, and
encounters;
their previous Medicaid
 ED visits; and
enrollment category.
 Preventive care codes.
Track preventive care
Claims data:
utilization rates and trends  Number, type, and
among different age and
frequency of preventive
gender groups.
care services used; and
 Gender- and age-specific
rates of pre-determined
preventive service
utilization.
1.2 Kentucky HEALTH policies will
Track and compare chronic Claims data:
promote member compliance
disease management
 Chronic disease
with chronic disease
compliance rates between
management codes; and
management.
current Kentucky HEALTH
 Participation in disease
members, and their
management program.
previous Medicaid
enrollment category.
1.3 Kentucky HEALTH policies will
Track and compare ACSCs
Claims data:
reduce member hospitalization hospitalization rates
 Ambulatory care
of ambulatory care sensitive
between current Kentucky
sensitive conditions
conditions (ACSCs).
HEALTH members, and
(ACSCs) codes.
their previous Medicaid
enrollment category.
1.4 Kentucky HEALTH will increase
Track and compare
Claims data:
access to substance use
inpatient specialty
 Specialist care
disorder (SUD) services with
care/SUD utilization rates
encounters.
special focus on Institutions for between current Kentucky
Mental Diseases (IMD).
HEALTH members, and
Administrative data and MCO
their previous Medicaid
reported data:
enrollment category.
 Network adequacy;
 Number of certified
providers;
 Change in ED utilization
and costs; and

57



Change in inpatient
utilization and costs.

Member survey:
 Percentage of members
who report the wait
times for SUD services.
Goal 2: Encourage individuals to become active participants and consumers of healthcare who are
prepared to use commercial health insurance
2.1 Kentucky HEALTH policies will
Track and compare
Administrative data:
provide incentives to monitor
remaining balances in
 Percentage of deductible
and manage the two member
member deductible
accounts that have a
managed account funds.
accounts at the end of each
balance at the end of a
benefit period.
benefit period.

Track and compare
balances in member My
Rewards accounts at the
end of each benefit period.

2.2

Kentucky HEALTH policies will
encourage healthy behaviors
and increase member access to
enhanced health services (such

Administrative data:
 Percentage of My
Rewards Accounts that
have a balance at the end
of the benefit period.
Track account balances
Administrative data:
transferred from the
 Average deductible
deductible account to the
account balance amount
My Rewards Account at the
at the end of each benefit
end of each benefit period.
period; and
 Number of members
 Average My Rewards
with unused deductible
Account balance at the
account balances at the
end of each benefit
end of each benefit
period.
period; and
 Average amount
transferred to My
Rewards Account at the
end of each benefit
period.
Track number of people
MCO administrative data.
checking their account
balances:
 Weekly;
 Monthly;
 Semi-Annually;
 Annually.
Track and compare My
Administrative data:
Reward Account
 Percentage of My Reward
expenditures on enhanced
Accounts that have
health services.
expenditures for
58

as dental, vision, gym
memberships and over-thecounter medications).

Track and compare
member achievement of
healthy incentives
contributions to the My
Rewards Account.

Track and compare type of
enhanced health services
used by member MY
Rewards accounts.

59

enhanced health services
at the end of each benefit
period;
 Average My Reward
Account expenditures for
enhanced health services
at the end of each benefit
period; and
 Percent of My Reward
Account expenditures for
enhanced health services
at the end of each benefit
period.
Administrative data:
 Members receiving any
healthy incentive
contributions;
 Type/source of healthy
incentive contribution
(e.g., avoidance of
inappropriate ER visits,
completed job search,
GED, etc.);
 Average number of
healthy incentive
contributions earned;
 Total dollar amount of
healthy incentive
contributions received;
and
 Average dollar amount of
healthy incentive
contributions received.
 Enhanced services used,
by percent of total
enhanced services
offered (e.g., 40% of all
enhanced services used
for gym memberships;
30% of all enhanced
services used for OTC
medications, etc.);
 Enhanced services used,
by number of services
(e.g., 4,000 total gym
memberships received;
3,000 total OTC

2.3

Kentucky HEALTH policies will
promote member compliance
with making premium
payments.

Track premium initial and
ongoing premium
payments.
 Overall;
 Above 100% FPL;
 At or below 100% FPL;
and
 Medically Frail Status.

2.4

Kentucky HEALTH open
enrollment policy will increase
member compliance with
redetermination process.

Track member compliance
with redetermination.
 Overall;
 Above 100% FPL;
 At or below 100% FPL;
and
 Medically Frail Status

60

medications received,
etc.);
 Total dollar amount spent
on enhanced services;
and
 Average amount spent on
enhanced services.
Health plan contribution and
enrollment data:
 Number and percentage
making premium
payments within allowed
time;
 Number and percentage
disenrolled from
Kentucky HEALTH due to
non-payment of premium
(above 100% FPL);
 Number and percentage
suspended with
copayments applied
(below 100% FPL) due to
non-payment of
premium;
 Number and percentage
reinstated early (before 6
months) into Kentucky
HEALTH after
disenrollment (above
100% FPL) or suspension
(at or below 100%) due
to non-payment of
premium; and
 Number and percentage
reinstated on-time (after
6 months) into Kentucky
HEALTH following nonpayment of premium.
 Number and percentage
disenrolled from
Kentucky HEALTH due to
failure to comply with
redetermination process;
 Number and percentage
reinstated prior to next
open enrollment period;
and



2.5

Kentucky HEALTH’s incentive
and disincentive policies
related to non-emergency use
of hospital emergency room
will reduce inappropriate
utilization among Kentucky
HEALTH members.

Number and percentage
reinstated at next open
enrollment period (after
six months).

Compare annual rates of
inappropriate emergency
department utilization
between Kentucky
Medicaid populations for
the years before waiver
(prior to 2017) and after
waiver (2017 and beyond).

Claims data:
 Annual overall
emergency department
utilization rates (percent
of members and
visits/100,000 members);
and
 Annual non-emergency
emergency department
utilization rates (percent
of members and
visits/100,000 members).

Survey Kentucky HEALTH
members on whether the
incentives and
disincentives related to the
My Rewards Account for
appropriate emergency
room utilization caused
them to seek services with
their primary care
physician or in an
alternative urgent care
setting.

Member survey:
 Percentage of members
who report the
disincentive caused them
to seek services with
their primary care
physician or in an
alternative urgent care
setting in lieu of the
emergency department.
 Percentage of members
who report the incentive
caused them to seek
services with their
primary care physician or
in an alternative urgent
care setting in lieu of the
emergency department.
MCO reported data:
 Number of members that
utilized inappropriate
emergency services:
o Only once;
o Two times;
o Three times; and
o More than three
times.

Compare annual rates of
members subject to the
escalating My Rewards
Account disincentive based
on repeated inappropriate
hospital emergency
department utilization.

61

Goal 3: Empower people to seek employment and transition to commercial health insurance
coverage
3.1 Kentucky HEALTH policies will
Track and compare
Administrative data:
encourage members to increase member achievement of
 Members receiving any
community engagement.
community engagement
community engagement
and employment
and employment related
contributions to the My
contributions to their My
Rewards Account.
Rewards Account; and
 Average number of such
contributions earned.
3.2

Kentucky HEALTH policies will
encourage members to obtain
their GED certification.

Track members preparing
for, taking and passing the
GED exam.

3.3

Kentucky HEALTH policies will
encourage members to seek
employment.

Track members
participating in job search
activities.

62

Administrative data:
 Members receiving
contributions to their My
Rewards Account for GED
related activities
 Members reporting GED
related activities for their
required community
engagement hour
requirements
 Members who utilize the
GED exam fee benefit
Administrative data:
 Number and percent of
members who register
with Career Center and
complete job needs
assessment;
 Number and percent of
members who participate
in qualifying community
service activity;
 Number and percent of
members who complete
job skills training (i.e.
vocational education,
training); and
 Number and percent of
members who complete
job search activities.

3.4

Kentucky HEALTH policies will
encourage members to earn
employment and ultimately
transition to commercial health
insurance coverage.

Track number of former
Administrative data:
Medicaid members
 Number of former
successfully transitioning to
members able to receive
commercial health
a cash reward after
insurance coverage and
transitioning to
accessing the My Rewards
commercial health
Account bonus after
insurance coverage;
eighteen months.
 Average My Rewards
Account balance payoff;
and
 Number of individuals
that reenter program
prior to achieving a full
eighteen months of
commercial health
insurance coverage.
Track number of individuals Administrative data:
employed over twenty
 Number of members who
hours per week.
move from part-time
employment to full-time
employment;
 Number of members who
move from
unemployment to parttime employment; and
 Number of members who
move from
unemployment to fulltime employment.
Track earnings of members Administrative data:
who earn employment.
 % FPL of individual
income; and
 % FPL of household
income.

3.5

The employer premium
assistance program will
increase the proportion of
Kentucky residents under 138%
FPL covered by employersponsored insurance (ESI).

Track the number of
Kentucky residents with
income under 138% FPL
covered by ESI over the
demonstration period.
Track employer premium
assistance program
member enrollment.

63

Current Population Survey &
American Community Survey:
 ESI coverage rate
estimates, all ages.
Kentucky HEALTH enrollment
and premium assistance
records:
 Number of Kentucky
HEALTH members who
are eligible for the

Track employer premium
assistance program
employer enrollment.

Track employer premium
assistance program wraparound coverage
expenditures.

3.6

Kentucky HEALTH’s sliding scale
increased premium payment
amounts will discourage
dependency on public
assistance and encourage
members to transition to
commercial health insurance
coverage.

Compare annual rates of
Medicaid enrollment
between Kentucky
Medicaid populations for
the years before waiver
(prior to 2017) and after
waiver (2017 and beyond).
Survey Kentucky HEALTH
members on whether the
64

employer premium
assistance program;
 Number of Kentucky
HEALTH members who
enroll into the employer
premium assistance
program.
 Percentage of total
demonstration enrollees
participating in the
employer premium
assistance program—
monthly and annually;
and
 Number of employer
premium assistance
program enrollees who
receive premium
assistance to purchase
ESI—monthly and
annually.
Employer premium
assistance program
administrative data:
 Number of employers
who enroll in the
employer premium
assistance program, by
employer size (e.g., small,
medium, large).
Claims data:
 Number, type, and
frequency of wraparound service used;
 Average cost of wraparound service used; and
 Total cost of wraparound service used.
Administrative data:
 Monthly Medicaid
enrollment; and
 Annual Medicaid
enrollment.
Member survey:

sliding scale increased
premium payment amount
caused them to seek
employment and/or other
forms of health insurance
coverage.

