Trump Administration Clears The Way For Medicaid Block Grants

Jan 30, 2020
Originally published on January 31, 2020 12:05 pm

The Trump administration wants to dramatically alter the way the federal government gives money to states for Medicaid.

On Thursday, Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, announced a new pathway for states to receive a capped amount of federal dollars for part of the program. The new demonstration program, called Healthy Adult Opportunity, would not be mandatory for states and would not affect all Medicaid beneficiaries, only adults under age 65 who are not disabled.

But for states that adopt the new approach, it could profoundly reshape how Medicaid operates.

Medicaid covers health care for 71 million people across the country — most are low-income people, disabled people, and children. It's set up as a federal-state partnership — a state contributes money to cover its Medicaid population, and the federal government matches that contribution using a formula based on a state's per capita income. Therefore, low-income states get more from the federal government than high-income states do.

There is currently no limit to what the federal government contributes — Medicaid beneficiaries across the country have a right to whatever care they need for however long they need it.

With the announcement, CMS is inviting states to design Medicaid plans that work with a new capped-funding approach; they have flexibility in how they design these plans and could be exempted from certain Medicaid requirements. For example, the plan would allow states to create a formulary to pick and choose which drugs are covered — normally Medicaid covers all drugs.

In her remarks, Verma anticipated critics who might consider this an attack on the safety net. She spoke passionately about the purpose of Medicaid, calling it "a lifeline for millions of Americans."

But she justified the new approach as a means to ensure financial sustainability for the program in the long term by letting states operate with a defined budget. This has historically been called a "block grant," but Verma was careful not to mention those words in her remarks.

"The Healthy Adult Opportunity represents an innovative and historic approach to surmounting Medicaid's structural challenges," she said.

With this announcement, the Trump administration is delivering on a longtime conservative ideal — block grants for Medicaid have been discussed for nearly as long as Medicaid has existed, going back to the Nixon administration. Every time, either Congress or the White House has declined to take the plunge, and Medicaid has remained open-ended.

"When enrollment goes up or during an economic downturn or the cost of prescription drugs go up, it costs the states more money to finance their programs, but the federal government matches those dollars to states," said Robin Rudowitz, vice president of the Kaiser Family Foundation and co-director of the foundation's program on Medicaid and the uninsured.

Whether Thursday's announcement will upend that system depends on what states do with the new guidance. States will have to ask CMS for a waiver and wait for approval. It's usually a lengthy process, although on Thursday, Verma indicated the agency would be attempting to streamline things by creating a template application. Most likely, it will be months before this plan could go into effect in a state.

There's also a question about whether this would be legal. Another major initiative from Verma to transform Medicaid was permission for states to get a waiver to make "work requirements" part of the program. That effort has been blocked in the courts and is currently on appeal.

One the few states that put into effect a work requirement — a requirement for some beneficiaries to report that they are working, going to school or doing community service — was Arkansas, and one analysis found thousands of people lost their health coverage as a result.

That has created the legal challenge for the government. The legal argument against them, which has made headway in courts, is that work requirements fail to "promote the objectives of the Medicaid program, which is primarily to provide affordable health coverage to low income people," said Rudowitz.

Oklahoma Gov. Kevin Stitt joined Verma at Thursday's announcement, calling the new approach to Medicaid "a game-changer." He said his state hopes to be among the first in the nation to apply for the waiver. Stitt, a Republican, is promoting his Medicaid plan as an alternative to a measure on the ballot in the upcoming election to expand Medicaid in his state, a move he said would be "wrong and will be ineffective."

He said the waiver would allow the state to innovate, including finding new ways to contain costs and adding premiums and work requirements to the plan for adults. He said his approach will create "expectations for able-bodied individuals to see this as a true trampoline to their future."

This move is geared toward red-state governors like Stitt, said Jamila Michener, an assistant professor of government at Cornell University. "They can't outright support Medicaid expansion or support Obamacare," also known as the Affordable Care Act, she said. "Work requirements were a way for them to kind of help save face, to expand Medicaid, but still be able to make it appear as though they were remaining true to their conservative bona fides." Now that work requirements are tied up in litigation, this presents another way to accomplish a similar political goal, she says.

Past efforts through the decades to institute block grants in Medicaid have come through Congress and would have changed Medicaid in all states at once — most recently in 2017 as part of the plan to repeal and replace Obamacare. Since states will have to apply for the Healthy Adult Opportunity waiver, this won't change Medicaid in many states that don't opt in. (Washington Gov. Jay Inslee, for one, tweeted, "Hard pass.")

Critics responded quickly to Thursday's announcement. Eagan Kemp, health care policy advocate with the liberal advocacy group Public Citizen, called the program "a Medicaid block grant by another name."

