[NYAPRS Enews] Trump Administration to Block Grant Medicaid to Face Legal Fight

[Harvey Rosenthal]

NYAPRS Note: The Trump Administration sent letters to state Medicaid directors yesterday encouraging them to move to a capped, block grant approach to cover adults who are enrolled via the ACA's Medicaid expansion program. States that voluntarily cover adult populations outside of the Obamacare expansion could also receive capped funding.
Under the proposed block grant, named "Healthy Adult Opportunity," states would manage their programs under these caps and assume risk for costs exceeding the annual cap. States would also have the option to limit benefits and available drugs for some patients and to set premiums and cost-sharing, with patients paying up to 5% of their household income on out-of-pocket costs.
According to CMS, states could also waive Medicaid requirements like retroactive coverage periods and enacting nominal premiums and cost-sharing and also cover social determinants of health factors in Medicaid, like programs linking beneficiaries to housing.
Democratic states that expanded Medicaid are unlikely to take up Trump's offer, but it may draw some interest from conservative states.
House and Senate Democrats and provider groups like the American Medical Association assailed the proposal and consumer advocacy groups like the National Health Law Program, which sued over work requirements, is taking a close look at the program.

Trump Admin To Allow Medicaid Caps, But Legal Fight Likely As Providers Protest
By Rebecca Pifer  Healthcare Dive  January 30, 2020

Dive Brief:

  *   The Trump administration has unrolled a long-awaited plan to cap funds in Medicaid, part of its ongoing crusade to roll back the scope of the safety net program for 75 million low-income Americans.
  *   CMS sent a letter<https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/Downloads/smd20001.pdf> Thursday to state Medicaid directors telling them they can now apply for permission to eschew how the program is traditionally structured, where payments expand and contract depending on how many people are enrolled. States can instead switch to block grants and receive a fixed federal payment for all able-bodied adults in the program - and be exempted from some of Medicaid's requirements.
  *   States that apply for the optional program, called Healthy Adult Opportunity, can choose between a per-enrollee budget or total budget, which will be calculated by CMS. The legality of the proposal is unclear, but both supporters and critics expect an imminent court challenge.

Dive Insight:
Despite President Donald Trump's 2016 campaign pledges to protect Medicaid, a cornerstone of the health safety net since the 1960s, officials have consistently looked for ways to pare it back, most notably through trying to tie coverage to beneficiaries' work hours.

The plan will let states request capped funding for low-income adults covered under their state's Medicaid expansion under the Affordable Care Act. CMS will calculate a state's annual aggregate or per capita cap by looking at the most recently available eight consecutive quarters of expenditure data to arrive at a base year amount. States will manage their programs under these caps and assume risk for costs exceeding the annual cap.

States also have the option to limit benefits and available drugs for some patients. CMS wants to give states more negotiating power to manage drug costs, too, by adopting their own formulary similar to those in the commercial market. The formulary will have to cover the essential health benefits for prescription drugs under the ACA, so people with HIV and behavioral health conditions can't be discriminated against.

CMS stressed that the plan, by just focusing on ACA expansion states, won't affect the disabled, pregnant women, children or the most vulnerable. Instead, the proposal was framed as a way to free up funds states could then reinvest into improving care for those populations.

States will have to report their performance back to CMS in real time, including any changes in health outcomes for Medicaid beneficiaries and whether they report less access to providers. That way, the federal government will ensure the health of people covered by Medicaid doesn't flag, CMS claimed.

In return for participating in the program, states can waive Medicaid requirements like retroactive coverage periods and enacting nominal premiums and cost-sharing. States can also cover social determinants of health factors in Medicaid, like programs linking beneficiaries to housing.

Providers came out against the proposal, noting it could lower access and strain hospitals' bottom lines. The American Medical Association "opposes caps on federal Medicaid funding, such as block grants, because they would increase the number of uninsured and undermine Medicaid's role as an indispensable safety net," the group's president Patrice Harris said Thursday.

Medicaid is usually the first or second line item in states' budgets. Currently, the federal government pays states for a set percentage of Medicaid costs, usually between 50% and 70%, and shells out more funds to expansion states: up to 90% of the expansion cost.