Compare annual rates of
members paying increased
premium amounts based
on continued annual
enrollment in Kentucky
HEALTH.



Percentage of members
who report the sliding
scale increased premium
payment amount caused
them to seek
employment and/or
other forms of health
insurance coverage.
MCO reported data:
 Premium payment
amounts, by year of
coverage.

Goal 4: Implement delivery system reforms to improve quality and outcomes
4.1 Kentucky HEALTH policies will
Track MCO ability to meet Claims data:
promote high quality
quality and outcome
 Kentucky HEALTH
healthcare delivered by
benchmarks within their
outcomes compared to
providers.
service contracts.
MCO benchmark
requirements:
o Primary care;
o Preventive care;
o Specialist care;
o Emergency care; and
o Ambulatory care
sensitive conditions.
Track Kentucky providers
MCO reported data:
receiving bonus payments  Bonus payments paid to
from MCOs for meeting
provider.
quality and outcomes
standards.
Goal 5: Ensure fiscal sustainability
5.1 Kentucky HEALTH will remain
budget-neutral for both the
federal and State governments.

Conduct a budget
neutrality analysis and
document adherence to
waiver margin.





65

Calculation of the waiver
margin (annual and
cumulative);
Documentation of all
State and federal costs;
and
Demonstration of budget
neutrality.

ATTACHMENT II: Financing and Budget Neutrality Summary
Milliman, Inc. (Milliman) was engaged to develop the response to the Budget Neutrality Form section for
the Section 1115 Medicaid Demonstration Waiver Application (1115 Waiver). The Centers for Medicare
and Medicaid Services (CMS) requires all 1115 Waivers to demonstrate budget neutrality. Budget
neutrality is a comparison of without waiver expenditures (WoW) to with waiver expenditures (WW).
CMS recommends two potential methodologies of demonstrating budget neutrality:
1. Per Capita Method: Assessment of the per member per month (PMPM) cost of the Demonstration
2. Aggregate Method: Assessment of both the number of members and PMPM cost of the
Demonstration
Budget neutrality for the Kentucky HEALTH 1115 Waiver will be demonstrated through the use of the
aggregate method. The budget neutrality projections were developed using CMS budget neutrality
requirements. A detailed budget neutrality worksheet is attached as Attachment III.
Milliman has relied upon certain data and information provided by the Kentucky Department for Medicaid
Services in the development of the estimates contained in the Budget Neutrality Worksheet. Milliman has
relied upon the Kentucky Department for Medicaid Services for the accuracy of the data and accepted it
without audit. Additionally, Milliman relied on data and other information from the Current Population
Survey and Medical Expenditure Panel Survey. To the extent that the data provided is not accurate, the
results of this analysis may need to be modified to reflect revised information.
Differences between our projections and actual amounts depend on the extent to which future
experience conforms to the assumptions made for this analysis. It is certain that actual experience will
not conform exactly to the assumptions used in this analysis. Actual amounts will differ from projected
amounts to the extent that actual experience deviates from expected experience. It should be
emphasized that the values in the Budget Neutrality Form are a projection of future costs based on a set
of assumptions. Results will differ if actual experience is different from the assumptions contained in this
analysis.
Appendix III illustrates the 1115 Waiver Budget Neutrality spreadsheet. The rest of this section
documents the supporting data included in the spreadsheet using guidance provided by CMS in the
Budget Neutrality Form.
I.

Without- and With-Waiver Projections for Historical Medicaid Populations
A. Recent Historical Actual Data
We have provided actual historical data separately for three Medicaid populations contained in the
waiver: Children (Age 18 and Under), Adults: Non-Expansion, and Adults: Expansion.
For both the Children and Adult Non-Expansion populations, we have provided historical data for
calendar years 2011 through 2015. For the Adult Expansion population, we have provided historical
data for the program’s first two years, calendar year (CY) 2014 through 2015. For each eligibility
group, the historical data includes capitation payments and fee-for-service experience for members
who were enrolled in program that will be eligible for Kentucky HEALTH.
66

B. Bridge Period
The bridge period is January 1, 2016 to December 31, 2016 (12 months).
C. Without-Waiver Trend Rates, PMPM costs and Member Months with Justification
For the Children and Adult Non-Expansion populations, we developed annual trend rates for member
months based on CY 2011 to CY 2015 eligible member months. For PMPM cost trend, we used
observed 5-year average trends developed based on the CY 2011 through CY 2015 historic data.
We were unable to observe reasonable enrollment and PMPM cost trends for the Ex pansion eligibility
group due to the infancy of the program. Therefore, we used eligible member months and PMPM
cost trend rates equal to the observed 5-year average trend rate for the Adult Non-Expansion
eligibility group.
D. Historical Medicaid Populations: With-Waiver PMPM Cost and Member Month Projections
To project with-waiver PMPM cost and member months, we estimated the impact of key features of
Kentucky HEALTH for each eligibility group. PMPM cost and enrollment changes were estimated
through the use of data and information provided by the Kentucky Department for Medicaid Services.
Additionally, we relied on data and other information from the Current Population Survey and Medical
Expenditure Panel Survey. We also relied on data and other information from similar Medicaid
programs to develop with-waiver projection estimates as appropriate.
Key features of Kentucky HEALTH reflected in the with-waiver projections include the following:
Benefit Package Changes. Specific benefit changes reflected in the with-waiver projections for the
Expansion eligibility group include:
 Removal of non-emergency medical transportation (NEMT) for non-medically frail
expansion eligibility group;
 Modification of service limits for PT/OT/ST; and,
 Addition of GED certification fees for Expansion and non-Expansion adults.
We relied on data and other information provided by consultants to the Kentucky Department for
Medicaid Services in developing estimated impacts for these benefit package changes. Please note
that no benefit package changes were assumed for the Children and Adult Non-Expansion eligibility
groups.
Coverage Effective Date & Retroactive Coverage. For non-exempted eligibility groups, we assumed
that retroactive eligibility will no longer apply. We anticipate that presumptive eligibility will be
introduced at additional providers corresponding with this program change. The removal of
retroactive eligibility is expected to have an impact to both enrollment and per capita claims. With no
retroactive eligibility, we expect to see anywhere from zero to three months of enrollment removed
for newly eligible beneficiaries. We assumed a different level of cost on a PMPM basis for these
retroactive months, relative to non-retroactive eligibility months, as the members are not fully
acclimated to Medicaid and may not fully utilize Medicaid covered services. Aggregate expenditures
are estimated to be reduced due to the removal of retroactive eligibility months.
67

To estimate the impact of this change, we compared base medical member months and PMPMs with
and without retroactive months for a similar Medicaid population. We reviewed the changes in
enrollment and cost between the two scenarios by eligibility group segment to estimate the impact
of removing retroactive eligibility. In developing these estimates, we considered the impact of
presumptive eligibility at additional providers, a provision which will partially offset the removal of
retroactive eligibility.
Employer Premium Assistance Program. We estimated the impact associated with the premium
assistance program through the use of Medical Expenditure Panel Survey data from the Agency for
Healthcare Research and Quality (AHRQ), along with the 2014 Current Population Survey. We expect
membership levels to increase under the premium assistance program as members with existing
Employer Sponsored Insurance (ESI) coverage apply for Medicaid ESI assistance. We developed
enrollment projections through the use of take up rates which varied by eligibility and age group.
Additionally, we estimated that the PMPM cost for the eligibility groups will decrease as the average
cost of ESI premium and cost sharing assistance is estimated to be lower than that of a traditional
Medicaid beneficiary. We estimated the impact of this by reviewing the employee premium and cost
sharing amounts for an ESI member as compared to Medicaid capitation rates and wrap around
coverage, stratified by quartile and eligibility group.
Premium Contributions and My Rewards Account Benefit. To estimate the impact of the introduction
of premiums on a household basis, we valued required premium contributions by income band and
assumed varying payment rates by eligibility group. Premium amounts were compared to existing
copayment requirements to estimate the net impact of member premium contributions.
To estimate the impact of the My Rewards Account, we modeled the PMPM cost or savings of each
program component by eligibility group. We estimated the impact of the eligible benefits (dental,
vision, and OTC drugs) based on PMPM cost estimates for these services, with allowances made for
the delayed implementation of vision and dental benefits in the first year of the waiver. We valued
the impact of deductible rollover by modeling the distribution of remaining year-end deductible levels
based on data and other information from a similar Medicaid program. We estimated the penalty
assessed for non-emergent emergency room use and the incentive for proper emergency room use
by reviewing the distribution of non-emergent and emergent emergency room utilization based on
data provided by the Kentucky Department for Medicaid Services.
Managed Care Reforms. We estimated that requiring the managed care organizations to align
payment incentives with quality performance and outcomes has the potential to reduce annualized
trends by 0.5% on a PMPM basis.
Community Engagement and Employment. Kentucky HEALTH is structured to encourage employment
and community engagement by requiring a graduated weekly commitment from all able bodied
adults. We utilized data from the 2014 Current Population Survey to model employment rates in
Kentucky while adjusting for children, pregnant women, medically frail, and adults with primary
caretaking responsibility for a dependent, which are exempt from the community engagement and
employment initiative. We modeled enrollment changes and the corresponding morbidity effects
based on a 2 year program phase in for community engagement requirements.

68

E. Justification for With-Waiver Trend Rates, PMPM Costs and Member Months
The impact of each feature of Kentucky HEALTH is fully reflected in the trend rates displayed in
Appendix III. The development and justification for these rates is described in Section D above.
II. Cost Projections for New Populations
Not applicable
III. Disproportionate Share Hospital Expenditure Offset
Not applicable
IV. Summary of Budget Neutrality
Appendix III illustrates the 1115 Waiver Budget Neutrality spreadsheet, which includes the following
applicable tabs:
i.
ii.
iii.
iv.

Historic Data
WOW (Without-Waiver)
WW (With-Waiver)
Summary (of Budget Neutrality)

V. Additional Information to Demonstrate Budget Neutrality
We do not believe there is any other information necessary for CMS to complete its analysis of the
budget neutrality submission.