Edwin Park of the Georgetown University Center for Children and Families said this kind of arrangement is a bad deal for states. "[They're] placing a fiscal straitjacket on themselves that will only lead to eventual cuts to their programs and harmful effects to their budgets," he said.

It's a political risk for the Trump administration as well. Polling suggests that Medicaid is very popular and that capping federal spending in the program is not. "Medicaid is more popular than it has ever been because people understand that if it's not their immediate family, their kids, it's their parents, it's neighbors and others who rely on the program," Park adds.

Michener pointed out the wonkiness of this move might insulate it from the disapproval of voters in an election year.

"If there's a way to get at Medicaid, which is what this administration [has been] trying to do the entire time, then this is the way," she said. And it helps, she adds, that the Trump administration can make this change on its own: "You don't have to fight Congress — like you did with repeal and replace — and lose in the end."

Correction: 1/30/20

In a previous version of the story, we incorrectly said Arkansas was the only state to have put Medicaid work requirements into effect. A few other states have done so.

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The Trump administration announced a plan today to allow states to start getting block grants for Medicaid, Medicaid being the program for low income and disabled Americans. This is a longtime conservative goal. And here to walk us through what this announcement means is NPR health policy reporter Selena Simmons-Duffin.

Hey, Selena.


KELLY: So I want to make sure I understand how Medicaid is set up now. Give me your best Medicaid primer, 30 seconds, go.

SIMMONS-DUFFIN: OK. So it is a huge health insurance program. Over 70 million people are enrolled. That includes low-income adults, children, disabled people. That works out to be 1 in 5 Americans in this program. Right now, beneficiaries have a right, an entitlement to whatever care they need for however long. And funding is shared between states and the federal government. So there is a formula based on the per capita income in a state. Poor states get more. And it's totally open-ended. So if there's a recession or a natural disaster, a new drug that's really expensive, states have to pay more for their Medicaid, but so does the federal government.

KELLY: OK. So today, the announcement that came from the head of the agency that runs Medicaid - this is a woman named Seema Verma. And she announced a waiver. States can apply for it. How was that going to work?

SIMMONS-DUFFIN: OK. So Verma called this healthy adult opportunity. She's really emphasizing how some beneficiaries wouldn't be affected - children and people with disabilities. This focuses on adults who are under age 65 and enrolled in Medicaid.

So how it works is states apply for this waiver to get this block grant. If approved, they'd get a capped budget from the feds for that population. And in return, they would have more flexibility to run the program. They could make changes to benefits. For example, they could limit the drugs that are covered. Right now, Medicaid covers all drugs.

Oklahoma's governor, Kevin Stitt, was there with Verma today. He says he's going to apply for this and called it a game-changer. And he talked about how this would allow him to charge premiums and add work requirements for adults and Medicaid. He said this could be, quote, "a trampoline to their future."

KELLY: (Laughter) OK. That's a memorable image. So this announcement came this morning. What has the reaction been? Are other states onboard?

SIMMONS-DUFFIN: So it's not clear if other states are going to apply besides Oklahoma. Washington state, for one, tweeted out that it was a hard pass. But some states are going to be interested. And critics were really quick to jump in here and say that this is not a good idea. It's not a good plan for states. One example of a group that came out against this was the American Academy of Pediatrics, which put out a statement that it is, quote, "baffling and alarming that such drastic harmful changes are being proposed to a program that works so well."

Critics have started to paint this as a threat to the safety net. And some pointed to Puerto Rico, which actually does already get a block grant for Medicaid and has had many natural disasters. And there, what they've had to do is cut benefits and cut provider payments, which has caused doctor shortages. And folks are pointing to that as a cautionary tale.

KELLY: But how big a deal is this change going to be? It's optional for states.


KELLY: It wouldn't change Medicaid for everybody who uses the program. So is this transformational?

SIMMONS-DUFFIN: It might be. I mean, it depends, as I just said, in terms of what states do with it, how many states apply. But it is actually a really big deal to be changing Medicaid at all. This idea of block grants has been on the table for a really long time. I mean, it was talked about in the Nixon era. Almost - it's almost as old as Medicaid, and it has always been passed over. So it's a big deal for the Trump administration to finally get it done without Congress.

But polling suggests that Medicaid is really popular, even in red states. Idaho, Utah and Nebraska were some of the latest to expand Medicaid by popular vote, which is a pillar of Obamacare. So it may be politically risky for the Trump administration to be doing this in an election year - and legally risky, too. It will almost certainly be challenged in court.

KELLY: That is NPR health policy reporter Selena Simmons-Duffin.

Thanks, Selena.

SIMMONS-DUFFIN: Thank you. Transcript provided by NPR, Copyright NPR.