North Dakota Medicaid seeks $4.9 million to design cross‑disability children’s waiver; agency outlines costs, risks and program requests

Sarah Acre, executive director of the Division of Medical Services at the North Dakota Department of Health and Human Services, told the Legislative Appropriations Committee that the division is requesting $4,900,000 in ongoing funding to design and implement a new cross‑disability children's Home‑ and Community‑Based Services (HCBS) waiver and to develop an updated level‑of‑care assessment.

Acre said the proposed waiver would combine elements of existing children’s waivers — autism, medically fragile and developmental disabilities — to create a single cross‑disability children’s waiver intended to improve transitions, family navigation and service flexibility for participating children and families. "We're requesting $4,900,000 in ongoing funding to help design and implement this waiver over the next biennium," Acre said during the hearing.

Why it matters: the Division said Medicaid and long‑term care together total about $2.9 billion and make up roughly 45.9% of the department’s budget; changes in waiver design, enrollment or reimbursement could affect care for children with complex needs, older adults and people with disabilities, and have major budget implications.

What the division reported - Program scale and finance: Acre said Medicaid is a federal‑state partnership, noting the program serves about 152,000 individuals over a year, with roughly 61% of funding federal and 37% state general funds. She described Medicaid as an entitlement program with certain places to limit service (for example, HCBS waiver slot limits).

- Waiver design and timeline: the requested $4.9 million is described as funding to develop the waiver (design, level‑of‑care development, provider qualifications, rate design, outcomes and initial service infrastructure). Acre said the division expects to seek a separate appropriation next biennium for the expanded population and services after the waiver is developed. "This is really to develop the waiver right now, with anticipation that it would start next biennium," Acre said.

- Federal process constraints: Acre explained the difference between a Medicaid state plan amendment (SPA) and a waiver application, including that SPAs can have retroactive effective dates while waivers generally cannot, and that 1915‑series waivers must demonstrate budget neutrality to the federal government.

- Managed care and capitation: Medicaid expansion in North Dakota is delivered through a risk‑based managed care contract (Blue Cross Blue Shield of North Dakota). Acre said calendar year 2025 capitation rates were finalized and that overall CY2025 capitation rates increased 9.1%, driven by higher acuity among remaining enrollees.

- Value‑based purchasing and incentives: the division described ongoing value‑based purchasing for hospitals and nursing facilities and requested $2,000,000 to continue implementation and expansion, including rural system participation. Acre summarized the nursing facility quality incentive (first distribution of $4,000,000 in June 2024) and the health system program that uses a 4% withhold/earn‑back structure for hospitals.

- Pharmacy and high‑cost drugs: the division described continuing pressures from high‑cost and specialty drugs, said it secured a $5,000,000 federal grant (no state match) to build bidirectional data exchange with correctional facilities for certain youth populations, and outlined the division’s reliance on federal and supplemental drug rebates and utilization management to control net pharmacy spend. "When we pay $0 or pay nothing we can't collect a rebate," Acre said, explaining a proposed change to pay co‑pays on certain $0 drugs so Medicaid can collect rebates.

- Targeted rate requests and other items: the presentation listed several targeted or decision‑package requests referenced in the hearing record: a $4,300,000 rebasing request for ambulance reimbursement (to align with a Medicare rural quartile); $2,000,000 to expand value‑based work; and other IT and staffing requests. Acre said the House changed the governor’s proposed provider inflation from 1.5% to 2% and added a $2,000,000 grant for critical access hospital networks in the engrossed bill (House Bill 1012 as presented in the hearing).

Unresolved requests and next steps - The $4.9 million for the cross‑disability waiver was presented as a budget request; Acre and committee members discussed that design funding is separate from a later request that would pay for expanded services and participating individuals once the waiver is implemented. “The intent ... would be that as individuals come out of this new waiver that they shift from the current waiver,” Acre said.

- The division said some 2025 capitation and rate decisions are final at the administrative level (CY2025 capitation rates and managed care performance withhold methodology), while legislative decisions on appropriations, provider inflation and other items remain pending.

Context and concerns discussed Committee members asked about waiver budget neutrality, the practicality of designing a cross‑disability waiver in a rural state, how consultant and FTE spending would be used, and how high‑cost drugs and specialty therapies affect long‑term Medicaid spending. Senators also raised workforce and provider‑rate questions, and the division described both federal regulatory constraints (for example, program rules that limit staff sharing across facility types) and state strategies (rate methodology, value‑based payments and provider engagement) to address access and cost issues.

What was not decided at the hearing No formal committee appropriation or vote was recorded in the transcript excerpt for the $4.9 million waiver design request or the other listed decision packages. Several items were described as requests or administrative actions; final legislative decisions remain pending.

Ending note: The division identified multiple near‑term implementation items the committee will consider — waiver design funding, ongoing value‑based care expansion, ambulance rate changes and pharmacy policies — and emphasized that several of the division’s proposals (including the cross‑disability waiver and expanded value‑based programs) will require additional, separate appropriations in future biennia.