Trump takes giant dump on Medicaid, slaps Orwellian name change on Block Grants

I'm a bit late on this one. It was reported a week or so ago but was officially introduced today:

Trump administration finalizing Medicaid block grant plan targeting Obamacare

  • The plan is guaranteed to enrage critics and invite attacks from Democrats in an election year.

The Trump administration is finalizing a plan to let states convert a chunk of Medicaid funding to block grants, even as officials remain divided over how to sell the controversial change to the safety net health program.

CMS Administrator Seema Verma plans to issue a letter soon explaining how states could seek waivers to receive defined payments for adults covered by Obamacare's Medicaid expansion, according to seven people with knowledge of the closely guarded effort. An announcement is tentatively slated for the end of next week, more than one year after Verma and her team began developing the plan.

Capping Medicaid spending, even among just Obamacare's expansion population, would be a major transformation of how the federal government finances the safety net health care program that has grown to cover about 1 in 5 Americans. The plan is guaranteed to enrage critics and invite attacks from Democrats in an election year.

In case you're wondering what's so awful about "Block Grants", here's a good primer...this is from a couple of years ago but I can't imagine that today's block grant rollout is that much different from how Aaron Carroll explains it:

As for today's news, I'll leave it up to University of Michigan Law Professor and ACA expert Nicholas Bagley to give the lowdown...as I sometimes do, I'm converting his tweets into a more readable bullet format. I STRONGLY urge anyone who's remotely interested in the ACA specifically, healthcare policy in general or the law to follow Prof. Bagley.

The "Dear State Medicaid Director" letter inviting states to adopt block grants for their Medicaid programs is available here...

The program to block grant Medicaid has been given the Orwellian name of "Healthy Adult Opportunity," as if stopping people from getting insurance counts as an "opportunity."

The big-picture view is that states can:

  1. slash provider payments w/o seeking permission
  2. limit access to prescription drugs
  3. share in savings if they agree to a cap on medicaid spending

And it looks like it's open season on eligibility rules for the expansion population. Unless I'm misreading, for example, it looks like a state could kick people off of Medicaid if they've been on the program for too long or if they don't meet onerous reporting requirements...

No, I'm not misreading. States would be free to impose asset tests, to limit eligibility to a slice of the expansion population, or even to cap Medicaid at (say) 75% of the poverty level.

States could also limit retroactive eligibility -- which is a really big deal. If you're not on Medicaid but are eligible to enroll, providers can still sign you up when you show up at the hospital with a medical emergency. Under a block grant waiver, they might not be able to.

Interestingly, states wouldn't be able to pare back much on benefits. They'll basically have to adhere to the ACA's rules, which means that states will be required to cover a full panoply of medically necessary care.

That is interesting. To put this in 3-legged stool terms, they have to cover the ACA's Essential Health Benefits...but they can make the enrollees pay for more of those benefits, kick off a big chunk of the enrollees, put all sorts of onerous paperwork hurdles on the enrollees, allow for ultra-skinny provider networks to perform the services and so forth. I guess they decided to throw a bone or two at the enrollees to avoid looking like complete assholes.

CMS clarifies too that you can't use block grant money for "room and board," meaning that a state couldn't divert Medicaid money to (say) programs that provide housing for the homeless.

In the provision that may attract the most attention, HHS says that it will allow states to close their formularies. What that means, in English, is that state Medicaid programs can refuse to cover some FDA-approved drugs if there are other, cheaper drugs available.

States could also impose premiums and cost-sharing on most beneficiaries so long as out-of-pocket costs are limited to 5% of income. If a beneficiary fails to make the requisite payments, they can be kicked off of Medicaid.

The Medicaid expansion population earns less than 138% FPL. For a single adult, that's around $17,200/year. 5% of that is $71/month.

For comparison, an ACA exchange enrollee in South Carolina (a non-expansion state) earning just under 138% FPL would be eligible for a $0-deductible, 94% AV policy for just $35/month with a maximum out of pocket cost of $1,200/year. At 138% FPL, that amounts to between 2.4% - 9.4% of income at the outside...meaning for many enrollees, Medicaid would actually be a worse deal for them than a subsidized private exchange plan.

Which, of course, is the whole point.

In a particularly galling bit of double-speak, HHS suggests that "suspending" poor people who don't make their monthly premium payments is "consistent with promoting the objectives of the Medicaid program."

There's some standard language about how HHS supports managed care, doesn't like certificate-of-need and scope-of-practice laws.

More intriguingly, states won't have to undergo CMS review to show that the rates they pay to managed care organizations are actuarially sound. Maybe that's cutting needless red tape; maybe it's licensing states to set irresponsibly low rates.

Same too with network adequacy and guaranteed access to care: HHS says that it'll basically cede that authority to states, even though states have proven lackluster at enforcing access rules. This is a license for states to slash provider rates w/o worrying about access problems.

Okay, now onto the question with big legal repercussions. HHS's authority under 1115 doesn't allow it to waive section 1903, which creates the basic financing structure for Medicaid and establishes a fixed federal matching rate for Medicaid.

These programs have to be budget-neutral, which means that a state can't draw down more dollars than it would have in the absence of the demonstration.

If a state goes over its block grant "cap," it won't be eligible for federal matching payments (with one exception). But if they go under, they'll be able to take some of the "saved" money and plow it back into Medicaid.

I *think* the basic idea is that the FMAP, over the course of the program, will remain the same, even if it's effectively higher or lower in any given year. That may be the way that the administration is attempting to square the circle.

There are two models that a state can adopt. Under the "aggregate cap" model, the cap is keyed to the prior year's expenditures. If a state saves money relative to the cap in Year One, it can use that "saved" money to offset going over the cap for the next three years.

Alternatively, it looks like states can just keep the savings, so long as it spends at least 80% of the aggregate cap in a given year. I don't understand how this can be consistent with 1903. If states keep savings, their effective FMAP is much larger than the statutory FMAP.

I mean, it couldn't be plainer that that's what's going on: CMS is saying that states can keep 25% to 50% of what they save. They've got meet various performance metrics in order to do so, but ... well, I think that's an effective change to the FMAP.

Yup. This is a way of deliberately reducing care, reducing enrollment and letting states steal money from Medicaid in order to use it for other things so they can cut taxes on the wealthy even more.

Bagley's thread goes on for quite awhile, but you get the gist of it...this is basically just a way for the Trump Administration to give GOP-run states carte blanche to spend hundreds of millions of dollars in Medicaid funding however the hell they want to. There's officially some restrictions, but they strike me as a fig leaf with plenty of ways around them (Bagley notes that a state could try to claim that a state might try stealing the money to use for an unrelated "smoking cessation program" instead of for actually treating medical care for low-income Medicaid enrollees, for instance...and if the director of that smoking cessation program just happens to also be the governor's brother-in-law or whatever? Why, what an amazing coincidence...)