WASHINGTON — The Trump administration wants to slash Medicaid spending through block grants — a strategy conservatives in Congress have repeatedly tried to implement without success. Here’s the tricky part: It would have to persuade states to accept fewer federal dollars than they’re getting now.
A small group of people within the Centers for Medicare and Medicaid Services is working on a plan to allow states to ask permission for their federal Medicaid dollars to be provided in a single lump sum instead of the way they are currently awarded as a percentage of states’ total costs. If they succeed, it could check off a top Republican priority of lowering spending on the health insurance program for low-income Americans, a dream goal they have frequently sought.
The agency hasn’t confirmed the effort, which was first reported by Politico, but some Medicaid policy experts said officials have coalesced around the concept and are trying to finalize plans on how to present it. A likely vehicle could be through guidance similar to the expansive new ways CMS has invited states to experiment with their Obamacare marketplaces.
It also could be one in a string of regulatory actions on health care undertaken by the Trump administration after its top priority to repeal and replace the Affordable Care Act failed in Congress.
CMS leaders aren’t seeking help from many departments within the agency that would normally weigh in on such an extensive change, Andrey Ostrovsky, CMS’ former chief medical officer over Medicaid, said, adding two employees have described the effort to him as “incredibly close to the chest.”
It’s not hard to figure out why CMS Administrator Seema Verma isn’t touting this effort at the moment. Republicans learned the hard way through their 2016 efforts to repeal and replace the ACA that suggesting big reductions to Medicaid spending isn’t a winning political strategy.
One version of a repeal bill offered by Sens. Bill Cassidy, R-Louisiana, and Lindsey Graham, R-South Carolina, would have converted Medicaid to a block grant program. The health care bills advanced in the House and the Senate would have also reduced future Medicaid spending by capping funding for states per enrollee. All of the measures polled badly at the time, and the Medicaid cuts gave Democrats a potent narrative that Republicans were trying to scale back benefits for the most vulnerable Americans.
Democrats — including Sen. Bob Casey, D-Pennsylvania; Rep. Don Beyer, D-Virginia; and Rep. G.K. Butterfield, D-North Carolina — similarly jumped on initial reports that CMS was looking into Medicaid block grants.
Health care providers, particularly those who serve the low-income, aren’t excited about the idea of block grants, either. Medicaid already reimburses them at significantly lower rates than Medicare or private insurers, and block-granting the program could prompt states to cut Medicaid enrollment or lower payments even further.
“Congress could not pass Medicaid block grant legislation because it would have put too many of the most vulnerable at risk, so it seems misplaced to consider establishing waivers to block grant Medicaid by fiat,” said Chip Kahn, president of the Federation of American Hospitals.
Rick Pollack, president of the American Hospital Association, said his group questions whether CMS has the legal authority to allocate Medicaid dollars through block grants. “We have long voiced concerns about how block granting Medicaid could ultimately result in losses of coverage and negatively impact access to quality care,” Pollack said in a statement.
Yet the agency does have broad latitude to permit states to experiment with their Medicaid programs and the marketplaces by applying for waivers. Verma is vigorously deploying that latitude by approving work requirements in multiple states and inviting states to seek ways of sidestepping certain ACA coverage mandates.
Some of those waivers are being challenged in court, but it’s not clear the agency would be stepping beyond its legal boundaries by allowing states to request their Medicaid dollars in block grant form. But here’s a key question: Would they sign up for a system that could result in fewer federal dollars in their pockets?
“What are they offering that would entice a state to enter into this bargain — that’s question number one,” said Matt Salo, executive director of the National Association of Medicaid Directors.
Verma often speaks of “flexibility” for states to run their own Medicaid programs and marketplaces as they wish. Salo pointed to several waiver requests made by states that Verma could grant if she wanted to show she’s serious about giving them flexibility.
Several states, including Arkansas and Massachusetts, have asked for permission to expand Medicaid to people earning just 100 percent of the federal poverty level, rather than 138 percent of it as provided in the ACA. Massachusetts has asked — and been denied — permission to choose which drugs Medicaid covers.
Ostrovsky noted something else: Getting the maximum amount of federal funds isn’t the foremost priority for some states, such as the conservative ones that rejected the ACA’s offer of Medicaid expansion. For some GOP governors and state lawmakers, it might be more politically advantageous to be able to tout to voters that they pulled back on the program.
“Money is not the primary motivator for several states,” he said. “Some political leaders don’t think certain populations — like the adult, generally healthy poor population — deserves Medicaid.”