Proponents of the policy say that will incentivize states to be frugal and slim down their spending, while critics maintain it will lead to states culling services or restricting enrollment. Additionally, if states are hit with an unexpected public health crisis, such as a virus epidemic or natural disaster, they may not have the resources to care for all Medicaid beneficiaries.

More than 35 House Democrats on Wednesday urged the Trump administration to halt the plan in a letter to HHS Secretary Alex Azar and CMS Administrator Seema Verma. The letter<https://twitter.com/RepJoeKennedy/status/1222634911707869184>, helmed by Rep. Joe Kennedy, D-Mass., said Medicaid block grants are not only "directly opposed Congress's intent for the Medicaid program, but they are illegal under Section 1115," a section of the Social Security Act giving HHS permission to green light state pilots of experimental programs in Medicaid.

Verma has been working on the block grant proposal for more than a year as a followup to work requirements, which have been challenged in court multiple times.

"The failure to update the Medicaid program is something this administration has felt needed to be addressed for some time," Joe Grogan, director of the Domestic Policy Council, said on a Thursday morning call with reporters.

A potential roadblock for the proposal is Medicaid's growing popularity. Enrollment has swelled as more states, red and blue alike, have voted to expand the safety net program. About two-thirds of states have already adopted expansion, and three GOP-led states - Utah, Idaho and Nebraska - moved forward on the measure last year.

"Hell no," Sen. Bob Casey, D-Penn., tweeted<https://twitter.com/SenBobCasey/status/1083880807096352768> earlier this month, pledging to fight the forthcoming plan "through legislation, in the courts, holding up Administration nominees, literally every means that a U.S. Senator has."

https://www.healthcaredive.com/news/trump-admin-to-allow-medicaid-caps-but-legal-fight-likely-as-providers-pro/571321/
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Trump Pushes Forward Conservative Transformation of Medicaid
By Rachel Roubein<https://www.politico.com/staff/rachel-roubein> and Dan Diamond<https://www.politico.com/staff/dan-diamond>  Politico  January 30, 2020

A new block grant program, rejected by Congress just three years ago, will face swift resistance from Democrats and expected legal challenges.

The Trump administration took a big step forward Thursday to let states convert a portion of Medicaid funding into block grants, a long-sought conservative overhaul of the safety net health care program that Democrats will wield as a political weapon during the election.

The plan is the administration's boldest step yet to curb Medicaid spending and shrink the program covering about 1 in 5 low-income Americans. But the move is inciting fierce opposition from Democrats who say it's the latest evidence President Donald Trump is trying to sabotage health coverage.
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CMS Administrator Seema Verma, who's crafted the politically sensitive and closely guarded plan for over a year,<https://www.politico.com/story/2019/01/11/trump-bypass-congress-medicaid-plan-1078885> on Thursday encouraged state Medicaid directors<https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/Downloads/smd20001.pdf> to request budgeted federal payments to cover poor adults who enrolled through Obamacare's Medicaid expansion in recent years. States who voluntarily cover adult populations outside of the Obamacare expansion could also receive capped funding.

Some conservative states have expressed interest in block grants in recent years, but it's not clear how many will take up the Trump administration's new offer.

Capped Medicaid payments would represent a radical departure in how the 55-year-old program is financed. The federal government has long provided open-ended matching funds to states.

Verma is touting block grants as a way for states to take greater accountability for the health of their residents while better controlling spending on the program, which takes up a chunk of state budgets. Verma also sees the policy as a way to constrain Obamacare's expansion of Medicaid to millions of low-income adults - a program that she argues has siphoned away resources for the most vulnerable populations covered by Medicaid.

"Adult Medicaid beneficiaries can hope for better health and all beneficiaries can expect a stronger, more sustainable program for years to come," Verma said Thursday morning.

The rollout of the policy represents a signature achievement for Verma, who pushed through the plan just weeks after a high-profile feud<https://www.politico.com/news/2019/12/11/azar-verma-trump-082816> with HHS Secretary Alex Azar jeopardized both of their jobs. The two have tried to repair their working relationship after an intervention from senior White House officials, and Azar appeared at Thursday's rollout in a show of support for Verma's policy.

