The Trump administration announced new Medicaid guidelines Thursday that will allow states to receive block grants to cover health care services for low-income people, limiting the amount of money in return for more state flexibility.
The optional program called "Healthy Adult Opportunity" is the latest effort to overhaul Obamacare. The administration says it will strengthen Medicaid, while Democrats say the block grants amount to cuts in the program.
The proposal was outlined Thursday by Seema Verma, head of the Centers for Medicare and Medicaid Services, in a letter to state Medicaid directors. The federal share of Medicaid is now open-ended, meaning that a state is at least partly protected from unexpected costs increases or spikes in enrollment.
States would need to apply for a federal waiver to be included. The deal would be restricted to able-bodied adults under 65, and states could not put nursing home residents, disabled people, pregnant women, or children into the new plan.
Ms. Verma told reporters Thursday that the move is partly intended to help Medicaid become more sustainable.
"Medicaid is the first or second budget item for states, crowding out other priorities such as transportation and education," she said.
Currently under Medicaid, funding from the federal government is open-ended. Conservatives say the financing formula encourages states to spend more so they can secure more federal money, while a block grant would better control costs.
Democrats blasted the plan as a way to cut health care services for the poor.
"Today's announcement is the cruelest step yet by the Trump administration to slash American health care and dismantle basic safety net programs like Medicaid," said Sen. Ron Wyden, Oregon Democrat.
Oklahoma, where voters this year will decide whether to expand Medicaid, plans to become the first state to take up CMS' offer.
Gov. Kevin Stitt said his plan, dubbed SoonerCare 2.0, will allow the state to target dollars toward challenges such as rural care or the opioids epidemic.
"With flexibility, we will seek to establish moderate premiums to prepare members for the responsibility of transitioning to private health insurance coverage," he said at the Trump administration's announcement in Washington.
"With flexibility, we will seek to establish work requirements that encourage Oklahomans to be engaged in activity that advances their personal potential — whether it be education, certification programs, work, or community involvement."
Joan Alker, executive director of the Georgetown University Center for Children, said CMS should withdraw its guidance "immediately."
She said states already have flexibility in how they run their Medicaid programs and will put their budgets and residents at risk if they accept a cap on the federal share of funding, only to face an economic recession, costly new treatments or a public health emergency.
"Without sufficient federal funding, states would likely have no choice but to make damaging cuts to their Medicaid programs, with the cuts growing larger over time. That means many more uninsured and underinsured people in states where the governor is willing to roll the dice on a block grant or per capita cap," said Ms. Alker, whose center focuses on how health policy affects low-income families.
States facing pressure to expand Medicaid, particularly if a ballot initiative is in the works, are the most likely to take up CMS' offer, she said.
"Medicaid expansion is popular with voters of all parties, so just saying 'no' is not a good option," Ms. Alker told The Washington Times. "That is part of the political calculation of the announcement today."
Larry Levitt a senior vice president at the Kaiser Family Foundation, said states "are going to be nervous about the idea of accepting a cap on federal Medicaid, but some are going to be enticed by the prospect of being able to decrease spending by cutting benefits, excluding certain drugs, and imposing premiums and patient cost-sharing."
"The ability to share in the federal savings will be very tempting," he said. A group of House Democrats objected to the proposal in a letter to Health and Human Services Secretary Alex Azar.
"Medicaid block grants necessitate cost-cutting measures like restricting enrollment, decreasing provider reimbursement and limiting eligibility and benefits through managed care," their letter said. "The actions endanger the lives of the most vulnerable patients, the population Medicaid was created to protect."