As part of an unprecedented waiver request, Utah has asked the CMS to cap the growth rate of federal Medicaid payments to cover its limited expansion population at the rate of medical inflation, rather than at the much lower rate of consumer price inflation.
The Section 1115 demonstration request issued Friday asked the CMS to pay the Affordable Care Act's enhanced, 90% matching rate for the state's partial expansion of Medicaid coverage to adults with incomes up to 100% of the federal poverty level.
No other state has gotten the ACA's enhanced match rate for an expansion that did not cover low-income adults up to 138% of poverty.
In addition, Utah asked the CMS to set a per capita cap for the expansion population on the portion of the federal payments above the traditional matching rate of about 70%. It wants the cap set separately for adults with dependent children, those without children, and people in residential treatment for substance abuse.
The state explained its per capita cap model as a way to provide increased coverage to Utahans in a fiscally sustainable manner. It said Medicaid's share of state spending grew from 12.7% to 26.1% from 1998 to 2017, and that it may not be "practicable" for state spending to continue to grow at that rapid pace.
The state proposed a 4.2% growth rate for years 1 and 2 of the five-year demonstration, based on the CMS Office of the Actuary's projection of medical consumer price inflation. It wants to adjust that rate for subsequent years in line with the actuary's updated projections.
That proposed growth rate is significantly higher than the national per capita Medicaid spending growth rate in recent years, which was 0.9% in 2017 and 1.2% in 2016, according to the Office of the Actuary.
The Utah waiver proposal reflects what experts say is the fraught nature of setting healthcare spending caps. It wants the CMS to rebase the per capita caps after year 2 if actual per-enrollee expenditures in the first two years are at least 5% below or above the established per capita cap amounts.
In addition, Utah officials want the CMS to consider modifying the per capita caps in case of a public health emergency or natural disaster, an economic recession or a new federal mandate such as a change in pharmacy coverage policies. Plus, it wants its compliance with the caps measured over the entire five-year demonstration, allowing the state to exceed the caps in any given year.
Tennessee also passed a law recently requiring the state to seek federal approval to transform its Medicaid program into a model featuring per capita federal spending caps or block grants. Like Utah, Tennessee wants to establish "guardrails" to ensure that the federal block grant payments are adequate to maintain the current level of coverage and even expand it to more people.
But critics say anything that strongly protects funding for the states would not be attractive to the Trump administration, which has made it clear it wants to sharply reduce federal Medicaid spending.
In March, Utah Republican legislators overrode a ballot initiative approved by voters last November to implement a full ACA Medicaid expansion. Instead, they passed a partial expansion for adults with incomes up to 100% of poverty, with a work requirement and a cap on federal payments to the state. It will cover an estimated 70,000 to 90,000 low-income adults, instead of the 150,000 who would have been covered by full expansion.
The state quickly won a CMS waiver to implement the limited expansion with the standard federal matching payments, starting April 1. The waiver also allowed the state to cap enrollment in the expansion program if the state lacks sufficient funds to match the federal payments. No other state has been allowed to do that.
The new waiver proposal would implement the next phase of the limited expansion, including the enhanced federal match, the per capita cap, a six-month coverage lockout for people who intentionally violate program rules, and elimination of hospital determinations of presumptive eligibility.
The Trump administration has signaled its strong interest in states seeking a capped federal payment model for their Medicaid programs. Conservatives have long sought to turn Medicaid into a system of fixed payments to the states, rather than an open-ended entitlement covering anyone who meets the program's eligibility requirements.
The Utah proposal would provide "stability" for the CMS because it would be paying a fixed amount per member per month for the state's expansion population, said Tom Hudachko, a spokesman for the Utah Department of Health.
But providers, patient advocates and Medicaid policy experts warn that the capped payment approach is perilous for providers and beneficiaries because when states hit the cap, they will have to cut payment rates, benefits, and eligibility.
"The problem with the per capita cap is that it can create serious problems when healthcare costs rise quickly and force the state to cut its Medicaid benefits," said Leighton Ku, a health policy professor at George Washington University. "This could mean that very sick people will be unable to get the medical treatments they need."
With this waiver proposal, Utah and the Trump administration "are testing the limits of the law," he said, predicting there will certainly be a court challenge if the CMS approves it.