The Trump administration is proposing a sharp slowdown in Medicaid spending as part of a broad reduction in the government’s investment in health care, calling for the public insurance for the poor to morph from an entitlement program to state block grants even after a Republican Congress rejected the idea.
The budget released by the White House on Monday also calls for a sizable reduction for Medicare, the federal insurance for older Americans that President Trump has consistently promised to protect. Most of the trims relate to changing payments to doctors and hospitals and renewing efforts to ferret out fraud and wasteful billing — oft-cited targets by presidents of both parties.
In keeping with Trump’s promise in last month’s State of the Union address to halt the spread of HIV over the next decade, the budget includes an initial installment of $291 million next year targeted to communities where the virus is continuing to infect people not getting proper treatment — the rural parts of seven states, including Mississippi; the District of Columbia; Puerto Rico and 48 hot-spot counties scattered throughout the country.
However, the spending plan would cut funding for global AIDS programs while slashing expenditures on the Centers for Disease Control and Prevention by about 10 percent.
Strategies the president and Health and Human Services Secretary Alex Azar advocate to curb the rising price of prescription drugs are part of the budget. But spending on the National Institutes of Health, a longtime favorite of lawmakers of both parties, would be reduced by $4.5 billion, with the National Cancer Institute proposed to absorb the largest chunk of that cut. Funding for pediatric cancer research, however, would increase by $50 million for the next fiscal year.
Taken together, the $87.1 billion in discretionary funding for HHS programs would be 12 percent less than in the spending plan Congress adopted for this fiscal year — although the proposal is unlikely to survive lawmakers’ scrutiny.
The idea of opening Medicaid to block grants to states — or a related idea that would create per-person funding caps — are fundamental alterations of an entitlement program run jointly by the federal government and states that began in the 1960s as part of the War on Poverty and have always provided each state a share of funding for anyone who is eligible. The budget calls for limiting the program’s growth to the pace of inflation.
Because health-care spending typically rises more swiftly than the consumer price index, tying it to the nation’s overall inflation rate would put a strong squeeze on the public insurance system that covers tens of thousands of poor, vulnerable people, some of them elderly.
The spending plan calls for a cut of nearly $1.5 trillion in Medicaid over 10 years and for $1.2 trillion to be added for the block grants or per-person caps that would start in 2021. Under the new arrangement, states would gain far more freedom to set their own rules about how to cover the poor.
The budget also would eliminate funding for Medicaid expansion under the Affordable Care Act, which has gone to about three dozen states over the past five years.
The budget does not make explicit whether the administration is asking Congress to consider converting Medicaid to a system of block grants once again — or whether it seeks to make such a switch on its own. Congressional Republicans included the idea in their failed 2017 efforts to repeal large aspects of the ACA. Opposition to block grants, including from some GOP governors who feared they would be saddled with escalating health-care costs, was a major reason behind the Senate’s inability to pass such bills.
Last year’s White House budget — an annual exercise that usually is more wish list than harbinger — also endorsed the Medicaid block grant idea, assuming it would be part of an ACA repeal. The new proposal comes as the House is in Democratic hands and even congressional Republicans have largely turned their attention away from dismantling the ACA.
Federal health officials have quietly been exploring the controversial proposal to give individual states permission to convert their Medicaid programs to block grants or a system of caps, without any change in law. Senior officials of at least one state, Utah, have said publicly they have been discussing the idea with leaders of HHS’s Centers for Medicare and Medicaid Services, and other conservative states also appear to be interested.
Matt Salo, executive director of the National Association of State Medicaid Directors, said that a proposal to give individual states permission to convert Medicaid to a block grant, “is still bouncing around in the administration.”
He said the question remains, “If state X says, ‘Hey, we want to do something different in terms of coverage, benefits, cost sharing,’ how much latitude does the administration have to grant that” in exchange for capping the federal funding?
The Trump budget also proposes to slow spending on Medicare, the federal program that gives health insurance to older Americans, by $845 billion over the next 10 years, in part by limiting fraud and abuse and payments to hospitals. During the 2016 presidential campaign, Trump said he would not cut Medicare or Social Security, the retirement program for the elderly, but his budget last year also included a proposed cut of more than $550 billion to the program.
This year’s proposed budget would reduce the growth of various Medicare provider payments, including for care after hospitalizations, graduate medical education and hospital-owned physician clinics, according to Marc Goldwein, budget expert at the Committee for a Responsible Federal Budget. He said that with some of the Medicare “reductions” simply being moved to other parts of the budget, the cuts could be construed as between $500 billion and $600 billion.
The increasingly ambitious cuts to Medicare come at a time when many Democrats have embraced plans for expansions of Medicare, including a Medicare-for-all system that would increase federal spending on the program by as much as $30 trillion but that backers say would insure more people and reduce overall health costs.
The changes are expected to encounter fierce resistance from industry lobbying groups, and members of Congress traditionally nervous about backing cuts to health-care programs.
Charles N. “Chip” Kahn III, president of the Federation of American Hospitals, which represents more than 1,000 for-profit hospitals and health systems, said the budget “imposes arbitrary and blunt Medicare cuts. . . .The impact on care for seniors would be devastating.”
However, Howard Gleckman, a budget expert at the Tax Policy Center, a nonpartisan think tank, said: “Administrations have been proposing to do these sort of things forever, and they never happen.”
Congressional Democrats pounced swiftly, deriding the GOP president’s spending priorities.
“Instead of building a stronger, healthier nation, President Trump’s budget would take away Americans’ health care and devastate the pillars of economic security for seniors and families,” House Speaker Nancy Pelosi (D-Calif.) said in a statement.
Azar, the HHS secretary, countered in a statement: “This budget will help deliver on the President’s vision for a fiscally sustainable federal budget, a stronger economy, and a healthier America.”