The offer represents the second — and boldest — step the Trump administration has taken to redefine the nation’s largest public insurance program, a cornerstone of the social safety net created as part of President Lyndon B. Johnson’s Great Society of the mid-1960s. It follows a guidance letter that Seema Verma, administrator of the federal Centers for Medicare and Medicaid Services, issued in January 2018, allowing states for the first time to compel poor Americans to work or prepare for jobs to qualify for Medicaid.
The work requirements triggered lawsuits by national and state-level groups opposed to those rules. Of 10 states CMS has approved to begin what advocates call “community engagement” requirements, virtually all have been blocked in federal court or are on hold while the litigation goes through legal appeals.
Proponents and critics alike expect the block grant guidance will also face court challenges. “Our legal team will be carefully assessing the enforcement and litigation options with respect to the guidance document,” said Jane Perkins, legal director of the National Health Law Program, a Washington-based group working on behalf of low-income Americans and a main plaintiff in the work-requirement cases.
Thursday’s letter, first reported by Politico, will be accompanied by an event that morning at the Department of Health and Human Services headquarters to tout the changes. Invitations emailed to various health-care organizations call the event “Transforming Medicaid: A New Opportunity for Better Health.”
Allowing block grants in Medicaid has been a prime objective for Verma since she arrived in Washington three years ago from a role as an Indiana-based health-care consultant whose clients included several states’ Medicaid programs. Within the administration, Verma has consistently argued for states to be allowed greater flexibility in running Medicaid, which is a joint responsibility of the federal government and the states.
Under Medicaid law, the federal government provides each state a percentage — in practice, between 50 percent and 70 percent, depending on a state’s wealth — of whatever it costs to insure any people who are eligible. Certain groups of people must be covered and certain health benefits are required as a minimum, while states have latitude to be more generous.
A big expansion of Medicaid has taken place in recent years under the Affordable Care Act, which paid states the entire cost at first — now 90 percent — of enrolling poor people with slightly higher incomes than most states had allowed before. Three dozen states have expanded Medicaid since 2014.
According to individuals inside and outside the administration, who spoke on the condition of anonymity to talk about a decision not yet public, the option for states to ask for a block grant is focused on able-bodied adults, excluding traditional Medicaid populations predating the ACA, such as pregnant women, children or people with disabilities.
Verma, who began working on guidance to permit block grants about a year ago, previewed her intentions last fall in a speech before the National Association of Medicaid Directors. “You will soon see guidance from us that lays out initial opportunities to test new approaches to delivering and financing care for certain optional adult populations,” she said at the association’s annual meeting in Washington. At the time she called the idea the “Medicaid Value and Accountability Demonstration,” but the name apparently has changed in recent days.
In September, Tennessee became the first state to ask CMS for what is known as a waiver from Medicaid rules to allow it to try a variant on a block grant. The state has not expanded Medicaid, and it is unclear that the new guidance described in the letter will permit what Tennessee wants to do.
Sarah Tanksley, a spokeswoman for TennCare, the state’s Medicaid program, said officials there have not had substantive conversations with CMS since formally sending in the request in November.
A few other states have expressed preliminary interest, but not formally asked for federal permission. They include one expansion state, Alaska, and states that have not expanded their programs, including Georgia and Oklahoma.
Many Republicans have long sought to end Medicaid’s open-ended federal matching payments. Fixed-size block grants, or per capita caps, were a central part of GOP legislation in 2017 that would have repealed much of the ACA. Internal party divisions, with opposition to block grants from Republican governors who had expanded Medicaid, helped thwart ACA-repeal efforts that year in the Senate.
Democrats and large swaths of the health-care industry have consistently opposed block grants, contending that such fixed payments could strand states financially when the economy deteriorates, expensive new therapies materialize or public health disasters arise. Such pressures, critics contend, would lead states to cut eligibility or services.
“These are all the reasons you’ve got to be nervous about a block grant,” said Charles N. “Chip” Kahn III, president of the Federation of American Hospitals. “It’s based on the assumption you can control costs and the levels of services are the same from year to year. You can get a curveball in there, and it can throw the whole thing off.”
Joseph R. Antos, a health-care scholar at the conservative American Enterprise Institute, said the part of Medicaid law that allows states to get exceptions from the program’s usual rules does not allow federal health officials to waive the formula that defines the share of money the federal government and states provide.
“Anything that sounds like a block grant,” Antos said, “can’t be done.”
House Democrats already are criticizing the administration’s plans. “Not only are Medicaid block grant proposals morally bankrupt, they are explicitly illegal,” said Rep. Joe Kennedy (Mass.), who is circulating a letter of opposition among fellow Democrats. “Under this Administration, success in health care policy is measured by nothing more than how many patients are left with nowhere to turn when tragedy strikes.”