State Flexibility: A Trojan Horse for Weakening Medicaid
Second, the Congressional majority hopes to realize its longtime dream of changing Medicaid’s financing structure to a block grant. Instead of the current system of the federal government matching a certain share of state Medicaid payments, under this approach states would receive capped payments. Since the size of the block grants would grow more slowly than health cost inflation, this would increasingly shift costs onto state budgets over the years, especially during recessions.
Conservatives frame block grants as increasing state flexibility. This is technically true, in the same sense that a worker who gets laid off suddenly has much more flexibility in how they spend their time. Understandably, however, the prospect of being broke generally takes precedence.
That’s why in reality, budgetary concerns tend to be more important to state officials than “flexibility.” And in that respect, block grants represent a massive cut to state budgets over time.
For example, Louisiana Secretary of Health Rebekah Gee has sharply criticized block grant proposals for Medicaid,
explaining that, “In a block grant scenario it would be a rationing – we'd have to ration care and who do we provide care to . . . when they talk about flexibility, it's flexibility to cut services. We have tremendous flexibility now. We do not need more flexibility.”
Secretary Gee isn’t bluffing about the stark math that states would face under block grants. Estimates have shown that by the tenth year of block grants, federal Medicaid funding would have been cut by
one-third compared to current law, with
14 to 20 million people losing coverage. Although Speaker Ryan recently
proposed giving states a choice between block grants and per capita caps, this is not a compromise. Per capita caps would be calculated as a capped amount per person rather than per state, but would still massively cut Medicaid funding.
Third, key members of the incoming administration hope to aggressively transform Medicaid’s benefits, eligibility, and cost-sharing through administrative actions and waivers – undermining the program without needing Congress’s help. Over the past few years, we’ve seen a limited preview of this in some states that have used waivers from the federal government to take more conservative approaches to expanding Medicaid, often focused around increased cost-sharing and health savings accounts. For example, Indiana
requires Medicaid expansion enrollees to pay premiums to receive the full benefits plan; those below the poverty level who don’t pay are shifted to a more limited plan, while those above the poverty level who don’t pay are dropped from coverage and banned from re-enrolling for six months.
Yet while the Obama administration has compromised with several governors on these more conservative arrangements in order to encourage them to expand Medicaid, it has held the line against more harmful waiver proposals that would undermine the objectives of the Medicaid program. Most notably, it has
consistently rejected proposals to add work requirements to Medicaid.
Regardless of Trump’s campaign rhetoric on Medicaid, since the election he has
nominated Seema Verma, the architect of waiver proposals in Indiana and Kentucky, to lead the Centers for Medicare and Medicaid Services. Under her leadership, CMS is likely to not only approve but encourage more harmful proposals. The policy changes the Trump administration could pursue include work requirements, premiums and higher cost-sharing for low-income enrollees, dis-enrollment with a six-month lockout for beneficiaries who fail to pay premiums or meet other requirements, more limited benefit packages, and overall caps on Medicaid enrollment.
State Flexibility: A Trojan Horse for Weakening Medicaid | RealClearHealth