Premiums and Section 1115 Waivers: What Cost Medicaid Expansion?

States reluctant to adopt the Affordable Care Act’s Medicaid expansion are demanding that the U.S. Department of Health and Human Services grant them Section 1115 demonstration waivers that allow them to charge poor people premiums. The U.S. Department of Health and Human Services has yielded to these demands, granting five states waivers of long standing federal statutory protections that limit state discretion to impose premiums for Medicaid. These premium waivers present a fundamental problem of law because the Secretary of the U.S. Department of Health and Human Services has no statutory authority to grant Section 1115 waivers that allow states to impose premiums on Affordable Care Act-eligible adults. The premium waivers the Secretary has granted are not legal and threaten the rule of law in Medicaid by signaling to states that the Secretary is willing to flaunt federal Medicaid law to entice states to implement the Affordable Care Act’s Medicaid expansion. This article provides a detailed look at the premium waivers that the Secretary has granted; a history of the Medicaid Act’s treatment of premiums in Medicaid, explaining why the Secretary has no Section 1115 authority to waive premium protections spelled out in the statute for Affordable Care Act-eligible adults; and what is at stake in terms of federalism, the relative roles of the agency and Congress, and people’s health and welfare. The article concludes by calling on the U.S. Department of Health and Human Services to issue sub-regulatory guidance describing the authority the agency claims to have to grant premium waivers and the parameters for such waivers. State legislatures need and deserve such guidance as they debate whether, and how, to expand Medicaid