HHS to file Medicaid state plan amendment under SB134; department warns of complex "medical frailty" and verification work

Director Lipman and Deputy Medicaid Director Olivia May briefed the Fiscal Committee on implementation steps required by Senate Bill 134 and the U.S. Centers for Medicare & Medicaid Services’ interim final rule.

Lipman said the statute requires the state to submit a state plan amendment rather than pursue an 1115 waiver and that the department intends to meet the 30-day filing deadline for the SPA template. "We think we can make the 30-day deadline as required in the legislation," Lipman told the committee.

A central policy issue is hardship exceptions. Lipman explained the federal rule generally requires a state to adopt either the statutory set of hardship exceptions or none of them; HHS oversight is available. The department plans to request oversight approval to keep the statute’s hardship categories (institutionalization, hospitalization, high local unemployment, medical travel needs).

Members and staff focused on operational questions. The law requires more frequent checks of recipients’ community-engagement or work-status (twice yearly rather than once), creating heavier verification demands. HHS staff urged starting with a single verification per year as an operationally prudent first step, noting other states that attempted more frequent checks had to add substantial staffing.

Lipman also described the federal rule’s medical-frailty requirement as an unanticipated implementation challenge: it goes beyond a diagnosis and requires an assessment of functional ability (activities of daily living) to determine whether someone can meet work requirements. "Medical frailty ... threw states into a little bit of a curveball," Lipman said, adding the department plans a year-one approach where self-claims will be accepted while the department runs algorithmic checks in parallel and designs processes for more formal clinical verification in year two.

On technical costs, Lipman said prior MMIS (Medicaid management information system) work allowed the department to repurpose builds and that the department received a federal grant (a bit over $2 million) to cover eligibility-system changes, meaning no immediate new state IT investment is required.

What comes next: HHS intends to seek HHS oversight for hardship exceptions, file the SPA once the federal portal is available, and recommend a phased operational rollout to reduce the risk of backlogs and eligibility-processing errors. The department offered to return to the committee with progress updates as the SPA and implementation work proceed.

The department asked lawmakers to consider the operational impacts—staffing, automation, and potential transition timelines—before implementing more frequent eligibility verifications.