The $1.5 trillion Medicaid cuts and the national work requirement in President Donald Trump's new proposed budget inject fresh uncertainty into the fate of current state efforts by Republicans to overhaul the healthcare program for poor and disabled Americans.
While details in the budget document are sparse, it appears the administration wants to replace the existing state waiver process for testing changes with a new national program granting states unfettered flexibility to customize their Medicaid programs, accompanied by tight federal spending caps. That's similar to the Senate Republicans' Graham-Cassidy plan to repeal and replace the Affordable Care Act in 2017, which failed to pass.
Trump's proposal could eliminate the need for the CMS to develop guidelines for states to apply for waivers to receive federal Medicaid funding in the form of block grants or with per-capita spending caps, which the agency reportedly is in the process of drafting.
In addition, a national work requirement for Medicaid beneficiaries could short-circuit pending legal challenges to CMS approval of Kentucky and Arkansas' work requirement waivers. A federal judge in Washington will hear arguments in those lawsuits Thursday.
The plan also would end the ACA's premium subsidies to help people with income up to 400% of the federal poverty level buy private health insurance. Instead, it would offer $1.2 trillion over 10 years to fund a "market-based health care grant," a block grant to the states. It's not clear how that would relate to Medicaid.
Experts believe the administration would need Congress to pass legislation to implement these proposals, though the budget plan leaves that unclear. While the Republican-controlled Senate might consider such legislation, it would have no chance of passing the Democratic-controlled House.
There are major doubts about whether governors and state lawmakers, both Republicans and Democrats, would support these proposals because they would lead to greatly reduced federal Medicaid funding and force them to implement work requirements.
On the other hand, many state leaders might welcome the greatly enhanced flexibility the Trump proposals would offer them. In addition, the proposal to grant states a block grant or per-capita system initially might give some states more money, though eventually they would receive significantly less.
"Some governors would like this, particularly if they won't be in office when the financial squeeze is on," said Joseph Antos, a conservative health policy analyst at the American Enterprise Institute. "But the people running Medicaid and the state budget will object, saying the block grant could hurt the state if there's an unanticipated increase in enrollment or per-enrollee costs."
The Trump budget would reduce federal Medicaid spending by $1.48 trillion over 10 years, with most of the reduction apparently due to the establishment of block grants or per-capita caps, whichever each state chooses, according to Edwin Park, a Medicaid expert at Georgetown University. Starting in 2021, federal Medicaid spending would grow annually at the Consumer Price Index, which is about two percentage points slower than actual Medicaid spending growth.
Of that $1.48 trillion in total reduced spending, $130 billion would result from the imposition of a work requirement in all states, which likely would push many people off the Medicaid rolls. It's not clear whether the requirement would apply to the entire Medicaid population or just to people who are enrolled through ACA Medicaid expansion.
The budget proposal would end Medicaid expansion funding. It also would allow states to restore asset tests to determine people's eligibility for Medicaid, which would reduce enrollment. The Affordable Care Act eliminated asset tests for Medicaid healthcare coverage.
Some Republican-led states, including Utah and Tennessee, are moving to ask the CMS for waivers to receive their federal Medicaid payments in the form of block grants or capped funding, so they can enjoy greater flexibility in designing benefits and setting eligibility.
One question is whether the Trump administration's new move to tie that flexible capped funding to big spending reductions will change those GOP officials' minds.
"No," said Paul Edwards, deputy chief of staff to Utah's Republican Gov. Gary Herbert.
But Trump's cap-and-cut proposal worries providers and patient advocates.
"These cuts will leave vulnerable Americans in the lurch and make it more difficult for clinicians and hospitals to meet their healthcare needs," said Chip Kahn, CEO of the Federation of American Hospitals.
Other experts believe conservative ideology may trump fiscal reality as Republican state officials push forward with block grant waiver requests, even if the Trump budget proposal goes nowhere.
"I can't imagine that any governor who's allowed to go forward with a Medicaid block grant demonstration doesn't realize the price is a lot less money," said Sara Rosenbaum, a health policy professor at George Washington University. "It leaves you scratching your head about why any governor would go for it."
