With Trump’s Blessing, Some States Aim to Cap Medicaid Rolls

This article originally appeared on Stateline, an initiative of the Pew Charitable Trusts.

Backed by President Donald Trump, Republicans in Congress have made several runs at changing Medicaid from an entitlement program — open to anybody who is eligible — to a program with a spending limit. They have failed.

But that hasn’t stopped some red states, with the encouragement of Trump’s Department of Health and Human Services, from making their own attempts to put historic limits on the federal-state health program for the poor, which covers more than 72 million U.S. residents.

The Tennessee legislature this year passed a measure formally asking the Trump administration to fund its Medicaid program through a block grant, or a specified sum of money, as opposed to funneling enough dollars to the state to cover everybody who meets eligibility requirements.

Alaska’s new Republican governor, Mike Dunleavy, has been enthusiastic about switching his state’s Medicaid program to block-grant funding. Influential Republican lawmakers in Georgia and Florida, both of which have GOP governors and legislative majorities, have floated the same idea.

Utah arguably has gone furthest, however, by receiving permission from the federal government to cap Medicaid enrollment at the state’s discretion. The request came through a law passed by the state’s Republican legislature, which approved the change as part of its rollback of a voter-approved Medicaid expansion.

The state actions would be a fundamental departure from the foundational philosophy of Medicaid: that it is an open-ended entitlement program. If you meet the criteria for enrolling, you’re in.

In contrast, block grants would limit Medicaid spending, creating the possibility of enrollment freezes and cutbacks in services. Democrats at both the national and state levels steadfastly oppose such an approach. It’s not clear such changes, in the absence of congressional action, could withstand legal challenges.

Utah Republicans who support the shift say they had no choice. State Sen. Jacob Anderegg said extending Medicaid coverage to more Utah residents was a laudable goal, but that the finances were “unworkable.”

“We would have found the situation completely out of control in less than a decade,” Anderegg said.

But health policy advocates in Utah and elsewhere say capping Medicaid would harm millions of people in need. “This is completely changing the nature of Medicaid, which is to provide comprehensive health care to low-income people,” said Courtney Bullard, a director at the Utah Health Policy Project. “And it will result in lower enrollment and lack of access to health care.”

“We also know from past experience that if this is approved in one state, you can expect it will get approved in other states as well.”

‘Sound Fiscal Path’

In its 2020 budget proposal, the Trump administration asserted that “the only way to put Medicaid on a sound fiscal path” was to shift to a per capita cap or block grant. Seema Verma, administrator of the U.S. Centers for Medicare and Medicaid Services (CMS), has been reiterating the point in meetings with governors.

Some conservatives support block grants to make Medicaid funding fairer for states. They believe many states benefit disproportionately from an outmoded formula used to reimburse hospitals for the amount of care that they provide low-income, uninsured populations.

“Solving inequities is a natural outgrowth of block-granting,” said Nina Schaefer, a senior research fellow at the conservative Heritage Foundation. “It is a way of dealing with how much cost-shifting has occurred from states to the federal government and how much obligation the federal government can take on moving forward.”

Last fall, Utah was one of 18 states that had not expanded Medicaid under the Affordable Care Act. The ACA allows states to extend Medicaid to childless adults making up to 138% of the poverty line. Under the ACA, the federal government initially pays 100% of costs for the expansion population, tapering down to 90% by 2020.

For non-expansion Medicaid beneficiaries, depending on the state, the federal government provides a match between 50% and 77% and the state kicks in the rest.

Historically, Medicaid has covered the children of low-income parents, pregnant women, seniors and people with disabilities. It has excluded most low-income adults. The ACA directed states to use Medicaid to extend coverage to that population. But a 2012 U.S. Supreme Court decision that upheld the ACA gave states the ability to opt out of expansion, which Utah did.

Last fall, however, Utah residents broke with the state’s GOP leadership. More than 53% of voters backed an initiative to expand Medicaid, along with an increase in the sales tax to finance the state’s portion of the payments.

Despite a pre-election analysis showing that revenue from the new sales tax would more than cover the state’s share of the cost of the expansion, at least in 2020 and 2021, Utah lawmakers balked. Instead, they took steps to scale back the expansion, cap enrollment and limit the amount of federal Medicaid money the state would receive.

“Although I respect the citizens’ initiative, let’s be frank,” Anderegg said. “There’s no way the general public understands the wonkiness of how this would play out across the state budget. It’s a tenuous situation for us legislators. We want to honor the will of the people, but we still have the political and practical obligation of having to balance our budget.”

First, the legislature limited Medicaid expansion to those making 100% of poverty ($12,490) rather than 138% ($17,236). The change reduced the number of people eligible by around 40,000.

Instead, people between 100% and 138% of poverty would be eligible to purchase health insurance on Utah’s health insurance exchange and to receive federal subsidies to help pay their premiums.

Per Capita Cap

Utah also asked CMS for a per capita cap on the amount of federal money the state would receive for its expanded Medicaid population. And it asked for approval of a work requirement for Medicaid beneficiaries, a provision the Trump administration has granted to other states, although a federal judge earlier this year ruled them illegal in Arkansas and Kentucky.

At the end of March, CMS granted Utah permission to limit Medicaid expansion to people making 100% of poverty, to impose work requirements and to cap enrollment.

Enrollment caps aren’t entirely unprecedented — the federal government has allowed states to impose them when they expand coverage to new populations, such as homeless people. The difference in this case is that Utah is going to cap enrollment without expanding eligibility beyond the people covered in federal law.

The state is still waiting for CMS to decide on its other requests.

“It’s infuriating and hard to understand,” said Bullard of the Utah Health Policy Project. “But our legislators don’t see this state turning blue. They feel protected.”