Trump administration finalizing Medicaid block grant plan targeting Obamacare
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.
Republicans have long argued that states should receive defined funding for Medicaid, instead of the current open-ended structure in which the federal government matches state spending. Democrats, along with many hospital and physician groups, have fiercely opposed the idea, warning that strict funding constraints would result in cuts to enrollment and health care services.
Democratic lawmakers have promised to fight the administration on block grants, contending CMS doesn’t have the authority to restructure the program’s financing without congressional approval.
Even as Verma and her aides work to push through the block grant plan, Trump officials are still battling over its scope and how to best guard it from lawsuits the administration expects from Medicaid advocates. Even the terminology is in flux, as officials work to identify an alternative to the term “block grant,” which has negative connotations in the advocacy community. The plan still needs sign-off from health department lawyers.
Meanwhile, there is internal debate on how broadly to publicize the effort. Verma, who two sources said sees the plan as a legacy-defining achievement, is pushing for an in-person event to announce the policy. Other officials, however, argue a high-profile rollout is unnecessary and could bring more scrutiny on a controversial proposal.
The White House will have final say on whether to pursue or halt the plan, the officials said.
President Donald Trump, who last week lashed out as HHS Secretary Alex Azar over negative health care polling, recently voiced concerns about fueling perceptions that he's cutting Medicaid and other health care services during an election year, said two officials with knowledge of the president's comments. Trump's remarks Wednesday about his willingness to look at entitlement cuts quickly became fodder for Democrats, as they accused him of violating a campaign pledge to leave those programs alone.
The Wall Street Journal first reported this weekend that CMS was finalizing a block grant policy.
CMS declined to comment. HHS said it did not comment on potential announcements, but a spokesperson pointed to the department's previous support for conservative proposals to change Medicaid.
"Medicaid plays a pivotal role in ensuring access to quality, affordable health care for the most vulnerable Americans," the HHS spokesperson said. "This administration has consistently worked to support states interested in finding innovative solutions to the unique health challenges of their citizens."
Some HHS officials are urging to slow down review, believing that the policy disagreements and legal issues are unlikely to be settled by next week. They’ve also noted that another of Verma’s major Medicaid initiatives, work requirements in some states, has been stymied by the courts. Officials widely expect that the new guidance will be immediately be held up in the courts.
One official also noted further delays in rolling out the plan could make it tougher for states to design block grant waivers and receive CMS approval before November’s election and a possible change in administrations.
Republicans have proposed Medicaid block grants dating back to the Reagan administration. They argue states could more effectively run the program with a lump sum payment from Washington and fewer federal requirements. Critics of the idea say it would not keep pace with rising health costs and leave states especially vulnerable during economic downturns, when there’s greater need for safety net services,
Congress has not been supportive of the idea. Lawmakers during the failed Obamacare replacement effort in 2017, rejected a similar plan to cap spending on Medicaid expansion and private health insurance subsidies, which would have resulted in millions losing coverage.
The Trump administration is seeking to bypass congressional opposition by using existing Medicaid authority to test states' health care ideas under what's known as demonstration waivers.
Several Republican-led states are pursuing plans to convert their Medicaid programs into block-grant funding. Tennessee, which has not expanded Medicaid, in November became the first state to submit a block grant plan to the Trump administration. That plan remains under review, but three officials said the forthcoming guidance from CMS will not give Tennessee everything it's seeking.
Some within the administration worry that Verma’s block grant guidance could actually encourage GOP-led states to partially expand Medicaid after resisting the Obamacare program for years. They believe some red states, under pressure to close coverage gaps, would cite new flexibility under a block grant to justify a partial expansion.
Verma had earlier encouraged Republican states to seek a partial expansion of Obamacare, but the idea was ultimately overruled by the White House.
