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Trump administration’s Medicaid block-grants option touches off ideological fight

Seema Verma, administrator of the Centers for Medicare and Medicaid Services, announced a new Healthy Adult Opportunity option for states that want to convert part of Medicaid to block grants.
Seema Verma, administrator of the Centers for Medicare and Medicaid Services, announced a new Healthy Adult Opportunity option for states that want to convert part of Medicaid to block grants. (Jabin Botsford/The Washington Post)

The latest battle over the future of Medicaid broke out on Thursday, as the Trump administration invited states to convert part of the public insurance system into block grants, prompting Democrats and a broad swath of the health-care industry to erupt in protest.

In announcing changes to a portion of the safety-net program, senior administration officials avoided any mention of “block grants,” a polarizing concept, instead naming the initiative “Healthy Adult Opportunity.” Officials portrayed it as a “groundbreaking opportunity” for states to upgrade care, limit the program’s strain on their budgets and gain more freedom to shape Medicaid to local needs.

“Our administration is committed to protecting and improving the lives of Medicaid recipients,” said Seema Verma, administrator of the federal Centers for Medicare and Medicaid Services and the chief champion of the idea among President Trump’s aides.

Before an invited crowd of health-care experts at the Department of Health and Human Services’ headquarters and in a letter sent Thursday to every state Medicaid director, officials emphasized that the block grants are an option for states. They apply only to financing health insurance for able-bodied adults — primarily for people slightly less poor than traditional Medicaid recipients and who have joined through expansions of the program under the Affordable Care Act.

“What we are announcing isn’t mandatory or top-down reform,” said HHS Secretary Alex Azar.

The strategy to soften the vocabulary and stress the finite scope of the changes did not blunt an immediate outpouring of opposition. Both sides predict court challenges.

“This nefarious program is just a Medicaid block grant by another name, and the only opportunity it will provide is to miss out on needed care or go broke trying to get it,” said Eagan Kemp, health policy advocate for Public Citizen, one of many pro-consumer and health-care groups that issued sharp denunciations. Opponents include a coalition of ­27 patient-advocacy organizations, AARP and major health-care lobbies.

Until now, Medicaid has always been an entitlement program, with each state receiving a specified percentage of its funding from the federal government, no matter how many people enroll. Critics contend the finite payment of a block grant could squeeze states if the need for coverage rises, prompting them to cut benefits or reimbursements to doctors and providers of care.

On Capitol Hill, Democrats immediately sought to employ Healthy Adult Opportunity as a tool for the November elections. “Even after people across the country spoke out and pressed Congress to reject President Trump’s plan to gut Medicaid . . . he’s still charging forward with harmful policies that will hurt the many families who rely on Medicaid,” wrote Sen. Patty Murray (Wash.), the ranking Democrat on the Senate Health, Education, Labor and Pensions Committee. “Democrats are going to continue championing patients and fighting to make sure everyone can get quality, affordable health care.”

Democrats portrayed the change as new evidence of the president’s determination to undermine the Affordable Care Act. “After being stopped in the Congress from repealing the health care law and destroying the lifeline of Medicaid, the Trump administration has decided to ignore the law and steal lifesaving health care from seniors and families anyway,” House Speaker Nancy Pelosi said in a statement.

Block grants for Medicaid have been a darling of conservatives since the Reagan administration. The idea has resurfaced repeatedly but has never been adopted until now. In 2017, when Congress, with GOP majorities in both chambers, sought to dismantle much of the ACA, the effort was thwarted in the Senate largely because party moderates opposed reining in Medicaid spending through block grants or per-person caps.

Details that emerged Thursday show the Trump administration’s version would allow states to choose either approach — a total, annual lump-sum payment or a lump-sum payment based on the number of able-bodied adults in a state’s program. The possibility would exclude coverage for groups traditionally eligible for Medicaid, such as children, pregnant women or people with disabilities.

Verma said states would have to expand to some degree — by choosing a finite group, such as homeless adults, or applying based on a full expansion under the ACA to adults with incomes of up to 138 percent of the federal poverty line. Only the full expansion would qualify for the higher federal payments the ACA provides.

During her three years overseeing CMS, Verma has sought to expand states’ flexibility in running their Medicaid programs, and Health Adult Opportunity folds in essentially everything she had advocated, even allowing states to make further changes after winning federal permission upfront.

In one important difference from regular Medicaid rules, states can restrict the drugs the program covers, creating what are called formularies, except for HIV or psychiatric medicines. States can add eligibility criteria; they include work requirements, which so far have been blocked in federal court in several states.

The question of how much payments would be adjusted year to year has always been a crucial and touchy issue in block-grant proposals. Under CMS’s plan, payments by states that chose a lump sum would rise at the rate of medical inflation plus a half percentage point, while the per­person version would rise a bit more slowly. Some congressional legislation in recent years has had higher or lower updates.

It remains unclear how many of the 14 states that have not expanded Medicaid — typically with Republican leaders — will be drawn to do so now with the block-grant option.

Asked about concerns that states with lump-sum federal payments could be strained in an economic downtown or public health emergency, when more people want to join, Verma told journalists a state could ask CMS for extra money. “We can make an adjustment,” she said.

She said she is confident the initiative can withstand legal challenges.

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