69

ATTACHMENT III: Budget Neutrality Worksheets

70

5 YEARS OF HISTORIC DATA
SPECIFY TIME PERIOD AND ELIGIBILITY GROUP DEPICTED:
Children (Age 18 and Under)
TOTAL EXPENDITURES
ELIGIBLE MEMBER MONTHS
PMPM COST
TREND RATES

$
$

2011
1,278,702,725
5,265,504
242.85

$
$

2012
1,310,253,249
5,273,555
248.46

TOTAL EXPENDITURE
ELIGIBLE MEMBER MONTHS
PMPM COST
Adults: Non-Expansion
TOTAL EXPENDITURES
ELIGIBLE MEMBER MONTHS
PMPM COST
TREND RATES

2.47%
0.15%
2.31%

$
$

2011
667,466,616
1,592,467
419.14

$
$

2012
717,268,238
1,585,041
452.52

TOTAL EXPENDITURE
ELIGIBLE MEMBER MONTHS
PMPM COST
Adults: Expansion
TOTAL EXPENDITURES
ELIGIBLE MEMBER MONTHS
PMPM COST
TREND RATES
TOTAL EXPENDITURE
ELIGIBLE MEMBER MONTHS
PMPM COST

7.46%
-0.47%
7.96%

$
$

2011

-

$
$

2012

-

0.00%
0.00%
0.00%

$
$

2013
1,376,613,845
5,271,564
261.14

$
$

ANNUAL CHANGE
5.06%
-0.04%
5.10%

$
$

2013
749,662,818
1,612,831
464.81

$

2013

-

ANNUAL CHANGE
0.00%
0.00%
0.00%

Historic Data

$
$

7.35%
6.68%
0.63%

$
$

ANNUAL CHANGE
4.52%
1.75%
2.72%

$

2014
1,477,821,840
5,623,907
262.77

2014
808,989,927
1,554,892
520.29

$

2014
2,316,349,837
4,422,028
523.82

0.00%
0.00%
0.00%

$

$
$

2015
892,510,877
1,626,900
548.60

$

$

2015
3,118,683,205
5,977,024
521.78

34.64%
35.16%
-0.39%

5-YEARS
3,835,898,476

5-YEAR
AVERAGE
7.53%
0.54%
6.96%

10.32%
4.63%
5.44%

$

5-YEARS
7,061,520,230

5-YEAR
AVERAGE
6.06%
3.26%
2.71%

9.49%
6.45%
2.86%

7.91%
-3.59%
11.93%

$

2015
1,618,128,571
5,986,896
270.28

$

5-YEARS
5,435,033,042

5-YEAR
AVERAGE
34.64%
35.16%
-0.39%

Page 1

DEMONSTRATION WITHOUT WAIVER (WOW) BUDGET PROJECTION: COVERAGE COSTS FOR POPULATIONS

ELIGIBILITY
GROUP
Children (Age 18 and Under)
Pop Type:
Eligible Member Months
PMPM Cost
Total Expenditure
Adults: Non-Expansion
Pop Type:
Eligible Member Months
PMPM Cost
Total Expenditure
Adults: Expansion
Pop Type:
Eligible Member Months
PMPM Cost
Total Expenditure

TREND
RATE 1

Medicaid

Medicaid

Medicaid

MONTHS
OF AGING

BASE YEAR
DY 00

TREND
RATE 2

DEMONSTRATION YEARS (DY)
DY 01
DY 02

DY 03

DY 04

TOTAL
WOW

DY 05

3.3%
2.7%

12
12 $

6,182,069
277.60

3.3%
2.7% $
$

6,383,604
285.12
1,820,093,153

$
$

6,591,709
292.85
1,930,382,104

$
$

6,806,599
300.79
2,047,356,958

$
$

7,028,494
308.94
2,171,383,023

$
$

7,257,623
317.31
2,302,916,416

$

10,272,131,654

0.5%
7.0%

12
12 $

1,635,685
586.78

0.5%
7.0% $
$

1,644,518
627.62
1,032,132,205

$
$

1,653,398
671.30
1,109,926,148

$
$

1,662,326
718.02
1,193,583,641

$
$

1,671,303
767.99
1,283,544,004

$
$

1,680,328
821.44
1,380,288,676

$

5,999,474,674

0.5%
7.0%

12
12 $

6,009,300
558.09

0.5%
7.0% $
$

6,041,750
596.93
3,606,502,037

$
$

6,074,376
638.48
3,878,367,462

$
$

6,107,177
682.92
4,170,713,612

$
$

6,140,156
730.45
4,485,077,089

$
$

6,173,313
781.29
4,823,147,740

$

20,963,807,940

WOW

Page 2

DEMONSTRATION WITH WAIVER (WW) BUDGET PROJECTION: COVERAGE COSTS FOR POPULATIONS

ELIGIBILITY GROUP
Children (Age 18 and Under)
Pop Type:
Eligible Member Months
PMPM Cost
Total Expenditure
Adults: Non-Expansion
Pop Type:
Eligible Member Months
PMPM Cost
Total Expenditure
Adults: Expansion
Pop Type:
Eligible Member Months
PMPM Cost
Total Expenditure

DY 00

Medicaid
$

Medicaid
$

Medicaid
$

DEMO TREND RATE

DEMONSTRATION YEARS (DY)
DY 01
DY 02

DY 03

DY 04

TOTAL WW

DY 05

6,182,069
277.60

3.3%
2.2% $
$

6,387,155
283.62
1,811,524,938

$
$

6,599,045
289.77
1,912,205,384

$
$

6,817,965
296.05
2,018,458,538

$
$

7,044,147
302.47
2,130,643,184

$
$

7,277,833
309.02
2,248,995,873

$

10,121,827,918

1,635,685
586.78

-2.2%
6.9% $
$

1,600,019
627.17
1,003,483,850

$
$

1,565,130
670.35
1,049,185,216

$
$

1,531,003
716.50
1,096,963,509

$
$

1,497,619
765.82
1,146,906,800

$
$

1,464,964
818.54
1,199,131,380

$

5,495,670,754

6,009,300
558.09

-2.3%
7.4% $
$

5,868,387
599.55
3,518,391,637

$
$

5,730,779
644.09
3,691,137,353

$
$

5,596,397
691.94
3,872,371,048

$
$

5,465,167
743.34
4,062,476,931

$
$

5,337,013
798.56
4,261,925,309

$

19,406,302,278

NOTES
For a per capita budget neutrality model, the trend for member months is the same in the with-waiver projections as in the without-waiver projections. This is the default setting.

WW

Page 3

Budget Neutrality Summary
Without-Waiver Total Expenditures

Medicaid Populations
Children (Age 18 and Under)
Adults: Non-Expansion
Adults: Expansion
TOTAL
With-Waiver Total Expenditures

Medicaid Populations
Children (Age 18 and Under)
Adults: Non-Expansion
Adults: Expansion

DEMONSTRATION YEARS (DY)
DY 01
DY 02

DY 03

DY 04

TOTAL

DY 05

$ 1,820,093,153
$ 1,032,132,205
$ 3,606,502,037

$ 1,930,382,104
$ 1,109,926,148
$ 3,878,367,462

$ 2,047,356,958
$ 1,193,583,641
$ 4,170,713,612

$ 2,171,383,023
$ 1,283,544,004
$ 4,485,077,089

$ 2,302,916,416
$ 1,380,288,676
$ 4,823,147,740

$
$
$

10,272,131,654
5,999,474,674
20,963,807,940

$

$

$

$

$

$

37,235,414,268

6,458,727,395

6,918,675,714

DEMONSTRATION YEARS (DY)
DY 01
DY 02

7,411,654,210

7,940,004,116

8,506,352,832

DY 03

DY 04

TOTAL

DY 05

$ 1,811,524,938
$ 1,003,483,850
$ 3,518,391,637

$ 1,912,205,384
$ 1,049,185,216
$ 3,691,137,353

$ 2,018,458,538
$ 1,096,963,509
$ 3,872,371,048

$ 2,130,643,184
$ 1,146,906,800
$ 4,062,476,931

$ 2,248,995,873
$ 1,199,131,380
$ 4,261,925,309

$
$
$

10,121,827,918
5,495,670,754
19,406,302,278

TOTAL

$

6,333,400,425

$

6,652,527,953

$

6,987,793,094

$

7,340,026,915

$

7,710,052,562

$

35,023,800,949

VARIANCE

$

125,326,970

$

266,147,762

$

423,861,116

$

599,977,201

$

796,300,270

$

2,211,613,318

Summary

Page 4

ATTACHMENT IV: Public Notice

71

NOTICE OF KENTUCKY DEPARTMENT FOR MEDICAID SERVICES
PUBLIC HEARINGS AND COMMENT PERIOD FOR
§1115 DEMONSTRATION WAIVER
Pursuant to 42 CFR 431.408, notice is hereby given that the Kentucky Department for Medicaid
Services will provide the public the opportunity to review and provide input on a §1115
demonstration waiver that will be submitted to the Centers for Medicare and Medicaid Services
(CMS) to implement Kentucky HEALTH. This notice provides details about the waiver
submission and serves to open the 30-day public comment period, which closes on Friday, July
22, 2016 at 5:00 p.m.
In addition to the 30-day public comment period in which the public will be able to provide
written comments to the agency via the US postal service or electronic mail, the Commonwealth
will also host two public hearings in which the public may provide verbal comments directly to
the Agency. The public hearings will be held on the following dates and times at the following
geographically distinct locations:
Tuesday, June 28, 2016, 10:00 AM – 12:00 PM (CST)
Western Kentucky University
Knicely Conference Center Auditorium
2355 Nashville Road
Bowling Green, KY 42101
Wednesday, June 29, 2016, 1:00 PM – 2:00 PM (EST)
Advisory Council for Medical Assistance (MAC) Special Meeting
Kentucky Capitol Annex
702 Capital Avenue
Frankfort, KY 40601
Wednesday, July 6, 2016, 11:00 AM – 1:00 PM (EST)
Hazard Community and Technical College Campus
Room 208, Jolly Classroom Center
1 Community College Drive
Hazard, KY 41701
Prior to finalizing the proposed waiver, the Commonwealth will consider all of the public
comments received during the public comment period, both written and verbal. The comments
will be summarized and addressed in the final draft of the waiver to be submitted to CMS.
WAIVER PROPOSAL SUMMARY
The §1115 demonstration waiver seeks to secure the long-term viability of Medicaid expansion
in Kentucky, and introduce reforms intended to tailor the program to a non-disabled working-age
adult population. The §1115 demonstration waiver creates an innovative, transformative
healthcare program designed to not only improve health outcomes for members, but also
improve their overall quality of life by addressing some of the underlying social determinants of
health and helping to break the cycle of poverty. The §1115 demonstration waiver includes the

