New York State’s $8 Billion Medicaid 1115 Waiver Amendment to Improve Access, Quality and Efficiency in the State’s Health Care Delivery System

by Ropes & Gray LLP

I.          Overview

On April 14, 2014, Governor Cuomo announced that New York had finalized the terms and conditions of a Medicaid 1115 waiver amendment agreement (the “MRT Waiver”) with the Centers for Medicare and Medicaid Services (“CMS”). The waiver amendment enables the state to reinvest over a five-year period $8 billion of the approximately $17.1 billion in federal savings generated by Medicaid Redesign Team (“MRT”) reforms. The reinvestment will allow for comprehensive reform primarily through the Delivery System Reform Incentive Payment (“DSRIP”) program. 

The DSRIP program is not unique to New York. It has been approved in several other states—including Texas, New Jersey, Pennsylvania and Kansas—as an alternative to more traditional waiver-funded supplemental payment programs. Program details vary by state, but generally provide federal and local funding for projects that further the “triple aims” of better care for individuals, better population health and lower cost through improvement and innovation. Participating providers receive funding to design and implement certain projects from a pre-approved “menu” provided as part of the MRT Waiver and are eligible for incentive payments if the programs meet or exceed certain performance metrics. 

Similar to DSRIP programs already approved by CMS in other states, the New York State DSRIP program approved through the MRT Waiver utilizes a rewards-based payment structure. This structure is designed to promote community-level collaborations and system reform with the overall goal of a 25% reduction in avoidable hospital utilization over the five-year reinvestment period.

II.        The Components of the MRT Waiver Amendment

New York submitted the MRT Waiver amendment proposal to CMS in August 2012, requesting to reinvest $10 billion in MRT-generated federal savings. CMS deemed several innovative strategies initially proposed by the state “unfundable” under federal rules, including those for rental subsidies and health information technology. After much back and forth, New York and CMS negotiated several structural changes to the original proposal, which enabled New York to reinvest $8 billion in federal savings for the following funding opportunities: 

  • $6.42 Billion for the DSRIP Program. The primary focus of the MRT Waiver is a rewards-based program that provides significant funding to eligible providers through planning grants, provider incentive payments and payments to fund administrative costs and related workforce transformation costs associated with innovative reform projects. The DSRIP program shares many features with existing federal and state reform initiatives and grant opportunities, but is unique in that it encourages meaningful collaboration among providers within a geographic area. For more information on the DSRIP program, please click here.
  • $500 Million for Interim Access Assurance Fund (“IAAF”). This time-limited funding will ensure that Medicaid safety net hospitals remain financially viable as they prepare for, commit to and participate fully in the DSRIP program transformation process. For more information on IAAF, please click here.
  • $1.08 Billion for other Medicaid Redesign Purposes. Unrelated to the DSRIP program, this “other” funding provided by the MRT Waiver will support ongoing state Medicaid reform initiatives, including: (i) Health Home sustainability; (ii) investments in workforce for Medicaid Long-Term Care plans (“MLTCs”); and (iii) the transition of individuals with mental health and substance abuse diagnoses into Medicaid managed care plans. For more information on waiver funding for these other Medicaid redesign purposes, please click here.

III.       The Importance of Strategic Planning

The expansive funding opportunities available through the MRT Waiver, and specifically the DSRIP program, must be carefully reviewed by providers, as each project carries unique eligibility and application criteria. In most cases, the DSRIP program will require new or expanded collaborative efforts with other eligible providers through coalitions called “Performing Provider Systems.” As providers analyze their eligibility and desire to apply for DSRIP funding, it is important to recognize that the DSRIP program does not supplant, but mostly supplements, existing Medicare and Medicaid reform efforts. Accordingly, providers should not lose sight of other ongoing Medicare and Medicaid reform initiatives, such as the transition of virtually all Medicaid beneficiaries into “care management” through managed care plans and state-designated Health Homes, which present opportunities for collaboration regarding planned changes in service delivery. 

Providers seeking to access MRT Waiver funding through the DSRIP program will need to contemplate whether to create new or leverage existing collaborative platforms, such as a Health Home, independent practice association (“IPA”) or Accountable Care Organization (“ACO”). In describing the components of the MRT Waiver, this summary presents key legal and practical issues for consideration to enable providers to appropriately develop new, or expand upon existing, collaborative initiatives.

IV.       Links and Resources

For more information about the MRT Waiver, please click here.

For more information about the DSRIP program, please click here.

Note that New York is seeking comments on DSRIP documents as follows:



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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