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January 16, 2019

CMS wants to significantly overhaul Medicaid—without Congress, sources say

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    The Trump administration is working on a plan that could significantly overhaul the way Medicaid is funded in some states, according to three administration sources, Politico reports.

    Medicaid currently is funded through a federal/state matching program in which the federal government reimburses states at a set rate for every dollar spent on Medicaid. The rate varies from state to state, ranging from 50% to 75% based on a state's per-capital income and other criteria.

    The federal matching rate differs for Medicaid expansion populations in states that expanded their programs under the Affordable Care Act (ACA). Under the ACA, the federal government matches nearly all funding (93% in 2019) for newly eligible adults who enroll under Medicaid expansion; that rate is set to decrease until it hits 90% in 2020.

    According to Politico, Medicaid now covers about one in five U.S. residents.

    Plan details

    According to Politico, the three sources said the administration is working on guidelines that could allow states to apply for waivers to receive the block grants, or impose limits on how much federal funding states receive, while granting states more flexibility on how they spend the funds.

    However, the sources said the plan is not yet finished, and it is not yet clear in which direction the policy would lean—block grants or spending caps. The scope of the changes also is not yet clear. For instance, it is unclear if CMS would apply the spending limits to the entire Medicaid population or to select subsets.

    According to Axios' "Vitals," the plan "would be vastly different from" a proposal to implement block grants for Medicaid that Republicans had included in legislation to repeal and replace the ACA in 2017, particularly because it would allow states to opt in to the change.

    Diane Rowland of the Kaiser Family Foundation explained that under the 2017 proposal, "there were states that would have been winners and states that would have been losers." She said, "Presumably, no state is going to negotiate a waiver in which it's a loser."

    Legal questions

    According to Politico, the administration is seeking to implement the plan through the executive branch, meaning it would not need Congress' approval. However, Politico reports that implementing the plan without Congress could spark legal challenges and likely would garner intense opposition from Democrats.

    Sen. Bob Casey (D-Pa.) in a tweet posted Friday vowed to oppose such a plan "through legislation, in the courts, holding up administration nominees, literally every means that a U.S. Senator has."

    House Energy and Commerce Committee Chair Frank Pallone (D-N.J.) said the administration does not have the authority to implement such a plan. "CMS doesn't have the legal authority to block grant Medicaid. Block grants undermine the protections of the Medicaid program and put our most vulnerable citizens at risk," he said.

    According to Politico, a CMS spokesperson did not comment on the alleged plan, but did indicate support for Medicaid block grants. "We believe strongly in the important role that states play in fostering innovation in program design and financing," the spokesperson said, adding, "We also believe that only when states are held accountable to a defined budget—can the federal government finally end our practice of micromanaging every administrative process."

    Politico reports that two CMS staffers said CMS Administrator Seema Verma, who has long supported block grants for Medicaid, has been looking to implement such a plan for months, but has received pushback from lawyers for the agency.

    According to Politico, CMS is hoping to announce the plan early this year, though it could be delayed because of further legal reviews (Pradhan/Diamond, Politico, 1/11; Sullivan, The Hill, 1/11; Owens, "Vitals," Axios, 1/14; Armour, Wall Street Journal, 1/11; Medicaid and CHIP Payment and Access Commission website, accessed 1/14).

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