1

creation of the Kentucky HEALTH program and introduces comprehensive delivery system
reforms targeting substance use disorder (SUD), chronic disease management, and managed care
to improve quality and outcomes.
Kentucky HEALTH offers eligible individuals two pathways to coverage: (i) an employer
premium assistance program, which assists individuals in purchasing their employer-sponsored
health insurance plan; and (ii) a consumer-driven health plan option, which offers members a
high-deductible health plan with commercial market benefits.
1. Employer Premium Assistance Program: Members who currently have access to health
insurance through their employer will have the option to enroll their family into their
employer-sponsored health insurance plan. Participation in the premium assistance
program in lieu of the standard Kentucky HEALTH consumer driven health plan is
optional during their first year of enrollment, but mandatory after the member’s second
year of eligibility, provided the member has been employed with their employer at least
one year. The employer premium assistance program will subsidize the member’s
employer-sponsored health insurance plan.
2. Consumer-Driven Health Plan: This innovative, transformative healthcare program
introduces commercial market health insurance features and encourages members to
become active consumers of healthcare. Kentucky HEALTH will be managed through a
managed care delivery system and will offer a new benefit package modeled after the
Kentucky State Employees’ Health Plan, while maintaining current mental health and
substance use disorder benefits. In addition, Kentucky HEALTH provides a consumerdriven, high-deductible health plan paired with two member controlled healthcare
spending accounts: (i) the deductible account, to cover deductible expenses; and (ii) the
My Rewards Account, to accrue savings and earned incentive dollars that can be used to
purchase enhanced benefits not covered in the base benefit package.
Kentucky HEALTH is designed to improve member health, prepare them for employment, and
provide them with the tools to successfully transition to commercial market insurance coverage.
First, the program focuses on engaging people to improve their overall health and wellbeing by
creating incentives for preventive care, participation in disease management programs, and
healthy lifestyles. Second, the program embraces commercial market policies and principles to
familiarize participants with commercial market coverage by requiring member premiums and
establishing an open enrollment period. Finally, the program actively assists members in
transitioning to commercial market insurance coverage by requiring participation in minimum
community engagement activities, incentivizing employment, and rewarding members who are
successfully able to obtain employment and commercial health insurance for at least eighteen
months.
GOALS & OBJECTIVES
The Kentucky HEALTH seeks to comprehensively transform Medicaid and accomplish the
following goals:
1. Improve participants’ health and help them be responsible for their health;

2

2. Encourage individuals to become active participants and consumers of healthcare who are
prepared to use commercial health insurance;
3. Empower people to seek employment and transition to commercial health insurance
coverage;
4. Implement delivery system reforms to improve quality and outcomes; and
5. Ensure fiscal sustainability.
ELIGIBILITY
Kentucky HEALTH is designed specifically for able-bodied working age adults and their
families. Currently, the Commonwealth has expanded Medicaid to cover this new adult group up
to 138% of the federal poverty level (FPL). This expansion will be maintained through Kentucky
HEALTH. In addition, the Commonwealth will seek to transition all other non-disabled adult
Medicaid recipients to Kentucky HEALTH. Finally, Kentucky HEALTH will seek to provide
seamless coverage for families by including children covered under the KCHIP program.
Kentucky HEALTH will include the following eligibility categories:








Individuals eligible in the new adult group pursuant to Section 1902(a)(10)(i)(VIII) of the
Social Security Act (the Act);
Low-income parents and caretaker relatives pursuant to Section 1931 of the Act;
Individuals eligible for transitional medical assistance pursuant to Section 1925 of the Act;
Women eligible in the pregnant women category;
Newborn children;
Medicaid eligible infants and children under age 19; and
Children eligible under Title XXI CHIP Program.

Kentucky HEALTH may also affect member eligibility due to the introduction of several
commercial market policies as well as the community engagement and employment initiative.


Commercial Market Policies: Similar to the commercial health insurance market, individuals
determined eligible for Kentucky HEALTH (excluding children and pregnant women) will
be required to make their first month’s required premium payment (as described in the Cost
Sharing section below) prior to the start of benefits. Notwithstanding the foregoing,
individuals with income at or below 100% FPL who do not make an initial premium payment
within sixty calendar days from the date of the invoice, will begin benefits but subject to the
non-payment penalty described below in the “Member Cost Sharing” section of this notice.
In addition, Kentucky HEALTH will establish a client-specific open enrollment period. That
is, if an individual is disenrolled from the program in accordance with current practice for
failing to comply with annual eligibility redetermination requirements, the individual will be
required to wait six months for a new open enrollment period. This policy will educate
members of the importance of meeting commercial health insurance market open enrollment
deadlines. Members may rejoin the program at any time prior to the six-month date by
completing a financial or health literacy course.



Community Engagement & Employment Initiative: To further the goal of helping members
transition to commercial health insurance coverage, Kentucky HEALTH will implement a

3

community engagement and employment initiative. After three months of program
eligibility, all able-bodied working age adult Kentucky HEALTH members will be required
to participate in a community engagement activity, such as volunteer work, employment or
job training, and job search activities. To help transition members into this requirement, the
hour requirement will gradually increase to require at least twenty hours of community
engagement activities each week after the first year. Children, pregnant women, individuals
determined medically frail, and individuals who are the primary caregiver of a dependent will
be exempt from this requirement.
Escalated Community Engagement & Employment Hours
Eligibility
Required Engagement
Period
Hours
1-3 months
0 hours per week
4-6 months
5 hours per week
6-9 months
10 hours per week
9-12 months
15 hours per week
12+ months
20 hours per week
ENROLLMENT & FISCAL PROJECTIONS
It is anticipated that enrollment in Kentucky HEALTH will fluctuate for a variety of reasons,
including program non-compliance. Members may have health coverage temporarily suspended
for not meeting the community engagement and employment initiative requirements or for
failing to pay required monthly premiums. However, all individuals will have the opportunity to
regain coverage at any time through compliance with the community engagement requirements,
or by completing a health or financial literacy class and paying premiums. In addition, initial
enrollment may fluctuate as individuals with little to no claims activity choose to leave the
program rather than pay premiums, however, over time this will settle as individuals become
familiar with the advantages of the program. Finally, in later demonstration years, more
participants are expected to transition to commercial coverage.
The following table illustrates the State’s enrollment projections by total member months.
Estimated Enrollment Projections
Year
Without Waiver
KENTUCKY HEALTH
1 (2017)
14,070,000
13,856,000
2 (2018)
14,319,000
13,895,000
3 (2019)
14,576,000
13,945,000
4 (2020)
14,840,000
14,007,000
5 (2021)
15,111,000
14,080,000
Note: Values shown have been rounded and represent member months.

Difference
(214,000)
(424,000)
(631,000)
(833,000)
(1,031,000)

Over the five-year demonstration period, Kentucky HEALTH will save a total of approximately
$2.2 billion. The table below provides the estimated State and federal costs divided by year.

4

Estimated Fiscal Projections
Demonstration
Year

Without
Waiver
1 (2017)
$ 6,458,700,000
2 (2018)
$ 6,918,700,000
3 (2019)
$ 7,411,700,000
4 (2020)
$ 7,940,000,000
5 (2021)
$ 8,506,400,000
Note: Values have been rounded.

Expenditures
Kentucky
HEALTH
$ 6,332,300,000
$ 6,650,100,000
$ 6,983,900,000
$ 7,334,700,000
$ 7,703,000,000

Difference
$ (126,500,000)
$ (268,600,000)
$ (427,700,000)
$ (605,300,000)
$ (803,300,000)

State Share of
Expenditure
Difference
$ (15,500,000)
$ (34,900,000)
$ (58,500,000)
$ (95,600,000)
$ (126,800,000)

BENEFITS
Kentucky HEALTH seeks to provide its members with a commercial health insurance
experience in order to better prepare members to transition to commercial insurance. The
Kentucky HEALTH benefit plan for the expansion population will align with the Kentucky State
Employees’ Health Plan, which provides a comprehensive commercial health insurance benefit
package. Kentucky HEALTH will preserve all current mental health and SUD services. Further,
additional benefits including dental services, vision services, over the counter medications, and
gym membership reimbursement will be available through the member’s My Rewards Account.
Further, consistent with the goal of offering a commercial health insurance market experience,
the Commonwealth will not provide coverage for non-emergency medical transportation
(NEMT) to the newly eligible adult group, and will seek a waiver of this non-commercial health
insurance benefit.
Children, pregnant women, medically frail individuals, and individuals eligible for Medicaid
prior to the passage of the Affordable Care Act will be eligible to receive standard Medicaid
State Plan benefits, including NEMT, vision services, and dental services. In addition, all
children receiving services through the waiver will continue to receive all early and periodic
screening, diagnostic, and treatment (EPSDT) services. The Commonwealth will make several
minor modifications to the current State Plan covered services via State Plan Amendment to
remove certain non-traditional Medicaid benefits that were added in 2014 with expansion, such
as private duty nursing and allergy testing.
In addition, this §1115 demonstration waiver seeks to implement a new employer premium
assistance program, which will allow eligible members to purchase their employer-sponsored
health insurance plan in lieu of participating in Kentucky HEALTH. Members participating in
the employer premium assistance option will have full access to the benefits and network of the
employer plan; however, the Commonwealth will provide wrap-around benefits to ensure that
members have access to all Kentucky HEALTH benefits not otherwise covered by the employersponsored health insurance plan.
MEMBER COST SHARING
All Kentucky HEALTH members, with the exception of pregnant women and children, will be
required to pay a monthly premium amount, increasing on a sliding scale based on family
income, ranging from $1.00 per month up to a maximum of $15.00 per month.

