Medicaid block grant waiver reports revive hospitals' funding worries

Hospitals are furious that the Trump administration is reportedly exploring allowing states to convert their Medicaid programs into block grants, a policy the industry fervently fought when Congress tried to repeal the Affordable Care Act.

If states take advantage of the block-grant flexibility, first reported in Politico, it would cap federal spending for Medicaid in those states and could leave them on the hook for any expenditures over that limit. States would either have to cut their Medicaid rolls or payments to disproportionate-share hospitals and nursing homes to curb spending, some experts said.

Chip Kahn, CEO of the Federation of American Hospitals, told Modern Healthcare that he is concerned about how block grants will affect access to coverage and questioned whether the CMS can legally allow these waivers.

Other hospital industry groups also were worried about the impact of the grants.

"We have long voiced concerns about how block granting Medicaid could ultimately result in losses of coverage and negatively impact access to quality care," said Ashley Thompson, senior vice president of public policy analysis at the American Hospital Association.

Both groups said that states have flexibility under federal waivers to make changes to Medicaid and questioned the need to install a block-grant program. Kahn also questioned why a state would willingly sign up for a block-grant waiver if it meant possibly lower federal Medicaid funding if the state goes over the cap.

Patricia Boozang, senior managing director at the consulting firm Manatt Health, said it is too soon to determine how popular block grants would be, adding that the "devil is in the details."

"Are we talking about a guidance that would have stringent caps on Medicaid spending or are we talking about something that would foster spending targets, which is what states do for waivers now in setting budget neutrality caps," she said.

So far the CMS hasn't put out guidance on what flexibility states could receive from block grants.

The agency did not confirm it was looking at a block-grant waiver program, but a spokesperson said that the CMS is open to giving states the option to adopt a block grant.

"As the administrator (Seema Verma) has stated publicly, we believe strongly in the important role that states play in fostering innovation in program design and financing," the spokesperson said. "We also believe that only when states are held accountable to a defined budget can the federal government finally end our practice of micromanaging every administrative process."

The exact guidance will be critical to determine whether a state actually signs up.

"I haven't met the state yet that would volunteer for a cut in its federal Medicaid funding," tweeted Drew Altman, CEO of the Kaiser Family Foundation. "A few might negotiate a cap on some or all of its program in return for some more flexibility—maybe. Not clear what these new 'block grant waivers' will amount to."

Block grants are not a new fight for hospital groups. In fall 2017, a bill to repeal the Affordable Care Act sponsored by Sens. Lindsey Graham (R-S.C.) and Bill Cassidy (R-La.) would have converted Medicaid into a block-grant program.

The lawmakers said that the block grants are key to reining in an out-of-control entitlement program and that it gives more power to states to develop a Medicaid program that meets their needs.

"Instead of a Washington-knows-best approach like Obamacare, our legislation empowers those closest to the healthcare needs of their communities to provide solutions," Graham said in a statement in September 2017 when the bill was introduced. "Our bill takes money and power out of Washington and gives it back to patients and states."

Hospital groups vehemently opposed the bill. The AHA wrote to congressional leaders in September 2017 that Medicaid funding cuts could have "serious negative consequences for communities across America" unless the lawmakers made sure alternative coverage is available.

A September 2017 analysis from the consulting firm Avalere Health estimated that Graham-Cassidy's block-grant program would have cut federal Medicaid funding by $205 billion through 2026 and more than $4 trillion over the next two decades.

GOP Senate leadership eventually scuttled the bill because of insufficient support from Republican senators.