The thorny trade-offs in the Trump administration's Medicaid deal

The Trump administration has a Medicaid deal for states: more control over health care spending on certain low-income residents if they agree to a limit on how much the feds kick in.

It’s unclear how many states would be interested in such a trade-off under a complex Medicaid block grant proposal unveiled Thursday by Seema Verma, head of the Centers for Medicare and Medicaid Services. The federal share of Medicaid is now open-ended, meaning that a state is at least partly protected from unpleasant surprises like a new, $300,000 prescription drug or an economic downturn that swells enrollment.

The deal is optional for states, and they’d have to apply for a federal waiver to get it. But takers would face the prospect of court battles.

Although the Medicaid law allows for state waivers to promote experimentation, advocates for low-income people say the administration is exceeding its legal authority because caps on federal spending would require congressional approval. Verma maintains that the plan does not cross any red lines by violating Medicaid’s spending formula.

The Trump administration is calling the proposal the Healthy Adult Opportunity. Outlined in a letter Thursday from Verma to state Medicaid directors, the deal would be restricted to able-bodied adults under 65. A state could not put nursing home residents, disabled people, pregnant women, or children into the new plan. The federal government would not limit its Medicaid contribution for these groups, considered the most sensitive.

“Our focus … is to change the whole paradigm and to reset the framework of how we’re working with states,” said Verma. “We are providing them this up front flexibility and the federal government is in the role of monitoring the program.”

In exchange for operating under a fixed federal allocation, states, among other things, would be able to:

— Limit what prescription drugs will be covered.

— Waive a current Medicaid benefit that allows a low-income person to get retroactive coverage for medical care going back three months.

— Use copays to steer Medicaid recipients to services that are deemed to have the highest value.

— Share in savings with the federal government.

One potential twist is whether GOP-led states that have refused the Affordable Care Act’s Medicaid expansion would be more receptive under the terms proposed by Verma. Oklahoma voters will get to decide on a Medicaid expansion ballot initiative this year, and Republican Gov. Kevin Stitt has expressed interest in a block grant.

Verma said the federal government would monitor a state’s performance, acting not only as a fiscal bean counter but also to protect Medicaid recipients.

“There would be very strong monitoring from the federal government,” she said. “If a state set up something that was onerous … that would be an impetus for the federal government to take action.”

Medicaid is a $600 billion federal-state program that covers about 70 million low-income people, from elderly nursing home residents to many newborns. President Barack Obama’s health care law gave states the option of expanding it. Most states have done so, covering millions more able-bodied adults. Polls show the program has widespread public support.

With President Donald Trump already getting poor marks from the public for his handling of health care, the Medicaid plan is likely to provide another set of election-year arguments for Democrats. It dovetails with Trump administration efforts to restrain spending on other programs that help the poor, including food stamps and housing assistance.

Early on as a presidential candidate Trump promised to protect Medicaid. “Every Republican wants to do a big number on Social Security, they want to do it on Medicare, they want to do it on Medicaid,” he said at a 2015 event in New Hampshire. “And we can’t do that.”

Medicaid promises faded away as Trump’s campaign advanced. Once elected, he sought deep cuts to the program as part of the failed GOP effort to repeal “Obamacare.” Trump’s budgets have continued to call for limits on the federal share of Medicaid.

“Capping federal funding weakens beneficiary protections, and it put beneficiaries, providers, and states at risk,” said Jessica Schubel, a health care policy analyst with the nonprofit Center on Budget and Policy Priorities, which advocated on behalf of low-income people.

The professional group representing cancer doctors has also raised concerns. “Block grants could transform Medicaid from a safety net program, designed to meet basic health needs for low-income Americans, to a program with funding limits that drive care rationing for the most vulnerable,” Dr. Howard Burris, president of the American Society of Clinical Oncology, said in a statement.

Potential lawsuits are another hurdle for the administration’s plan.

“It is virtually certain that any state that takes up the option will be walking into litigation,” said Cindy Mann, who ran Medicaid in the Obama administration. She’s now with the Manatt Health consultancy.