5

Kentucky HEALTH Sliding Scale Premium Contribution Amounts
Federal Poverty Level
Premium Payment
Under 25% FPL
$1.00 per month
25-50% FPL
$4.00 per month
51-100% FPL
$8.00 per month
101-138% FPL
$15.00 per month
To discourage long-term program dependency and to prepare higher income members for
Marketplace coverage, premium requirements will gradually increase for individuals with
income greater than 100% FPL each year the member remains Kentucky HEALTH, in
accordance with the table below.
Increased Premium Amounts for Individuals
Year 1-2
Year 3
FPL
Premium
Premium
101-138%
$15.00
$22.50

Over 100% FPL
Year 4
Year 5+
Premium
Premium
$30.00
$37.50

In addition to monthly premiums, Kentucky HEALTH will include a deductible (equal to
$1,000), and each member (except pregnant women and children who are exempt from all cost
sharing) will be provided a fully funded deductible account to pay for the deductible. Preventive
services, such as annual examinations, are covered without charge to the member and are not
included in the plan deductible amount. After the $1,000 deductible is met through the utilization
of the member’s deductible account, the managed care plan will pay for all covered services in
full.
Members who consistently make their required premium contributions will have access to the
My Rewards Account. The My Rewards Account will contain incentive dollars which members
may earn by completing specified activities designed to improve member health (i.e.
participation in disease management course) and increase community engagement (i.e. volunteer
work, participation in job search or training, etc.). In addition, members may transfer up to 50%
of any unused balance in their deductible account to the My Rewards Account at the end of the
benefit period. As funds accumulate in the My Rewards Account, the member may purchase
additional benefits (as described in the Benefits section above).
Members will have a sixty-day grace period to make their required monthly premium payment
contribution to the deductible account. Similar to commercial plans, Kentucky HEALTH will
impose consequences for non-compliance in order to help educate members about standard
commercial health insurance market policies. Therefore, individuals that do not pay a required
premium payment within sixty calendar days from the due date will face a six-month nonpayment penalty, as detailed in the table below. However, all individuals will have the ability to
end their non-payment penalty period by completing one of the early re-entry options outlined in
the table below.

6

Non-Payment
Member
FPL
Above
100% FPL
At or below
100% FPL
&
Medically
Frail

Pregnant
Women and
Children

Penalty
Non-Payment Penalty






Disenrolled from Kentucky HEALTH
Re-enrollment waiting period of six
months
State Plan copayments required for all
services
$25 is deducted from the My Rewards
Account
My Rewards Account is suspended
o Not able to use funds in account
o Not able to accrue funds in account

Not applicable. Exempt from all cost-sharing
requirements.

Early Re-Entry
Option
 Pay past debt;
 Pay premium for
reinstatement
month; and
 Participate in
financial or health
literacy course

Not applicable

As long as the member is consistently paying their monthly premium, Kentucky HEALTH will
not require additional copayments for services. Kentucky HEALTH will only apply copayments
to services for individuals with income at or below 100% FPL or for those determined medically
frail. Required copayments during the member’s non-payment penalty period will be equal to the
current copayments scheduled in the Kentucky Medicaid State Plan, which range from $3.00 for
a physician office visit and up to $50.00 for hospital inpatient services.
In addition, to incentivize appropriate hospital emergency department utilization, Kentucky
HEALTH will implement incentives and disincentive related to the members My Rewards
Account. Members will be eligible for a $20 financial contribution to the My Rewards Account
for each year in which the member avoids unnecessary emergency room services and seeks
appropriate alternative providers for care, and be subject to escalating deductions from the My
Rewards Account for each inappropriate emergency room visit.
Inappropriate Emergency
Inappropriate ER Visit
1st Visit
2nd Visit
3rd Visit or More

Room Utilization My Rewards Account Penalty
Account Deduction
$20
$50
$75

HEALTH CARE DELIVERY SYSTEM
Kentucky HEALTH will rely on the Commonwealth’s existing managed care delivery system. In
addition to the creation of the Kentucky HEALTH program, the §1115 demonstration waiver
will also introduce comprehensive delivery system reforms targeting substance use disorder
(SUD), chronic disease management, and managed care to improve quality and outcomes.


Substance Use Disorder: Kentucky HEALTH will maintain all current mental health and
substance use disorder (SUD) benefits. However, this §1115 demonstration waiver will
also implement a pilot program in ten to twenty select counties to improve access to
7

mental health and SUD services. Counties will be identified based on a recent CDC
HIV/hepatitis C outbreak study, the State’s existing Shaping Our Appalachian Region
(SOAR) initiative, and public input received during the demonstration waiver public
notice and comment period. Specifically, the Commonwealth will request a waiver of the
Institutions for Mental Disease (IMD) exclusion to allow Medicaid reimbursement for
short-term residential stays of up to thirty days in an IMD. The pilot program will also
examine best practice improvements related to standards of care, care coordination
between levels and settings of care, and strategies to address prescription drug abuse and
opioid use disorder.


Chronic Disease Management: The waiver will align various Kentucky HEALTH
program components to support the Commonwealth’s existing public health
infrastructure and current efforts to improve chronic disease prevention and management.
In addition, the Commonwealth will work with Kentucky’s Medicaid managed care
organizations to continue implementing best practices from nationally recognized disease
management programs, such as the National Diabetes Prevention Program.



Managed Care Reforms: Prior to implementing Kentucky HEALTH, the Commonwealth
will align incentives across the delivery system by introducing mechanisms to control
spending, as well as payment incentives for providers and the managed care
organizations to improve quality and align with member incentives. In addition, the
Kentucky Department for Medicaid Services will continue to seek improvements and
administrative efficiencies in the existing Medicaid managed care program, such as
uniform credentialing and formulary alignment.

IMPLEMENTATION
The Commonwealth will implement the Kentucky HEALTH program on a statewide basis on or
about six months post-§1115 demonstration waiver approval; however, this date may vary
depending on the approval date from CMS. The Kentucky HEALTH community engagement
and employment initiative will be phased in on a county-by-county basis and may take longer.
Implementation of this 1115 demonstration waiver will require the Commonwealth to amend the
existing managed care contracts, modify systems and other operational procedures, and conduct
a readiness review of various vendors. In addition to these tasks, the Commonwealth will also
have to amend the Medicaid State Plan, amend the Alternative Benefit Plan, develop education
materials, and prepare to transition existing members.
HYPOTHESES & EVALUATION
This Section 1115 demonstration waiver will investigate the following research hypotheses
related to each program goal:
Goal 1: Improve participant’s health and help them be responsible for their health
 Hypothesis: Kentucky HEALTH policies will promote member use of preventive and
primary care.
o Track and compare health service utilization rates between current Kentucky
HEALTH members and their previous Medicaid enrollment category.

8







o Track preventive care utilization rates and trends among different age and
gender groups.
Hypothesis: Kentucky HEALTH policies will promote member compliance with
chronic disease management.
o Track and compare chronic disease management compliance rates between
current Kentucky HEALTH members and their previous Medicaid enrollment
category.
Hypothesis: Kentucky HEALTH policies will reduce member hospitalization of
ambulatory care sensitive conditions (ACSCs).
o Track and compare ACSCs hospitalization rates between current Kentucky
HEALTH members, and their previous Medicaid enrollment category.
Hypothesis: Kentucky HEALTH policies will increase access to substance use
disorder (SUD) services with special focus on Institutions for Mental Diseases (IMD).
o Track and compare inpatient specialty care/SUD utilization rates between
current Kentucky HEALTH members, and their previous Medicaid enrollment
category.

Goal 2: Transform individuals from passive beneficiaries to active participants and
consumers of healthcare who are prepared to use commercial health insurance
 Hypothesis: Kentucky HEALTH policies will provide incentives to monitor and
managed the two member managed account funds.
o Track and compare remaining balances in member deductible accounts at the
end of each benefit period.
o Track and compare balance in member My Rewards Accounts at the end of
each benefit period.
o Track account balances transferred from the deductible account to the My
Rewards Account at the end of each benefit period, including number of
members with unused deductible account balances at the end of each benefit
period and the average amount transferred to the My Rewards Account at the
end of each benefit period.
o Track number of people checking their account balances, as well as how often
they are checked (i.e. weekly, monthly, semi-annually, and annually).
 Hypothesis: Kentucky HEALTH policies will encourage healthy behaviors and
increase member access to enhanced health services (such as gym memberships and
over-the-counter medications).
o Track and compare My Reward Account expenditures on enhanced health
services.
o Track and compare member achievement of healthy incentives contributions
to the My Rewards Account.
o Track and compare type of enhanced health services used by member MY
Rewards accounts.
 Hypothesis: Kentucky HEALTH policies will promote member compliance with
making premium payments.
o Track premium initial and ongoing premium payments.
 Hypothesis: Kentucky HEALTH open enrollment policy will increase member
compliance with redetermination process.

9



o Track member compliance with redetermination.
Hypothesis: Kentucky HEALTH’s incentive and disincentive policies related to nonemergency use of hospital emergency room will reduce inappropriate utilization
among Kentucky HEALTH members.
o Compare annual rates of inappropriate emergency department utilization
between Kentucky Medicaid populations for the years before waiver (prior to
2017) and after waiver (2017 and beyond).
o Survey Kentucky HEALTH members on whether the incentives and
disincentives related to the My Rewards Account for appropriate emergency
room utilization caused them to seek services with their primary care
physician or in an alternative urgent care setting.
o Compare annual rates of members subject to the escalating My Rewards
Account disincentive based on repeated inappropriate hospital emergency
department utilization.

Goal 3: Empower people to seek employment and transition to commercial health
insurance coverage
 Hypothesis: Kentucky HEALTH policies will encourage members to increase
community engagement.
o Track and compare member achievement of community engagement and
employment contributions to the My Rewards Account.
 Hypothesis: Kentucky HEALTH policies will encourage members to seek
employment.
o Track members participating in job search activities.
 Hypothesis: Kentucky HEALTH policies will encourage members to earn
employment and ultimately transition to commercial health insurance coverage.
o Track number of individuals successfully transitioning to commercial health
insurance coverage and accessing the My Rewards Account bonus after
eighteen months.
o Track number of individuals employed over twenty hours per week.
o Track earnings of members who earn employment.
 Hypothesis: The employer premium assistance program will increase the proportion
of Kentucky residents under 138% FPL covered by employer sponsored insurance.
o Track the number of Kentucky residents with income under 138% FPL
covered by ESI over the demonstration.
o Track employer premium assistance program member enrollment.
o Track employer premium assistance program employer enrollment.
o Track employer premium assistance program wrap-around coverage
expenditures.
 Hypothesis: Kentucky HEALTH’s sliding scale increase premium payment amounts
will discourage dependency on public assistance and encourage members to transition
to commercial health insurance coverage.
o Compare annual rates of Medicaid enrollment between Kentucky Medicaid
populations for the years before waiver (prior to 2017) and after waiver (2017
and beyond).

