Medicaid block grants would gut law and cut care


Yesterday, the Department of Health and Human Services (HHS) announced a new policy that tries to undo the Medicaid program as it has existed for 55 years. HHS attempts to convert Medicaid to a block grant program, a Holy Grail for many conservatives. But any block grant system would be illegal, and if implemented, would leave many without necessary medical care.

Medicaid offers federal money to states to pay for medical assistance to the nation’s poor, provided that states follow federal baseline rules. Medicaid covers more than 71 million lives, including nearly 4 in 10 children, half of all births, and almost two-thirds of those living in nursing homes.

Given that it supports the full cycle of life, it is unsurprising that polls show favorable views of Medicaid. Medicaid has even sprouted grassroots movements, which fostered ballot initiatives to expand eligibility in four red states and one purple state, four of which were successful in the last election cycle.

In contrast, this week’s announcement is the latest example of the Trump administration’s hostility toward Medicaid, particularly Medicaid expansion under the ACA.  HHS would allow states to request block grants for the Medicaid expansion population (childless, non-elderly adults) in exchange for limited federal oversight.

Many conservative politicians have tried to convert Medicaid to a limited support program, but Congress never has had enough votes to change the law — recently reflected in the failure to replace the ACA in 2017. Now, the Trump administration seeks to achieve by administrative policy what it could not do legislatively.

The Medicaid program is part of the Social Security Act (SSA). SSA section 1903 requires the federal government to match states’ Medicaid spending at a set rate partly determined by the state’s per capita income, so poorer states have higher match rates than richer states. Every dollar a state spends on medical care for Medicaid enrollees is matched under federal law, which does not cap how much federal money can be spent on medical care.

So, Medicaid is a statutory entitlement that protects both state budgets and Medicaid beneficiaries. This federal promise responds to a long history (dating back to the Great Depression) of states being unable or unwilling to adequately provide medical care for the poor.

Also, the federal match encourages states to implement both mandatory and optional benefits and gives states the financial resources to respond to recessions, natural disasters, and public health crises (like the new coronavirus).

The HHS Secretary has the power to permit states to advance the purposes of Medicaid by waiving some provisions of federal law. These “1115 waivers” allow states to “demonstrate” ways to improve beneficiary coverage, access, delivery, or care — but only for certain sections of the Medicaid Act, which do not include the provisions governing federal payment in section 1903.

Simply put, the Secretary of HHS does not have the authority to waive section 1903, which declares that the Secretary “shall pay to each State … the [federal match] of the total amount expended … as medical assistance under the State plan… .” So, HHS cannot cap Medicaid funds it disburses to states, whether per person, by population, programmatically, or otherwise, because HHS must pay the federal match for the “total amount” of a state’s spending. 

Even if somehow authority existed to waive section 1903, capped spending does not meet the legal standard that a demonstration waiver must “assist in promoting the objectives” of Medicaid. This is informed by Medicaid’s core purpose, to “furnish medical assistance.”

This language is right at the start of the Medicaid Act where federal funds are appropriated for states participating in Medicaid. This phrase has been scrutinized by the federal judge deciding the Medicaid work requirement cases, and he found that Medicaid’s statutory purpose is to pay for medical care, not to promote a generalized idea of health or to decrease costs. 

Spending caps would lead to limits on enrollment, which are barriers to care, would limit payment for care across all beneficiaries (even if the policy focuses on the expansion population), and would limit all types of benefits coverage —the opposite of furnishing medical assistance.

Block grants face a third legal hurdle. Administrative agencies only have the authority to implement the specific laws they administer; they cannot rewrite a statute. Federal law prescribes how agencies can develop regulations and policies, which typically includes publishing notice of proposed rules and inviting the public to comment. 

Agencies must take those public comments into account before finalizing a new rule. While interpretive policies can be issued without the required notice and comment, a new substantive policy cannot.

Block grants are a substantive change to Medicaid’s law. Remarkably, the President’s Fiscal Year 2020 Budget for HHS acknowledged this, noting that the Medicaid Act is a barrier to block grants and calling for new legislation modeled after 2017 bills introduced to replace the ACA with more limited programs and which included block grants for Medicaid. Congress did not repeal the ACA and did not amend Medicaid, and HHS cannot do so in its stead.

According to the Congressional Budget Office and others, block grants would encourage states to take actions that include restricting enrollment for legally eligible beneficiaries, limiting mandatory and optional benefits, decreasing reimbursement rates (which may lead providers to abandon the program), and more. 

Only if a state disenrolls patients, restricts benefits, or reduces payments to health care providers — any of which would restrict access to care — could predict cost savings occur. And, states may make other choices harmful to patients. For example, nearly half of states limit the number of prescriptions Medicaid beneficiaries may fill at one time. States may try to adopt or to tighten such policies, even though they are understood to harm patients.

States always have had significant flexibility to shape Medicaid within the bounds of federal law. It simply is not accurate that states need more flexibility, or that Medicaid spending is out of control (recent evidence is that Medicaid costs less than projected), as Administrator Verma asserts. The federal rules actually exist for a reason: to protect states and to ensure beneficiaries receive the medical care promised by law. 

Make no mistake, this new policy attempts to bypass federal law because this administration has been unsuccessful in repealing the ACA. The foreseeable outcome will be predictable risks for the lives of all Americans.

Nicole Huberfeld is a professor of health law, ethics and human rights and a professor of law at Boston University.


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