- The Trump administration has unrolled a long-awaited plan to cap funds in Medicaid, part of its ongoing crusade to roll back the scope of the safety net program for 75 million low-income Americans.
- CMS sent a letter Thursday to state Medicaid directors telling them they can now apply for permission to eschew how the program is traditionally structured, where payments expand and contract depending on how many people are enrolled. States can instead switch to block grants and receive a fixed federal payment for all able-bodied adults in the program — and be exempted from some of Medicaid's requirements.
- States that apply for the optional program, called Healthy Adult Opportunity, can choose between a per-enrollee budget or total budget, which will be calculated by CMS. The legality of the proposal is unclear, but both supporters and critics expect an imminent court challenge.
Despite President Donald Trump's 2016 campaign pledges to protect Medicaid, a cornerstone of the health safety net since the 1960s, officials have consistently looked for ways to pare it back, most notably through trying to tie coverage to beneficiaries' work hours.
The plan will let states request capped funding for low-income adults covered under their state's Medicaid expansion under the Affordable Care Act. CMS will calculate a state's annual aggregate or per capita cap by looking at the most recently available eight consecutive quarters of expenditure data to arrive at a base year amount. States will manage their programs under these caps and assume risk for costs exceeding the annual cap.
States also have the option to limit benefits and available drugs for some patients. CMS wants to give states more negotiating power to manage drug costs, too, by adopting their own formulary similar to those in the commercial market. The formulary will have to cover the essential health benefits for prescription drugs under the ACA, so people with HIV and behavioral health conditions can't be discriminated against.
CMS stressed that the plan, by just focusing on ACA expansion states, won't affect the disabled, pregnant women, children or the most vulnerable. Instead, the proposal was framed as a way to free up funds states could then reinvest into improving care for those populations.
States will have to report their performance back to CMS in real time, including any changes in health outcomes for Medicaid beneficiaries and whether they report less access to providers. That way, the federal government will ensure the health of people covered by Medicaid doesn't flag, CMS claimed.
In return for participating in the program, states can waive Medicaid requirements like retroactive coverage periods and enacting nominal premiums and cost-sharing. States can also cover social determinants of health factors in Medicaid, like programs linking beneficiaries to housing.
Providers came out against the proposal, noting it could lower access and strain hospitals' bottom lines. The American Medical Association "opposes caps on federal Medicaid funding, such as block grants, because they would increase the number of uninsured and undermine Medicaid’s role as an indispensable safety net," the group's president Patrice Harris said Thursday.
Medicaid is usually the first or second line item in states' budgets. Currently, the federal government pays states for a set percentage of Medicaid costs, usually between 50% and 70%, and shells out more funds to expansion states: up to 90% of the expansion cost.
Proponents of the policy say that will incentivize states to be frugal and slim down their spending, while critics maintain it will lead to states culling services or restricting enrollment. Additionally, if states are hit with an unexpected public health crisis, such as a virus epidemic or natural disaster, they may not have the resources to care for all Medicaid beneficiaries.
More than 35 House Democrats on Wednesday urged the Trump administration to halt the plan in a letter to HHS Secretary Alex Azar and CMS Administrator Seema Verma. The letter, helmed by Rep. Joe Kennedy, D-Mass., said Medicaid block grants are not only "directly opposed Congress's intent for the Medicaid program, but they are illegal under Section 1115," a section of the Social Security Act giving HHS permission to green light state pilots of experimental programs in Medicaid.
Verma has been working on the block grant proposal for more than a year as a followup to work requirements, which have been challenged in court multiple times.
"The failure to update the Medicaid program is something this administration has felt needed to be addressed for some time," Joe Grogan, director of the Domestic Policy Council, said on a Thursday morning call with reporters.
A potential roadblock for the proposal is Medicaid's growing popularity. Enrollment has swelled as more states, red and blue alike, have voted to expand the safety net program. About two-thirds of states have already adopted expansion, and three GOP-led states — Utah, Idaho and Nebraska — moved forward on the measure last year.
"Hell no," Sen. Bob Casey, D-Penn., tweeted earlier this month, pledging to fight the forthcoming plan "through legislation, in the courts, holding up Administration nominees, literally every means that a U.S. Senator has."
Correction: A previous version of this article included a Thursday statement from the American Hospital Association that was about the Medicaid fiscal accountability rule, not the block grant proposal.