10

o Survey Kentucky HEALTH members on whether the sliding scale increased
premium payment amount caused them to seek employment and/or other
forms of health insurance coverage.
o Compare annual rates of members paying increased premium amounts based
on continued annual enrollment in Kentucky HEALTH.
Goal 4: Implement Delivery System Reform to Improve Quality and Outcomes
 Hypothesis: Kentucky HEALTH policies will promote high quality healthcare
delivered by providers.
o Track managed care organizations ability to meet quality and outcome
benchmarks within their service contracts.
o Track Kentucky providers receiving bonus payments from the managed care
organizations for meeting quality and outcomes standards.
Goal 5: Ensure fiscal sustainability
 Hypothesis: Kentucky HEALTH will remain budget-neutral for both the federal and
State governments.
o Conduct a budget neutrality analysis and document adherence to waiver
margin.
WAIVER & EXPENDITURE AUTHORITIES
Below is a list of proposed waivers the Commonwealth will seek from CMS to implement
Kentucky HEALTH:
1. Eligibility: Section 1902(a)(10)(A)
o To the extent necessary to enable Kentucky to not provide medical coverage until the
first day of the month in which the Kentucky HEALTH member pays their first
premium payment, or for members below 100% FPL who fail to make an initial
premium payment, the first day of the month following the expiration of the 60-day
payment period.
o To the extent necessary to enable Kentucky to require Kentucky HEALTH members,
as a condition of eligibility, to complete specified community engagement hours.
2. Retroactive Eligibility: Section 1902(a)(34)
o To the extent necessary to enable Kentucky to not provide medical coverage for any
month prior to the month in which the member finalized enrollment in Kentucky
HEALTH.
3. Cost-Sharing: Section 1902(a)(14) insofar as it incorporates 1916 and 1916A
o To the extent necessary to enable Kentucky to require monthly premium payments
not to exceed 5% of income, but no less than $1.00 per month, for all Kentucky
HEALTH members.
4. Amount, Duration, and Scope: Section 1902(a)(10)(B)
o To the extent necessary to enable Kentucky to vary cost-sharing requirements, such
that premium contribution amounts increase each year members with income above
100% FPL remain on Kentucky HEALTH, not to exceed 5% of income, and to
charge copayments in lieu of premiums for individuals at or below 100% FPL who
fail to make their premium payment within the sixty-day payment period.

11

5.

6.

7.

o To the extent necessary to allow Kentucky HEALTH members who continue to pay
premium contributions to use their My Rewards Account to purchase specified
enhanced benefits not otherwise available in the base Kentucky HEALTH benefit
package.
o To the extent necessary to enable Kentucky to allow individuals to receive the
benefits provided through their employer-sponsored plan.
Reasonable Promptness: Section 1902(a)(3)/Section 1902(a)(8)
o To the extent necessary to enable Kentucky to delay benefits, such that benefits do
not begin until a member makes a premium contribution, or until the expiration of a
60-day payment period for members below 100% FPL who fail to make a premium
contribution.
o To the extent necessary to enable Kentucky to prohibit re-enrollment for up to six
months for Kentucky HEALTH members above 100% FPL who are disenrolled for
failure to make their required premium contributions within 60 days of the due date.
o To the extent necessary to enable Kentucky to implement an open enrollment period
for Kentucky HEALTH, such that members who are disenrolled for failure to
complete redetermination process will be required to wait until their next open
enrollment period to re-enroll (up to six months).
Freedom of Choice: Section 1902(a)(23)
o To the extent necessary to enable Kentucky to restrict the freedom of choice of
providers for demonstration eligibility groups.
Non-Emergency Transportation: Section 1902(a)(4) insofar as it incorporates 42 CFR
431.53
o To the extent necessary to relieve Kentucky of the requirement to assure nonemergency medical transportation to and from medical providers for Kentucky
HEALTH members.

In addition, the Commonwealth requests that expenditures related to providing services in an
Institution for Mental Disease (IMD), in participating pilot project counties, be regarded as
expenditures under the Commonwealth’s Medicaid Title XIX State Plan.
REVIEW OF DOCUMENTS & SUBMISSION OF COMMENTS
All information regarding the Kentucky HEALTH §1115 demonstration waiver, including this
public notice, the waiver application, and other documentation regarding the proposal are
available at: http://chfs.ky.gov/kentuckyhealth. In addition, the Kentucky HEALTH §1115
demonstration waiver application is available for in-person public review at Cabinet for Health
and Family Services, Office of the Secretary, 275 E. Main St., Frankfort, KY 40621.
Written comments regarding the Kentucky HEALTH waiver application may be mailed to
Commissioner Stephen Miller, Department for Medicaid Services, 275 E. Main Street, Frankfort,
KY 40621. Comments may also be sent via electronic mail to [e-mail]. All comments
must be received by Friday, July 22, 2016 at 5:00 p.m.

12

NOTICE OF KENTUCKY DEPARTMENT FOR MEDICAID SERVICES
PUBLIC COMMENT PERIOD FOR §1115 DEMONSTRATION WAIVER
Notice is hereby given that the Kentucky Department for Medicaid Services (DMS) will extend
the public comment period on the §1115 demonstration waiver that will be submitted to the
Centers for Medicare and Medicaid Services (CMS) to implement Kentucky HEALTH.
This notice provides details about the waiver submission and serves as formal notice of the
public comment period extension through Friday, August 12, 2016 at 5:00 p.m.
DMS previously held open a 30-day public comment period on the same Kentucky HEALTH
waiver from June 22, 2016 through July 22, 2016. In response to the volume of comments that
were submitted on the final day of the comment period, including after the 5:00 p.m. deadline,
DMS is extending the comment period through 5:00 p.m. on August 12, 2016. This will allow
for the numerous comments that came in after the official deadline to be incorporated, as well as
allow any individual who was unable to comment previously the opportunity to do so.
Prior to finalizing the proposed waiver, the Commonwealth will consider all comments received
on the Kentucky HEALTH waiver, including the original 30-day public comment period as well
as this extended public comment period. All comments will be summarized and addressed in the
final waiver to be submitted to CMS.
WAIVER PROPOSAL SUMMARY
The §1115 demonstration waiver seeks to secure the long-term viability of Medicaid expansion
in Kentucky, and introduce reforms intended to tailor the program to a non-disabled working-age
adult population. The §1115 demonstration waiver creates an innovative, transformative
healthcare program designed to not only improve health outcomes for members, but also
improve their overall quality of life by addressing some of the underlying social determinants of
health and helping to break the cycle of poverty. The §1115 demonstration waiver includes the
creation of the Kentucky HEALTH program and introduces comprehensive delivery system
reforms targeting substance use disorder (SUD), chronic disease management, and managed care
to improve quality and outcomes.
Kentucky HEALTH offers eligible individuals two pathways to coverage: (i) an employer
premium assistance program, which assists individuals in purchasing their employer-sponsored
health insurance plan; and (ii) a consumer-driven health plan option, which offers members a
high-deductible health plan with commercial market benefits.
1. Employer Premium Assistance Program: Members who currently have access to health
insurance through their employer will have the option to enroll their family into their
employer-sponsored health insurance plan. Participation in the premium assistance
program in lieu of the standard Kentucky HEALTH consumer driven health plan is
optional during their first year of enrollment, but mandatory after the member’s second
year of eligibility, provided the member has been employed with their employer at least
one year. The employer premium assistance program will subsidize the member’s
employer-sponsored health insurance plan.

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2. Consumer-Driven Health Plan: This innovative, transformative healthcare program
introduces commercial market health insurance features and encourages members to
become active consumers of healthcare. Kentucky HEALTH will be managed through a
managed care delivery system and will offer a new benefit package modeled after the
Kentucky State Employees’ Health Plan, while maintaining current mental health and
substance use disorder benefits. In addition, Kentucky HEALTH provides a consumerdriven, high-deductible health plan paired with two member controlled healthcare
spending accounts: (i) the deductible account, to cover deductible expenses; and (ii) the
My Rewards Account, to accrue savings and earned incentive dollars that can be used to
purchase enhanced benefits not covered in the base benefit package.
Kentucky HEALTH is designed to improve member health, prepare them for employment, and
provide them with the tools to successfully transition to commercial market insurance coverage.
First, the program focuses on engaging people to improve their overall health and wellbeing by
creating incentives for preventive care, participation in disease management programs, and
healthy lifestyles. Second, the program embraces commercial market policies and principles to
familiarize participants with commercial market coverage by requiring member premiums and
establishing an open enrollment period. Finally, the program actively assists members in
transitioning to commercial market insurance coverage by requiring participation in minimum
community engagement activities, incentivizing employment, and rewarding members who are
successfully able to obtain employment and commercial health insurance for at least eighteen
months.
GOALS & OBJECTIVES
The Kentucky HEALTH seeks to comprehensively transform Medicaid and accomplish the
following goals:
1. Improve participants’ health and help them be responsible for their health;
2. Encourage individuals to become active participants and consumers of healthcare who are
prepared to use commercial health insurance;
3. Empower people to seek employment and transition to commercial health insurance
coverage;
4. Implement delivery system reforms to improve quality and outcomes; and
5. Ensure fiscal sustainability.
ELIGIBILITY
Kentucky HEALTH is designed specifically for able-bodied working age adults and their
families. Currently, the Commonwealth has expanded Medicaid to cover this new adult group up
to 138% of the federal poverty level (FPL). This expansion will be maintained through Kentucky
HEALTH. In addition, the Commonwealth will seek to transition all other non-disabled adult
Medicaid recipients to Kentucky HEALTH. Finally, Kentucky HEALTH will seek to provide
seamless coverage for families by including children covered under the KCHIP program.
Kentucky HEALTH will include the following eligibility categories:

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







Individuals eligible in the new adult group pursuant to Section 1902(a)(10)(i)(VIII) of the
Social Security Act (the Act);
Low-income parents and caretaker relatives pursuant to Section 1931 of the Act;
Individuals eligible for transitional medical assistance pursuant to Section 1925 of the Act;
Women eligible in the pregnant women category;
Newborn children;
Medicaid eligible infants and children under age 19; and
Children eligible under Title XXI CHIP Program.

Kentucky HEALTH may also affect member eligibility due to the introduction of several
commercial market policies as well as the community engagement and employment initiative.


Commercial Market Policies: Similar to the commercial health insurance market, individuals
determined eligible for Kentucky HEALTH (excluding children and pregnant women) will
be required to make their first month’s required premium payment (as described in the Cost
Sharing section below) prior to the start of benefits. Notwithstanding the foregoing,
individuals with income at or below 100% FPL who do not make an initial premium payment
within sixty calendar days from the date of the invoice, will begin benefits but subject to the
non-payment penalty described below in the “Member Cost Sharing” section of this notice.
In addition, Kentucky HEALTH will establish a client-specific open enrollment period. That
is, if an individual is disenrolled from the program in accordance with current practice for
failing to comply with annual eligibility redetermination requirements, the individual will be
required to wait six months for a new open enrollment period. This policy will educate
members of the importance of meeting commercial health insurance market open enrollment
deadlines. Members may rejoin the program at any time prior to the six-month date by
completing a financial or health literacy course.