Still, Medicaid advocates are likely to challenge the policy in court.

Democratic lawmakers have long cautioned the Trump administration against advancing the policy, contending the health department doesn't have the authority to unilaterally cap program spending. In a letter to Verma this week, more than 30 House Democrats warned the move "defies Congress" and threatens care for some of the country's most vulnerable people.

Democrats are portraying the new block grant policy as a cut to Americans' health care and tied it to Trump's efforts to undermine the Affordable Care Act. During the failed effort to repeal and replace Obamacare in 2017, Congress rejected a similar block grant proposal after analysts found it would result in millions of people losing coverage.

"Even after people across the country spoke out and pressed Congress to reject President Trump's plan to gut Medicaid with his Trumpcare bill, he's still charging forward with harmful policies that will hurt the many families who rely on Medicaid," said Patty Murray, the top Democrat on the Senate health committee.

The health care law - and in particular its Medicaid expansion - remains popular after the failed effort to replace it during Trump's first year in office. Nearly three-quarters of states have expanded Medicaid since 2014, and support for the program has boosted Democratic candidates in conservative strongholds.

On Wednesday, one day before the block grant rollout, Verma sought to rebut claims that the administration is undermining Obamacare - even as Trump supports a lawsuit that could kill the entire health care law.

"The tired canard that the Trump Administration is sabotaging the ACA rings hollow," Verma said. "Rather, we are keeping what works and fixing what's broken."

Block grants have been a regular feature in Republican health plans dating back to the 1980s. Republicans say that states can better manage the programs on a defined budget and fewer rules set by Washington. However, Medicaid advocates say a block grant would limit states' ability to respond to economic downturns and expensive new drugs, forcing them to trim their programs.

The administration said states can pursue block grants under the health department's authority to waive Medicaid requirements to test new payment and health care delivery ideas. Critics argue, however, that the administration can't legally cap Medicaid spending without permission from Congress.

Sensitive to the negative connotations surrounding block grants, the Trump administration is branding the policy "Healthy Adult Opportunity." Officials are emphasizing that states receiving lump-sum payments will face stricter oversight to ensure patients aren't getting sicker or losing access to health care providers. Traditional populations covered by the program - like children, elderly adults and people with disabilities - would not be eligible for capped payments.

State Medicaid programs would also have new ability to limit health benefits and drugs. They would also be allowed to set premiums and cost-sharing, but patients can't be required to pay more than 5 percent of their household income on out-of-pocket costs.
Bottom of Form

Some states have been frustrated that Medicaid programs, which must cover every FDA-approved drug, have had limited tools for constraining drug costs. Under the new guidance, state Medicaid programs could establish a list of covered drugs known as a formulary.
States could choose to receive lump-sum funding or receive funding based on the number of enrollees.

Democratic states that expanded Medicaid are unlikely to take up Trump's offer, but it may draw some interest from conservative states.

Oklahoma Gov. Kevin Stitt, whose state hasn't expanded Medicaid, appeared alongside Verma to announce he would apply for a new waiver, calling the new policy a "game changer." Stitt for months has been agitating for a block grant as an alternative to a Medicaid expansion referendum expected on the Oklahoma ballot this fall.

Mike Dunleavy, Alaska's Republican governor, has also expressed interest in a block grant. Tennessee, which hasn't expanded Medicaid, last fall became the first state to formally request a block grant for its program. Verma said that the Tennessee request is broader than the scope of the new guidance.

Litigation could still halt the new policy, potentially leaving another one of Verma's Medicaid initiatives tied up in courts after a federal judge blocked new work rules<https://www.politico.com/story/2019/03/27/work-requirements-medicaid-1240074>. A federal appeals court in Washington, D.C., is weighing the Trump administration's request to revive the rules requiring some Medicaid enrollees to work, volunteer or attend school as a condition of coverage.

Groups like the National Health Law Program, which sued over work requirements, said they'll closely review the block grant plan. Its legal team will be "carefully assessing the enforcement and litigation options" said Leonardo Cuello, the group's health policy director.

Rachana Pradhan contributed to this report.
https://www.politico.com/news/2020/01/30/medicaid-spending-plan-109460

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