Trump Administration Looks At Medicaid Block Grants

The Trump administration is finalizing a block grant plan that targets the Medicaid expansion brought about under the Affordable Care Act, Politico reported today.

The administration wants to let states convert part of their Medicaid funding to block grants, and the Centers for Medicare and Medicaid Services is expected to announce the details of the plan by the end of next week.

The CMS is expected to explain how states could seek waivers to receive defined payments for adults covered by the ACA’s Medicaid expansion.

The action takes place a year after the administration began quietly devising a plan bypassing Congress to give block grants to states for Medicaid. Conservatives have long wanted to cut back spending on the Medicaid program.

Instead of the traditional open-ended entitlement, states would get spending limits for Medicaid, as well as more flexibility to run the health program that serves nearly 75 million low-income people - including children, the disabled and nursing home residents who have run out of personal funds.

Putting a cap on Medicaid spending would be a major change in the way the federal government finances the health care program that has grown to cover about one in five Americans.

Capping spending could mean fewer low-income people getting covered. It also could lead to state-designated cutbacks in health benefits — although those who favor the block grants argue that states would be able to spend the money smarter if fewer federal strings were attached.

The administration wants to let states use waivers to reshape their Medicaid programs, but the effort could face legal challenges in the courts. Waivers approved by the Trump administration to allow the first-ever Medicaid work requirements for some enrollees, for example, are already being challenged in at least two states.

In recent years, governors have complained about the rising costs of Medicaid, which is eating up a bigger share of state budgets. States jointly finance the program with the federal government, which on average covers 60% of the cost – although the federal government typically pays for a higher percentage in poorer states. The federal government covers a much higher share of the cost for Medicaid enrollees covered by the expansion under the ACA.

Republicans have long favored defined funding for Medicaid, instead of the current open-ended structure in which the federal government matches state spending. Democrats, along with many hospital and physician groups, have opposed strict funding constraints on Medicare, fearing they would result in cuts to enrollment and health care services.

Congress has not been supportive of capping Medicaid spending. During the failed ACA replacement effort in 2017, lawmakers rejected a similar plan to cap spending on Medicaid expansion and private health insurance subsidies, which would have resulted in millions of people losing coverage.

The Trump administration wants to bypass congressional opposition by using existing Medicaid authority to test states' health care ideas under what's known as demonstration waivers.

Several Republican-led states are pushing plans to convert their Medicaid programs into block-grant funding. Tennessee, which has not expanded Medicaid, submitted a block grant plan to the administration in November, becoming the first state to do so.  That plan remains under review.