Community Engagement & Employment Initiative: To further the goal of helping members
transition to commercial health insurance coverage, Kentucky HEALTH will implement a
community engagement and employment initiative. After three months of program
eligibility, all able-bodied working age adult Kentucky HEALTH members will be required
to participate in a community engagement activity, such as volunteer work, employment or
job training, and job search activities. To help transition members into this requirement, the
hour requirement will gradually increase to require at least twenty hours of community
engagement activities each week after the first year. Children, pregnant women, individuals
determined medically frail, and individuals who are the primary caregiver of a dependent will
be exempt from this requirement.
Escalated Community Engagement & Employment Hours
Eligibility
Required Engagement
Period
Hours
1-3 months
0 hours per week
4-6 months
5 hours per week
6-9 months
10 hours per week
9-12 months
15 hours per week
12+ months
20 hours per week
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ENROLLMENT & FISCAL PROJECTIONS
It is anticipated that enrollment in Kentucky HEALTH will fluctuate for a variety of reasons,
including program non-compliance. Members may have health coverage temporarily suspended
for not meeting the community engagement and employment initiative requirements or for
failing to pay required monthly premiums. However, all individuals will have the opportunity to
regain coverage at any time through compliance with the community engagement requirements,
or by completing a health or financial literacy class and paying premiums. In addition, initial
enrollment may fluctuate as individuals with little to no claims activity choose to leave the
program rather than pay premiums, however, over time this will settle as individuals become
familiar with the advantages of the program. Finally, in later demonstration years, more
participants are expected to transition to commercial coverage.
The following table illustrates the State’s enrollment projections by total member months.
Estimated Enrollment Projections
Year
Without Waiver KENTUCKY HEALTH
1 (2017)
14,070,000
13,856,000
2 (2018)
14,319,000
13,895,000
3 (2019)
14,576,000
13,945,000
4 (2020)
14,840,000
14,007,000
5 (2021)
15,111,000
14,080,000
Note: Values shown have been rounded and represent member months.

Difference
(214,000)
(424,000)
(631,000)
(833,000)
(1,031,000)

Over the five-year demonstration period, Kentucky HEALTH will save a total of approximately
$2.2 billion. The table below provides the estimated State and federal costs divided by year.
Estimated Fiscal Projections
Demonstration
Year

Without
Waiver
1 (2017)
$ 6,458,700,000
2 (2018)
$ 6,918,700,000
3 (2019)
$ 7,411,700,000
4 (2020)
$ 7,940,000,000
5 (2021)
$ 8,506,400,000
Note: Values have been rounded.

Expenditures
Kentucky
HEALTH
$ 6,332,300,000
$ 6,650,100,000
$ 6,983,900,000
$ 7,334,700,000
$ 7,703,000,000

Difference
$ (126,500,000)
$ (268,600,000)
$ (427,700,000)
$ (605,300,000)
$ (803,300,000)

State Share of
Expenditure
Difference
$ (15,500,000)
$ (34,900,000)
$ (58,500,000)
$ (95,600,000)
$ (126,800,000)

BENEFITS
Kentucky HEALTH seeks to provide its members with a commercial health insurance
experience in order to better prepare members to transition to commercial insurance. The
Kentucky HEALTH benefit plan for the expansion population will align with the Kentucky State
Employees’ Health Plan, which provides a comprehensive commercial health insurance benefit
package. Kentucky HEALTH will preserve all current mental health and SUD services. Further,
additional benefits including dental services, vision services, over the counter medications, and
gym membership reimbursement will be available through the member’s My Rewards Account.

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Further, consistent with the goal of offering a commercial health insurance market experience,
the Commonwealth will not provide coverage for non-emergency medical transportation
(NEMT) to the newly eligible adult group, and will seek a waiver of this non-commercial health
insurance benefit.
Children, pregnant women, medically frail individuals, and individuals eligible for Medicaid
prior to the passage of the Affordable Care Act will be eligible to receive standard Medicaid
State Plan benefits, including NEMT, vision services, and dental services. In addition, all
children receiving services through the waiver will continue to receive all early and periodic
screening, diagnostic, and treatment (EPSDT) services. The Commonwealth will make several
minor modifications to the current State Plan covered services via State Plan Amendment to
remove certain non-traditional Medicaid benefits that were added in 2014 with expansion, such
as private duty nursing and allergy testing.
In addition, this §1115 demonstration waiver seeks to implement a new employer premium
assistance program, which will allow eligible members to purchase their employer-sponsored
health insurance plan in lieu of participating in Kentucky HEALTH. Members participating in
the employer premium assistance option will have full access to the benefits and network of the
employer plan; however, the Commonwealth will provide wrap-around benefits to ensure that
members have access to all Kentucky HEALTH benefits not otherwise covered by the employersponsored health insurance plan.
MEMBER COST SHARING
All Kentucky HEALTH members, with the exception of pregnant women and children, will be
required to pay a monthly premium amount, increasing on a sliding scale based on family
income, ranging from $1.00 per month up to a maximum of $15.00 per month.
Kentucky HEALTH Sliding Scale Premium Contribution Amounts
Federal Poverty Level
Premium Payment
Under 25% FPL
$1.00 per month
25-50% FPL
$4.00 per month
51-100% FPL
$8.00 per month
101-138% FPL
$15.00 per month
To discourage long-term program dependency and to prepare higher income members for
Marketplace coverage, premium requirements will gradually increase for individuals with
income greater than 100% FPL each year the member remains Kentucky HEALTH, in
accordance with the table below.
Increased Premium Amounts for Individuals Over 100% FPL
Year 1-2
Year 3
Year 4
Year 5+
FPL
Premium
Premium
Premium
Premium
$15.00
$22.50
$30.00
$37.50
101-138%
In addition to monthly premiums, Kentucky HEALTH will include a deductible (equal to
$1,000), and each member (except pregnant women and children who are exempt from all cost

5

sharing) will be provided a fully funded deductible account to pay for the deductible. Preventive
services, such as annual examinations, are covered without charge to the member and are not
included in the plan deductible amount. After the $1,000 deductible is met through the utilization
of the member’s deductible account, the managed care plan will pay for all covered services in
full.
Members who consistently make their required premium contributions will have access to the
My Rewards Account. The My Rewards Account will contain incentive dollars which members
may earn by completing specified activities designed to improve member health (i.e.
participation in disease management course) and increase community engagement (i.e. volunteer
work, participation in job search or training, etc.). In addition, members may transfer up to 50%
of any unused balance in their deductible account to the My Rewards Account at the end of the
benefit period. As funds accumulate in the My Rewards Account, the member may purchase
additional benefits (as described in the Benefits section above).
Members will have a sixty-day grace period to make their required monthly premium payment
contribution to the deductible account. Similar to commercial plans, Kentucky HEALTH will
impose consequences for non-compliance in order to help educate members about standard
commercial health insurance market policies. Therefore, individuals that do not pay a required
premium payment within sixty calendar days from the due date will face a six-month nonpayment penalty, as detailed in the table below. However, all individuals will have the ability to
end their non-payment penalty period by completing one of the early re-entry options outlined in
the table below.
Non-Payment Penalty
Member
Non-Payment Penalty
FPL
Above
 Disenrolled from Kentucky HEALTH
100% FPL
 Re-enrollment waiting period of six
months
At or below  State Plan copayments required for all
100% FPL
services
&
 $25 is deducted from the My Rewards
Medically
Account
Frail
 My Rewards Account is suspended
o Not able to use funds in account
o Not able to accrue funds in account
Pregnant
Not applicable. Exempt from all cost-sharing
Women and
requirements.
Children

Early Re-Entry
Option
 Pay past debt;
 Pay premium for
reinstatement
month; and
 Participate in
financial or health
literacy course

Not applicable

As long as the member is consistently paying their monthly premium, Kentucky HEALTH will
not require additional copayments for services. Kentucky HEALTH will only apply copayments
to services for individuals with income at or below 100% FPL or for those determined medically
frail. Required copayments during the member’s non-payment penalty period will be equal to the

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current copayments scheduled in the Kentucky Medicaid State Plan, which range from $3.00 for
a physician office visit and up to $50.00 for hospital inpatient services.
In addition, to incentivize appropriate hospital emergency department utilization, Kentucky
HEALTH will implement incentives and disincentive related to the members My Rewards
Account. Members will be eligible for a $20 financial contribution to the My Rewards Account
for each year in which the member avoids unnecessary emergency room services and seeks
appropriate alternative providers for care, and be subject to escalating deductions from the My
Rewards Account for each inappropriate emergency room visit.
Inappropriate Emergency Room Utilization My Rewards Account Penalty
Inappropriate ER Visit Account Deduction
1st Visit
$20
2nd Visit
$50
3rd Visit or More
$75
HEALTH CARE DELIVERY SYSTEM
Kentucky HEALTH will rely on the Commonwealth’s existing managed care delivery system. In
addition to the creation of the Kentucky HEALTH program, the §1115 demonstration waiver
will also introduce comprehensive delivery system reforms targeting substance use disorder
(SUD), chronic disease management, and managed care to improve quality and outcomes.


Substance Use Disorder: Kentucky HEALTH will maintain all current mental health and
substance use disorder (SUD) benefits. However, this §1115 demonstration waiver will
also implement a pilot program in ten to twenty select counties to improve access to
mental health and SUD services. Counties will be identified based on a recent CDC
HIV/hepatitis C outbreak study, the State’s existing Shaping Our Appalachian Region
(SOAR) initiative, and public input received during the demonstration waiver public
notice and comment period. Specifically, the Commonwealth will request a waiver of the
Institutions for Mental Disease (IMD) exclusion to allow Medicaid reimbursement for
short-term residential stays of up to thirty days in an IMD. The pilot program will also
examine best practice improvements related to standards of care, care coordination
between levels and settings of care, and strategies to address prescription drug abuse and
opioid use disorder.



Chronic Disease Management: The waiver will align various Kentucky HEALTH
program components to support the Commonwealth’s existing public health
infrastructure and current efforts to improve chronic disease prevention and management.
In addition, the Commonwealth will work with Kentucky’s Medicaid managed care
organizations to continue implementing best practices from nationally recognized disease
management programs, such as the National Diabetes Prevention Program.



