KanCare: Waivers and MCO Contracts

Megan Leopold
Senior Fiscal Analyst

Elizabeth Cohn
Senior Research Analyst

The Kansas Medicaid program, KanCare, is a jointly funded state and federal government program that provides health coverage to qualifying individuals. States can choose how to administer their own Medicaid program within federal guidelines, creating programs that vary from state to state. To allow this flexibility, the federal government offers waivers that allow states to waive certain provisions of the Medicaid statutes related to program design. Kansas is currently approved for two waivers: a section 1115 waiver for KanCare and a section 1915(c) waiver for home and community-based services.

KanCare: Section 1115 Waiver

In 2013, Kansas shifted from a state-operated program to KanCare, in which managed care organizations (MCOs) provide services. As part of creating KanCare, Kansas successfully applied for a Section 1115 demonstration waiver and has operated under a 1115 waiver since 2013, renewing it once in January of 2019. Generally, Section 1115 demonstrations are approved for an initial five-year period and can be extended for up to an additional three to five years, depending on the populations served. States commonly request and receive additional five-year extension approvals.

The current 1115 waiver is set to expire in December 2023, at which time Kansas must obtain a new source of authority to continue implementation of its managed care delivery system. The following are authorities being considered for the continuation of KanCare:

1115 Waiver Renewal. While Kansas has the option to pursue a renewal of the 1115 waiver, this type of waiver requires budget neutrality, or a limit on the amount of federal dollars that can be spent. This cap on federal spending may limit the state’s ability to address certain initiatives such as reducing the waitlists for Home and Community Based Waivers and increasing provider reimbursement rates.

1915(b) Waiver. This type of waiver is initially granted for a two-year period and allows states to provide services through a managed care plan. While this waiver does not have a budget neutrality cap, states must demonstrate that their managed care system is cost effective. This waiver allows states to require that all state plan populations enroll in managed care, including dual eligibles (individuals who receive both Medicare and Medicaid benefits) and children with special health care needs.

State Plan Amendment. States can also permanently implement a managed care delivery system by getting a state plan amendment approved by the Centers for Medicare and Medicaid Services (CMS). State Plan amendments do not need to be renewed but do place some limits on the populations a state can require to enroll in managed care. For example, State Plan amendments do not allow states to require dual eligibles and children with special healthcare needs to enroll in a managed care program.

All three of these authorities allow states to be exempt from certain requirements of Medicaid. For example, they each allow states to implement managed care in only some areas of the state and allow states to require people to receive their Medicaid services from a managed care plan. Regardless of the type of authority, however, states are required to comply with other federal guidelines around managed care, including reasonable access to providers and the right to change managed care plans.

KanCare Managed Care Contracts

Kansas contracts with three managed care organizations – Aetna, Sunflower Health Plan, and United Healthcare – to provide Medicaid services under KanCare. These contracts outline the relationship between the State and the MCOs and establish the state’s expectations and priorities. The current contracts between each of the MCOs and the State began in January 2019 and will expire on December 31, 2023.

Although the MCO contracts are set to expire at the same time as the current 1115 waiver, the MCO contracts are not tied to the federal authority the State uses to operate KanCare. If the timing necessitated it, Kansas could shift to a new waiver or federal authority without needing to amend the MCO contracts.

Differences Between the 1115 Waiver and MCO Contracts

1115 WaiverMCO Contracts
Governs the state’s relationship with the federal governmentGoverns the MCO’s relationship with the State
Focused on the state’s authority to draw down federal funds, required reports, and other issuesFocused on the day-to-day relationships between the MCOs, providers and beneficiaries
Does not directly affect providers and beneficiariesDirectly affects providers and beneficiaries