By Rachana Pradhan and Phil Galewitz JANUARY
31, 2020
The
Trump administration unveiled a plan Thursday
that would dramatically revamp Medicaid by allowing states to opt out of part
of the current federal funding program and instead seek a fixed payment each
year in exchange for gaining unprecedented flexibility over the program.
Medicaid,
a federal-state health program that covers 1 in 5 Americans, has been an
open-ended entitlement since its beginning in 1965. That means the amount of
money provided by the federal government grows with a rise in enrollment and
health costs.
The
administration said the new program would
allow states to offer patients more benefits while controlling government
spending. But the plan was assailed by Democrats, consumer advocates and health
providers as undermining efforts to serve the poor.
States
would not be required to switch to the new model. It will be optional, and
states interested in it would have to seek authority from the federal
government. That makes the proposal less sweeping than efforts by Republican
lawmakers to revamp Medicaid that were included in failed 2017 legislation to
gut the Affordable Care Act.
The
long-awaited guidance to states on turning Medicaid into a block grant allows
the Trump administration to proclaim it’s transforming the Medicaid program and
offers a way for states that haven’t expanded under the Affordable Care Act to
move ahead.
It
could also tee up an election-year battle in which opponents will use the plan
to argue that it’s President Donald Trump’s latest salvo in a long-running
effort to unravel the health care safety net.
“The
Trump administration’s announcement today is a game changer,” said Oklahoma
Gov. Kevin Stitt, a Republican who plans to expand coverage up to ACA levels
and pursue a block grant with a Medicaid work requirement and new premiums.
Here
are the big things to know about how the new plan works.
Millions
of people might be affected by block grants.
The
millions of low-income adults without children who obtained coverage under the
ACA’s Medicaid expansion could be included under a block grant. Key Republicans,
including officials in the Trump administration, have argued that covering
those adults uses resources better geared toward other Medicaid enrollees whose
medical needs are greater.
However,
a state could also decide to include certain pregnant women and low-income parents
because their coverage is not mandated by federal law.
Tens of
millions of people currently enrolled in Medicaid would not be included in a
potential state block-grant project, including children, people who qualify for
the program based on disability, people needing long-term care and individuals
who are 65 and over, according to the guidance announced by the Centers for
Medicare & Medicaid Services on Thursday.
States
seeking the new authority would be able to make new cuts to benefits, including
which prescription drugs are covered, and impose new out-of-pocket costs on
enrollees.
Medicaid
traditionally has covered all federally approved prescription drugs. In June
2018, the Trump administration reinforced that position when it rejected a
request from Massachusetts Gov. Charlie Baker to limit drugs covered under the
state’s Medicaid program.
Under
the new guidance, a state could ask to cover just one drug per class for most
conditions — similar to what’s required for private insurance coverage in the
Affordable Care Act marketplaces.
While
the rule allows exceptions, including for medications to treat behavioral
health issues or HIV, the policy change could affect access to drugs for a
range of serious illnesses, such as cancer.
Another
change included in the administration’s policy is what kinds of copays states
can charge, according to Cindy Mann, a lawyer who ran the Medicaid program
under the Obama administration and is now a consultant with Manatt, Phelps
& Phillips.
While a
Medicaid enrollee cannot be charged premiums and out-of-pocket costs that
exceed 5% of their household income, the guidance removes other restrictions on
copays, opening the door for their more widespread use and in higher amounts.
Those changes will disproportionately affect people with more serious health
issues, she said.
“Even a
copay that’s $1 can be a burden,” Mann said. “These could allow copays that are
much more than that.”
States
could also move to eliminate other Medicaid benefits, such as nonemergency
medical transportation and a comprehensive series of preventive, diagnostic and
treatment services that are a pillar of the program — known as the Early and Periodic Screening,
Diagnostic and Treatment (EPSDT) benefit — for 19- and
20-year-olds.
The
federal government will exercise less oversight over the private health
insurance companies that states hire to run their programs, giving states more
power to set rules on provider participation and payments.
About
two-thirds of Medicaid participants are enrolled in a private managed-care
firm, and the proposal would reduce federal oversight of how these companies
operate. States would be able to choose if they want to follow federal rules
seeking to make sure that health plans provide reasonable access to a
sufficient number of in-network doctors and hospitals, said MaryBeth Musumeci,
associate director for the Kaiser Family Foundation Program on Medicaid and the
Uninsured. In addition, the federal government would not have to approve
payment rates to the plans before they take effect, she said. (Kaiser Health
News is an editorially independent program of the foundation.)
A few
states have operated under Medicaid spending caps before, including Rhode
Island, but the amounts were set so high a state was never in any danger of
hitting the limit, Musumeci said.
The CMS
guidance did not estimate how much the new financing system could save the federal
budget.
All
states could technically apply for a block grant, but most are unlikely.
Only a
few states would be expected at least initially to apply for the block grant
and those would almost certainly be some of the 14 states that have not
expanded Medicaid, said Matt Salo, executive director of the National
Association of Medicaid Directors.
However,
many states would be concerned about loss of funding or not having enough
federal dollars when demand for services or enrollment rose.
“States
will be asking: Is the added flexibility worth the risk or the downside of a
different funding arrangement?” Salo said.
Still,
he added, for some states that have not expanded eligibility, “this is a call
to get them to the finish line.”
Other
state proposals to pursue capped Medicaid financing — notably Tennessee’s,
which is pending with the Department of Health and Human Services — are much
different from what the new Trump approach telegraphs. That said, some
Republican-led expansion states are also likely to find it appealing.
“Waivers
will never be long-term substitutes for congressional action. But this does
represent a significant opportunity to test new ideas to see what works and
especially to better understand how much risk states are willing to accept in exchange
for greater control,” said Dennis Smith, who ran Medicaid during the George W.
Bush administration and is now a senior adviser for Medicaid and health reform
for Arkansas Gov. Asa Hutchinson. “If one expects a harvest, a person first has
to plant the seed.”
The
impact won’t be felt anytime soon.
The
federal government generally moves at a glacial pace in approving new state
projects, particularly for ones that set new precedent or are controversial.
Given that, it’s unlikely any state would get a waiver before 2021 — when there
could be a change in federal administrations.
Plus,
there is all but certain to be litigation that could thwart the entire effort.
“The
document issued today by CMS appears to rewrite bedrock provisions of Medicaid,
an activity which is beyond the scope of CMS’ power. Only Congress is tasked
with making these changes,” said Jane Perkins, legal director of the National
Health Law Program, a legal aid group that has sued over the Trump
administration’s approval of work requirements for many Medicaid enrollees in
five states. It is evaluating litigation options on the block grants.
Rachana
Pradhan: rpradhan@kff.org, @rachanadixit
Phil
Galewitz: pgalewitz@kff.org, @philgalewitz
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