typically prefers to consolidate waivers, particularly if there is a chance of double-counting budget neutrality savings. This was a small risk under California’s current waivers, which only cover hospital services, personal care services, and family planning. If California develops a more comprehensive waiver proposal, CMS will likely insist that the hospital waiver be merged with the new program. The waiver will also have to address that portion of the family planning waiver population who are income eligible under the new waiver to avoid duplicate coverage. The benefits and disadvantages of this will have to be explored.
Toward the end of securing favorable terms for budget neutrality, there are several options that could be customized to California’s situation. First, the waiver baseline must be considered. California has a low baseline because of low provider payments, other cost savings initiatives, and also because of existing managed care initiatives. One strategy would be to negotiate an inflated waiver baseline that reflects a more typical state’s baseline. This would in effect allow California to benefit from the fact that it has historically held costs low. Another negotiation strategy is around the trend rate, which is the inflation factor that is a component of calculating the waiver ceiling from year to year. California could ask for a trend rate that increases at a level higher than the national spending projections based on the fact that a low cost state cannot hold costs down forever. At a minimum California should ask to get the national inflation rates, not its own relatively low Medicaid inflation history.
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