The Trump administration on Thursday released details for how states can apply to convert Medicaid to block grants that would let them impose changes such as eligibility requirements and prescription drug limits for millions of adults in the program.
The instructions, outlined in a letter to states, show the administration is accelerating its push to give states unprecedented leeway in revamping parts of Medicaid. First-ever work requirements have already been approved and plans are under way to stiffen eligibility verifications. The administration says the shift would grant states autonomy to design programs that save money while safeguarding coverage.
A legal row over the changes is likely. Democrats say the administration lacks the authority to approve structural changes to Medicaid that they say would hurt enrollment. Consumer advocates say the changes, including the limits on federal funding, hurt the poor.
Seema Verma, administrator at the Centers for Medicare and Medicaid Services, said the administration is responding to states that want to design innovative programs rather than a one-size-fits all approach.
“It’s a bit of a D.C.-centric idea that only D.C. will do the right thing,” she said on a conference call.
States now get open-ended, federal matching funds for Medicaid, and the federal government pays 90% of the cost of Medicaid expansion. Under the changes outlined Thursday, they can seek federal approval for a block grant covering some Medicaid enrollees.
Under the plan, state officials could agree to limits on their federal funding based on overall or per capita budget targets tied to inflation.
The block grant changes wouldn’t affect children, pregnant women, elderly adults, and people with disabilities, according to federal officials.
In addition, it could only apply to adults in expanded Medicaid and adults not covered by traditional state Medicaid programs who aren’t disabled or receiving long-term care. In states that didn’t expand Medicaid, some states also cover some people who wouldn’t be covered by traditional Medicaid. They could use block grant Medicaid for that group, as long as the people aren’t disabled or getting long-term care.
The states could apply to block grant some of their Medicaid program with a streamlined application and would be able to then make other changes to how it is run.
For example, states could make new eligibility requirements, require cost-sharing amounts and premiums, or stop covering retroactive benefits for people who received care in the few months before they technically signed up for Medicaid.
States that didn’t expand Medicaid could also opt to expand it to cover specific groups, such as people needing substance-abuse treatment, as long as those individuals met income requirements.
States could establish specific lists, or formularies, of medications that Medicaid would pay for. States that adopt a formulary for prescription drugs would still have to ensure enrollees are able to get the same medications for human immunodeficiency virus and mental health conditions such as depression, according to the guidance.
Republicans have hailed the initiatives as giving states more autonomy to design and run Medicaid. Block grants, they say, would free them from regulations so they could design novel programs to save money. Lawmakers in Alaska, Georgia, Oklahoma, Tennessee and Utah have already shown some interest.
But efforts to convert Medicaid to block grants have been contentious. A Republican-led push to repeal the Affordable Care Act in 2017 largely failed because it included a plan to block-grant Medicaid. Analysts said millions of people would lose health coverage.
Democrats and consumer advocates say the new changes threaten enrollment gains seen under the former Obama administration and violate federal law.
“Medicaid block grants necessitate cost-cutting measures like restricting enrollment, decreasing provider reimbursement, and limiting eligibility and benefits through managed care,” said a Jan. 29 letter to CMS signed by Rep. Joe Kennedy (D., Mass.) and 35 House Democrats. “These actions endanger the lives of the most vulnerable patients, the population Medicaid was created to protect.”
The block grants would operate under two models—a lump sum or per capita budget target. Costs that go over the annual lump sum or per capita budget wouldn’t be eligible for federal financial participation. States couldn’t cap enrollment, however, and continue getting the federal funds for Medicaid expansion.
States under the total lump sum block grant model would be required to keep health service spending at a level of at least 80% of the target. The federal government would then share a portion of the federal savings with the state to reinvest in Medicaid as long as there has been no drop in access or quality, officials said.
Under the per-person block grant budget, the base amount of federal funding would be tied to prior-year enrollment and would increase if more people are covered.
The administration would add additional oversight and monitoring of states that pursue the block grants, including quarterly monitoring. Twenty-five measures that are now optional would be required to be reported. States will have to report on the number of providers enrolled and seeking patients, for example, and the number of grievances filed by enrollees.
Officials said minimum essential health benefits, including prevention services, as well as mental health and substance abuse, should be covered. Eligibility protections and limits on out-of-pocket expenses would remain in place.
States would have to provide public notice on any changes. The approved waivers would last for five years, and could be renewed after that for periods of up to 10 years.