The Farce of Flexibility – Lifting the Veil on the Trump Administration’s Plans to Cap Medicaid Funding

  ·  Health Policy Hub   ·   Rachelle Brill

Photo credit: Bigstockphoto.com

On January 30, the Centers for Medicare & Medicaid Services issued a letter to state Medicaid directors allowing states to cap the funding they receive for their Medicaid program. This proposal, entitled a “Healthy Adult Opportunity” by the Administration and referred to as the “block grant guidance” in media and policy circles, would drastically reduce the amount of money available to states to cover their Medicaid costs. With a strict limit on the amount of federal Medicaid funding put in place, states would be forced to cut benefits or services, thereby putting the health and well-being of Medicaid enrollees at risk.

The guidance only allows states to cap funding for Medicaid expansion – a program that has been shown to improve the health and financial security of enrollees while also improving state budgets. Capped funding would certainly harm both expansion and non-expansion states, however. For states that have already expanded, all of these important benefits would be diminished or reversed. And for states that have not yet expanded, doing so under capped funding would prevent them from fully realizing the myriad benefits of Medicaid expansion.

Not surprisingly, the Trump administration is trying to cloak the true harm of capped funding behind specious health policy buzzwords, like “flexibility” and “innovation.” In an opinion piece in The Washington Post last week entitled, “No, the Trump administration is not cutting Medicaid,” Seema Verma, Administrator for the Centers for Medicare & Medicaid Services, claims that capped funding offers states “the upfront flexibility to design a program that works for their state’s unique needs, rather than being constrained by top-down dictates from Washington.”

To see through the Trump Administration’s smoke and mirrors, it’s important to first understand the dangerous nature of capping Medicaid funding. Right now, states are reimbursed by the federal government for at least half of the cost of their Medicaid programs (anywhere between 50% to about 75%). Under this capped funding proposal, the amount that states receive in reimbursement will be capped, and they will be fully financially responsible for covering costs above the capped amount. Therefore, states have a large incentive to make cuts to their programs so that they stay below their capped amount. What’s perhaps most frustrating about the Trump administration’s spin on capped funding is the fact that they’re painting it as a way for states to better address the social determinants of health, by giving states the “flexibility” to spend capped funding on services that aren’t related to health care. But it’s impossible to have more flexibility when there is less funding with which to do so, and it’s impossible to do anything innovative if you’re forced to make cuts to stay within a capped budget.

Not only does the capped funding proposal represent a threat to Medicaid enrollees, it also marks the latest step in the Trump administration’s ongoing efforts to undermine the Medicaid program. From allowing states to impose harmful work reporting requirements, rolling back patient protections in Medicaid managed care regulations, rescinding access monitoring requirements for fee-for-service enrollees, to severely restricting the way states can raise revenue for their Medicaid programs in the recent fiscal accountability regulation, it’s clear that the Trump Administration wants to significantly weaken this program that serves not only as a critical health coverage program for low-income individuals as families, but also as a critical lifeline for safety net providers like hospitals and community health centers.

Ultimately, capping Medicaid funding represents a big risk for states to take, both with their own budgets, since they would be on the hook to cover any Medicaid costs above the capped amount, and with the lives of their residents enrolled in Medicaid, since they would likely need to cut benefits and services in order to stay below the capped amount. Despite capped funding being such a grave risk and bad deal for states, however, several have already signaled an interest in taking them up as a way to solidify their ideological opposition to Medicaid expansion. For example, Gov. Bill Lee of Tennessee has already submitted an application to convert Tennessee’s Medicaid program to a capped funding model, and Governor Kevin Stitt of Oklahoma has also expressed interest in expanding the state’s Medicaid program under capped funding.

Community Catalyst and our partners in the advocacy community are currently sounding the alarm about the harm these proposals will cause to both states and Medicaid enrollees, so that hopefully no state decides to take the Trump Administration’s bait.