Managed Care Reforms: Prior to implementing Kentucky HEALTH, the Commonwealth
will align incentives across the delivery system by introducing mechanisms to control
spending, as well as payment incentives for providers and the managed care
organizations to improve quality and align with member incentives. In addition, the

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Kentucky Department for Medicaid Services will continue to seek improvements and
administrative efficiencies in the existing Medicaid managed care program, such as
uniform credentialing and formulary alignment.
IMPLEMENTATION
The Commonwealth will implement the Kentucky HEALTH program on a statewide basis on or
about six months post-§1115 demonstration waiver approval; however, this date may vary
depending on the approval date from CMS. The Kentucky HEALTH community engagement
and employment initiative will be phased in on a county-by-county basis and may take longer.
Implementation of this 1115 demonstration waiver will require the Commonwealth to amend the
existing managed care contracts, modify systems and other operational procedures, and conduct
a readiness review of various vendors. In addition to these tasks, the Commonwealth will also
have to amend the Medicaid State Plan, amend the Alternative Benefit Plan, develop education
materials, and prepare to transition existing members.
HYPOTHESES & EVALUATION
This Section 1115 demonstration waiver will investigate the following research hypotheses
related to each program goal:
Goal 1: Improve participant’s health and help them be responsible for their health
 Hypothesis: Kentucky HEALTH policies will promote member use of preventive and
primary care.
o Track and compare health service utilization rates between current Kentucky
HEALTH members and their previous Medicaid enrollment category.
o Track preventive care utilization rates and trends among different age and
gender groups.
 Hypothesis: Kentucky HEALTH policies will promote member compliance with
chronic disease management.
o Track and compare chronic disease management compliance rates between
current Kentucky HEALTH members and their previous Medicaid enrollment
category.
 Hypothesis: Kentucky HEALTH policies will reduce member hospitalization of
ambulatory care sensitive conditions (ACSCs).
o Track and compare ACSCs hospitalization rates between current Kentucky
HEALTH members, and their previous Medicaid enrollment category.
 Hypothesis: Kentucky HEALTH policies will increase access to substance use
disorder (SUD) services with special focus on Institutions for Mental Diseases (IMD).
o Track and compare inpatient specialty care/SUD utilization rates between
current Kentucky HEALTH members, and their previous Medicaid enrollment
category.
Goal 2: Transform individuals from passive beneficiaries to active participants and
consumers of healthcare who are prepared to use commercial health insurance
 Hypothesis: Kentucky HEALTH policies will provide incentives to monitor and
managed the two member managed account funds.

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





o Track and compare remaining balances in member deductible accounts at the
end of each benefit period.
o Track and compare balance in member My Rewards Accounts at the end of
each benefit period.
o Track account balances transferred from the deductible account to the My
Rewards Account at the end of each benefit period, including number of
members with unused deductible account balances at the end of each benefit
period and the average amount transferred to the My Rewards Account at the
end of each benefit period.
o Track number of people checking their account balances, as well as how often
they are checked (i.e. weekly, monthly, semi-annually, and annually).
Hypothesis: Kentucky HEALTH policies will encourage healthy behaviors and
increase member access to enhanced health services (such as gym memberships and
over-the-counter medications).
o Track and compare My Reward Account expenditures on enhanced health
services.
o Track and compare member achievement of healthy incentives contributions
to the My Rewards Account.
o Track and compare type of enhanced health services used by member MY
Rewards accounts.
Hypothesis: Kentucky HEALTH policies will promote member compliance with
making premium payments.
o Track premium initial and ongoing premium payments.
Hypothesis: Kentucky HEALTH open enrollment policy will increase member
compliance with redetermination process.
o Track member compliance with redetermination.
Hypothesis: Kentucky HEALTH’s incentive and disincentive policies related to nonemergency use of hospital emergency room will reduce inappropriate utilization
among Kentucky HEALTH members.
o Compare annual rates of inappropriate emergency department utilization
between Kentucky Medicaid populations for the years before waiver (prior to
2017) and after waiver (2017 and beyond).
o Survey Kentucky HEALTH members on whether the incentives and
disincentives related to the My Rewards Account for appropriate emergency
room utilization caused them to seek services with their primary care
physician or in an alternative urgent care setting.
o Compare annual rates of members subject to the escalating My Rewards
Account disincentive based on repeated inappropriate hospital emergency
department utilization.

Goal 3: Empower people to seek employment and transition to commercial health
insurance coverage
 Hypothesis: Kentucky HEALTH policies will encourage members to increase
community engagement.
o Track and compare member achievement of community engagement and
employment contributions to the My Rewards Account.

9








Hypothesis: Kentucky HEALTH policies will encourage members to seek
employment.
o Track members participating in job search activities.
Hypothesis: Kentucky HEALTH policies will encourage members to earn
employment and ultimately transition to commercial health insurance coverage.
o Track number of individuals successfully transitioning to commercial health
insurance coverage and accessing the My Rewards Account bonus after
eighteen months.
o Track number of individuals employed over twenty hours per week.
o Track earnings of members who earn employment.
Hypothesis: The employer premium assistance program will increase the proportion
of Kentucky residents under 138% FPL covered by employer sponsored insurance.
o Track the number of Kentucky residents with income under 138% FPL
covered by ESI over the demonstration.
o Track employer premium assistance program member enrollment.
o Track employer premium assistance program employer enrollment.
o Track employer premium assistance program wrap-around coverage
expenditures.
Hypothesis: Kentucky HEALTH’s sliding scale increase premium payment amounts
will discourage dependency on public assistance and encourage members to transition
to commercial health insurance coverage.
o Compare annual rates of Medicaid enrollment between Kentucky Medicaid
populations for the years before waiver (prior to 2017) and after waiver (2017
and beyond).
o Survey Kentucky HEALTH members on whether the sliding scale increased
premium payment amount caused them to seek employment and/or other
forms of health insurance coverage.
o Compare annual rates of members paying increased premium amounts based
on continued annual enrollment in Kentucky HEALTH.

Goal 4: Implement Delivery System Reform to Improve Quality and Outcomes
 Hypothesis: Kentucky HEALTH policies will promote high quality healthcare
delivered by providers.
o Track managed care organizations ability to meet quality and outcome
benchmarks within their service contracts.
o Track Kentucky providers receiving bonus payments from the managed care
organizations for meeting quality and outcomes standards.
Goal 5: Ensure fiscal sustainability
 Hypothesis: Kentucky HEALTH will remain budget-neutral for both the federal and
State governments.
o Conduct a budget neutrality analysis and document adherence to waiver
margin.
WAIVER & EXPENDITURE AUTHORITIES

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Below is a list of proposed waivers the Commonwealth will seek from CMS to implement
Kentucky HEALTH:
1. Eligibility: Section 1902(a)(10)(A)
o To the extent necessary to enable Kentucky to not provide medical coverage until the
first day of the month in which the Kentucky HEALTH member pays their first
premium payment, or for members below 100% FPL who fail to make an initial
premium payment, the first day of the month following the expiration of the 60-day
payment period.
o To the extent necessary to enable Kentucky to require Kentucky HEALTH members,
as a condition of eligibility, to complete specified community engagement hours.
2. Retroactive Eligibility: Section 1902(a)(34)
o To the extent necessary to enable Kentucky to not provide medical coverage for any
month prior to the month in which the member finalized enrollment in Kentucky
HEALTH.
3. Cost-Sharing: Section 1902(a)(14) insofar as it incorporates 1916 and 1916A
o To the extent necessary to enable Kentucky to require monthly premium payments
not to exceed 5% of income, but no less than $1.00 per month, for all Kentucky
HEALTH members.
4. Amount, Duration, and Scope: Section 1902(a)(10)(B)
o To the extent necessary to enable Kentucky to vary cost-sharing requirements, such
that premium contribution amounts increase each year members with income above
100% FPL remain on Kentucky HEALTH, not to exceed 5% of income, and to
charge copayments in lieu of premiums for individuals at or below 100% FPL who
fail to make their premium payment within the sixty-day payment period.
o To the extent necessary to allow Kentucky HEALTH members who continue to pay
premium contributions to use their My Rewards Account to purchase specified
enhanced benefits not otherwise available in the base Kentucky HEALTH benefit
package.
o To the extent necessary to enable Kentucky to allow individuals to receive the
benefits provided through their employer-sponsored plan.
5. Reasonable Promptness: Section 1902(a)(3)/Section 1902(a)(8)
o To the extent necessary to enable Kentucky to delay benefits, such that benefits do
not begin until a member makes a premium contribution, or until the expiration of a
60-day payment period for members below 100% FPL who fail to make a premium
contribution.
o To the extent necessary to enable Kentucky to prohibit re-enrollment for up to six
months for Kentucky HEALTH members above 100% FPL who are disenrolled for
failure to make their required premium contributions within 60 days of the due date.
o To the extent necessary to enable Kentucky to implement an open enrollment period
for Kentucky HEALTH, such that members who are disenrolled for failure to
complete redetermination process will be required to wait until their next open
enrollment period to re-enroll (up to six months).
6. Freedom of Choice: Section 1902(a)(23)
o To the extent necessary to enable Kentucky to restrict the freedom of choice of
providers for demonstration eligibility groups.

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7.

Non-Emergency Transportation: Section 1902(a)(4) insofar as it incorporates 42 CFR
431.53
o To the extent necessary to relieve Kentucky of the requirement to assure nonemergency medical transportation to and from medical providers for Kentucky
HEALTH members.

In addition, the Commonwealth requests that expenditures related to providing services in an
Institution for Mental Disease (IMD), in participating pilot project counties, be regarded as
expenditures under the Commonwealth’s Medicaid Title XIX State Plan.
REVIEW OF DOCUMENTS & SUBMISSION OF COMMENTS
All information regarding the Kentucky HEALTH §1115 demonstration waiver, including this
public notice, the waiver application, and other documentation regarding the proposal are
available at: http://chfs.ky.gov/kentuckyhealth. In addition, the Kentucky HEALTH §1115
demonstration waiver application is available for in-person public review at Cabinet for Health
and Family Services, Office of the Secretary, 275 E. Main St., Frankfort, KY 40621.
Written comments regarding the Kentucky HEALTH waiver application may be mailed to
Commissioner Stephen Miller, Department for Medicaid Services, 275 E. Main Street, Frankfort,
KY 40621. Comments may also be sent via electronic mail to [e-mail].
All comments must be received by Friday, August 12, 2016 at 5:00 p.m.

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