CMS Administrator Seema Verma announced an optional program on Thursday that would allow states to fund Medicaid expansion through block grants.
Block grants are back, but under a different name. Patient and physician groups raised concerns over a policy change that they said could result in cuts to eligibility and benefits for those covered under Medicaid expansion.
On Thursday, the Centers for Medicare and Medicaid Services announced it would allow states to fund Medicaid expansion through block grants under an initiative called the Healthy Adult Opportunity. Instead of funding Medicaid expansion under the current system, states can opt to receive a fixed payment based on population and costs in previous years.
States could change who is eligible for coverage, either by adjusting the income standard or implementing work requirements. States would also be able to decide how much enrollees pay for care and what drugs are covered through a closed formulary. But there are still some limitations: states much still meet minimum benefit standards, eligibility protections and limits on out-of-pocket expenses. Policies must also include access to HIV and behavioral health medications, according to CMS.
To date, 37 states have expanded Medicaid, which allows adults who make less than 138% of the federal poverty level — roughly $29,435 for a family of three — to receive health coverage. In states that didn’t expand Medicaid, most adults without children are not eligible for coverage. The median income limit in 2019 was just 40 percent of the poverty level, or an annual income of $8,532 for a family of three, according to the Kaiser Family Foundation. The new rule would only apply to those covered under Medicaid expansion.
In prepared statements announcing the new program, CMS Administrator Seema Verma raised concerns about Medicaid’s long-term viability, pointing to a “looming cost crisis” as more aging adults turn to long-term care.
“Since 2014, Medicaid has added approximately 15 million new working-age adult enrollees who primarily qualify as part of Obamacare’s expansion of the program,” Verma said. “The program was not originally designed for this group.”
As an optional demonstration, the CMS’ proposal is supposed to be budget neutral. The program’s future fiscal implications are unknown, since it’s too early to tell which states will opt in to the block grants.
The main concern raised by medical groups is the funding limitations that come with block grants. If states spend more than the allotted amount, they won’t be reimbursed by the federal government, except in “extraordinary events.”
A group of 27 organizations, including the American Heart Association, National Alliance on Mental Illness and the ALS Association expressed concerns that the policy could ultimately reduce access to care for the patients that they represent.
“As the gap between the capped allotment and actual costs of patient care increases over time, states will likely limit enrollment, reduce benefits, lower provider payments or increase cost-sharing for patients,” the groups wrote in a letter to Verma. “States are already moving forward with deeply troubling proposals in anticipation of today’s guidance promoting these limiting financing arrangements.”
Physician groups also pushed back on the policy change. Dr. Patrice Harris, President of the American Medical Association, wrote in a statement that funding caps would increase the number of uninsured and undermine Medicaid’s role as a safety net. Dr. Gary LeRoy, president of the American Academy of Family Physicians, added that it could reduce access to care in rural areas and other underserved communities.
“Moving to a block grant system will likely limit the ability of Medicaid patients to receive preventive and needed medical care from their family physicians, and it will only increase the health disparities that exist in these communities, worsen overall health outcomes, and ultimately, increase costs,” he wrote in a statement.
Verma took to Twitter to defend the proposal, saying it wouldn’t result in a decrease to Medicaid funding since state budgets could grow up to inflation.
“Reminder: this is a working-age adult population that is optional to cover and wasn’t even eligible for Medicaid less than a decade ago. And by the way – if a state doesn’t want to use this waiver, they don’t have to,” she wrote.
The Trump administration has long set its sights on funding Medicaid through block grants. An initial attempt, under the Better Care Reconciliation Act, flopped after a Republican-led Senate failed to pass the bill. The new CMS policy became effective immediately on Thursday, though it will likely take a year for the agency to review proposals from states.
A few states that might make the shift include Oklahoma, which hasn’t yet expanded Medicaid, and Utah, which recently expanded coverage, but added work requirements. Oklahoma Governor Kevin Stitt spoke in favor of the block grants at HHS’ announcement of the program on Thursday, calling it a “game changer.” Utah Governor Gary Herbert tweeted in favor of the policy, saying the announcement was welcome news.
Tennessee is also looking to fund its Medicaid program through block grants, but on a completely different scale. The state voted last fall to cover its entire Medicaid program through block grants, including disabled, elderly, and low-income children and adults that would be covered under Medicaid.
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