The Trump administration fulfilled a long-held conservative dream Thursday with introduction of Medicaid guidance for block grants. But it's unclear whether many states will opt into its proposal to cap federal Medicaid payments in return for greater latitude in structuring the federal-state healthcare safety net.
Medicaid, which covers some 75 million poor and disabled Americans, is a top item on state budgets. At the same time, the option to expand Medicaid under the Affordable Care Act has surged in popularity, with a slew of red and blue states alike stretching coverage to more beneficiaries over the past year.
Two states already expressed interest in the block grants, in which states can elect to receive per-enrollee or aggregate fixed federal payments for all able-bodied adults in that expansion population: Arkansas and Oklahoma.
It's understandable some states are interested, experts say, as Medicaid spending is forecast to mushroom from $597 billion in 2018 to almost $1 trillion in 2027, according to CMS projections. Patient groups, providers and liberal critics say block grants are a bad solution, though, citing a slew of studies that the capped funding will force states to cull medical services and restrict enrollment.
But "there is a huge need to find a way to cap the growth in Medicaid," Moody's analyst Dean Ungar told Healthcare Dive, and the spotlight will now swivel to the states. But which will roll the dice on the new guidance?
A proviso to Medicaid expansion
GOP-led states facing pressure to expand Medicaid from their residents will most likely make the first move, experts say. One such state, Oklahoma, has already pledged to be the first state to apply for a waiver through so-called Healthy Adults Opportunity to get funds for its Medicaid program.
Long-time Medicaid expansion foe Oklahoma Governor Kevin Stitt called the guidance a "gamechanger" at a press conference Thursday.
Oklahoma will navigate away from a government fee-for-service model and toward value-based payments as it looks to become the first state to utilize the flexibility, Stitt said. Its program will have "moderate" premiums for able-bodied beneficiaries to prepare people to transition to private coverage, and will include work requirements tying coverage to work or volunteering hours.
"We will set up a program that creates expectations for able-bodied individuals to see this as a true trampoline for their future," Stitt said. The two-year governor opposes State Question 802, the voter initiative to expand Medicaid. It will be on the state’s ballot sometime this year, likely in November.
"Stitt realizes he can’t just say no to Medicaid expansion and not have a response," Joan Alker, executive director of the Georgetown University Center for Children and Families and a Medicaid policy expert, told Healthcare Dive. "This is his response."
Oklahoma is one of two states with a pending Medicaid ballot. The other is Missouri, where Republican Governor Mike Parson has signaled he's open to expansion, if that's what the voters want though he doesn't support it himself. Neither the Missouri health department or the governor's office responded to a request for comment Thursday.
The Midwestern state's legislature debated block grants in 2017 and 2018, with two Senate bills that eventually fizzled following strong public opposition.
Arkansas also came out in support of the block grants. Two-term Arkansas Governor Asa Hutchinson said in a statement Thursday that the state, which expanded Medicaid in 2014, has talked to CMS about the need for a block grant before.
"We will immediately begin to review the specific model and guidelines that the Trump administration issued today to see how this would fit into an Arkansas-type approach," the Republican said.
The Arkansas General Assembly has already passed legislation directing the state to pursue a block grant waiver once allowed. But the state is currently waiting on an appeal of the court decision voiding CMS' approval of 2018's Arkansas Works waiver, which would dial back expansion to 100% of the federal poverty line and put stipulations in place requiring beneficiaries volunteer or work at least 80 hours a month to receive coverage.
Tennessee is also a state to watch, experts say. Last fall, the state submitted a CMS waiver proposal seeking permission for an inflation-weighted block grant that could be hiked up on a per capita basis if enrollment swelled.
Unlike the new federal guidance, in Tennessee's waiver the capped funding of $7.9 billion would apply to the entire Medicaid population. It's still pending, and the future of the waiver is unclear given the Trump administration's new direction.
"The guidance itself is a roadmap," Alker said. "It does not mean the administration isn’t going to consider other proposals that are more far reaching."
But unlike Oklahoma and Missouri, Tennessee has not signaled an intention to expand Medicaid, and its Republican Governor Bill Lee strongly opposes the idea.
Some states that have already expanded Medicaid are also likely to mull over converting their expansion population programs to block grants. The governors of Alaska and Georgia may feel pressure to follow this guidance, according to Families USA executive director Frederick Isasi, though "block grants are possibly the worst Medicaid idea ever presented to states by a federal administration."
In 2015, Alaska's then-governor Bill Walker, an Independent, used his executive power to expand Medicaid to more than 40,000 additional residents. Current Governor Republican Gov. Mike Dunleavy has been bullish on the idea of converting the program's funding to a capped structure.
Dunleavy's Department of Health and Social Services commissioned a study last year of whether block grants would save Alaska money. The remote and tiny state has some of the highest premiums in the individual private market in the country, and highest costs overall, though both have recovered slightly as ACA exchanges stabilized.
CMS Administrator Seema Verma "has urged us to be the first state to receive Medicaid dollars as a block grant. We are eager to do this," Dunleavy wrote in a letter on Alaska policy to President Donald Trump in March.
Georgia, which late last year submitted a waiver to CMS seeking a partial Medicaid expansion to 100% of the FPL for beneficiaries meeting work requirements, is also a state to watch. Additionally, Sen. Bill Cassidy, the Republican senator of expansion state Louisiana — the first Deep South state to expand Medicaid, in 2016 — said he supported the block grants Thursday.
But, for the deepest red states, experts predict the change in federal guidance is unlikely to tip the scales in favor of expansion. Medicaid programs in Texas, Kansas, Wyoming, South Dakota, Wisconsin, Mississippi, Alabama, Florida, South Carolina and North Carolina, which have yet to grow their federally subsidized health insurance coverage, are expected to chug along as usual.
"I don’t think states that have not expressed interest in expanding will change their mind based on this guidance," Associate Principal at Avalere Margaret Scott told Healthcare Dive.