CMS Unveils Medicaid Block Grant Proposal; Critics Pounce

The Trump Administration unveiled its newest version of Medicaid block grants last Thursday –a proposal it calls “Healthy Adult Opportunity” that will allow states to determine how much it wants to spend for certain adults in its Medicaid population and what benefits to include for the population. The state would then receive a federal share that is either tied to historical expense trends or a per-beneficiary amount that fluctuates in a given year. 
In general, the way Medicaid operates now, a state’s expenditure on Medicaid could increase due to increased enrollment or medical expenses, and the federal share of funding will also rise. In a block grant scenario like the one unveiled last week, the federal funding is capped, but gives states new flexibility that could result in state programs modifying enrollee benefits, increasing enrollee cost-sharing, or limiting the availability of certain prescription drugs through a closed formulary. Depending on the model, states risk exposure if more people enroll due to an economic downturn or if medical expenses increase unexpectedly due to, for example, a health epidemic or the development of an extremely high-cost drug.
A group of Democrats in Congress, including Massachusetts Representative Joseph Kennedy and Ayanna Pressley, argue that aside from reducing federal oversight of state programs that could unfairly reduce benefits and access to enrollees, the CMS block grant proposal is plainly illegal. In a letter to HHS Secretary Alex Azar and CMS Administrator Seema Verma last Wednesday, the Congress Members wrote that CMS is required under statute to match state’s spending and “is powerless in determining alternative state payments, including capping the Medicaid funds it disburses. The power and responsibility to change these payments lie solely with Congress.” Block grant proponents commented last week that the new CMS proposal may have been crafted in such a way to alleviate that concern. But all observers agree that a legal challenge awaits Healthy Adult Opportunity.