The newblock grants could tee up an election-year battle in whichopponents argue that it's President Donald Trump's latest salvo ina long-running effort to unravel the health care safety net.(Photo: Shutterstock)

The Trump administration unveiled a plan Thursday that would dramatically revamp Medicaid by allowing states to opt outof part of the current federal funding program and instead seek afixed payment each year in exchange for gaining unprecedentedflexibility over the program.

Medicaid, a federal-state health program that covers 1 in 5Americans, has been an open-ended entitlement since its beginningin 1965. That means the amount of money provided by the federalgovernment grows with a rise in enrollment and health costs.

The administration said the new program would allow states to offer patients more benefitswhile controlling government spending. But the plan was assailed byDemocrats, consumer advocates and health providers as underminingefforts to serve the poor.

Related: Medicaid expansion soldiers on

States would not be required to switch to the new model. It willbe optional, and states interested in it would have to seekauthority from the federal government. That makes the proposal lesssweeping than efforts by Republican lawmakers to revamp Medicaidthat were included in failed 2017 legislation to gut the AffordableCare Act.

The long-awaited guidance to states on turning Medicaid into ablock grant allows the Trump administration to proclaim it'stransforming the Medicaid program and offers a way for states thathaven't expanded under the Affordable Care Act to move ahead.

It could also tee up an election-year battle in which opponentswill use the plan to argue that it's President Donald Trump'slatest salvo in a long-running effort to unravel the health caresafety net.

"The Trump administration's announcement today is a gamechanger," said Oklahoma Gov. Kevin Stitt, a Republican who plans toexpand coverage up to ACA levels and pursue a block grant with aMedicaid work requirement and new premiums.

Here are the big things to know about how the new planworks.

Millions of people might be affected by blockgrants.

The millions of low-income adults without children who obtainedcoverage under the ACA's Medicaid expansion could be included undera block grant. Key Republicans, including officials in the Trumpadministration, have argued that covering those adults usesresources better geared toward other Medicaid enrollees whosemedical needs are greater.

However, a state could also decide to include certain pregnantwomen and low-income parents because their coverage is not mandatedby federal law.

Tens of millions of people currently enrolled in Medicaid wouldnot be included in a potential state block-grant project, includingchildren, people who qualify for the program based on disability,people needing long-term care and individuals who are 65 and over,according to the guidance announced by the Centers for Medicare& Medicaid Services on Thursday.

States seeking the new authority would be able to makenew cuts to benefits, including which prescription drugs arecovered, and impose new out-of-pocket costs onenrollees.

Medicaid traditionally has covered all federally approvedprescription drugs. In June 2018, the Trump administrationreinforced that position when it rejected a request fromMassachusetts Gov. Charlie Baker to limit drugs covered under thestate's Medicaid program.

Under the new guidance, a state could ask to cover just one drugper class for most conditions — similar to what's required forprivate insurance coverage in the Affordable Care Actmarketplaces.

While the rule allows exceptions, including for medications totreat behavioral health issues or HIV, the policy change couldaffect access to drugs for a range of serious illnesses, such ascancer.

Another change included in the administration's policy is whatkinds of copays states can charge, according to Cindy Mann, alawyer who ran the Medicaid program under the Obama administrationand is now a consultant with Manatt, Phelps & Phillips.

While a Medicaid enrollee cannot be charged premiums andout-of-pocket costs that exceed 5 percent of their householdincome, the guidance removes other restrictions on copays, openingthe door for their more widespread use and in higher amounts. Thosechanges will disproportionately affect people with more serioushealth issues, she said.

"Even a copay that's $1 can be a burden," Mann said. "Thesecould allow copays that are much more than that."

States could also move to eliminate other Medicaid benefits,such as nonemergency medical transportation and a comprehensiveseries of preventive, diagnostic and treatment services that are apillar of the program — known as the Early and Periodic Screening, Diagnostic and Treatment (EPSDT)benefit — for 19- and 20-year-olds.

The federal government will exercise less oversight overthe private health insurance companies that states hire to runtheir programs, giving states more power to set rules on providerparticipation and payments.

About two-thirds of Medicaid participants are enrolled in aprivate managed-care firm, and the proposal would reduce federaloversight of how these companies operate. States would be able tochoose if they want to follow federal rules seeking to make surethat health plans provide reasonable access to a sufficient numberof in-network doctors and hospitals, said MaryBeth Musumeci,associate director for the Kaiser Family Foundation Program onMedicaid and the Uninsured. In addition, the federal governmentwould not have to approve payment rates to the plans before theytake effect, she said. (Kaiser Health News is an editoriallyindependent program of the foundation.)

A few states have operated under Medicaid spending caps before,including Rhode Island, but the amounts were set so high a statewas never in any danger of hitting the limit, Musumeci said.

The CMS guidance did not estimate how much the new financingsystem could save the federal budget.

All states could technically apply for a block grant,but most are unlikely.

Only a few states would be expected at least initially to applyfor the block grant and those would almost certainly be some of the14 states that have not expanded Medicaid, said Matt Salo,executive director of the National Association of MedicaidDirectors.

However, many states would be concerned about loss of funding ornot having enough federal dollars when demand for services orenrollment rose.

"States will be asking: Is the added flexibility worth the riskor the downside of a different funding arrangement?" Salo said.

Still, he added, for some states that have not expandedeligibility, "this is a call to get them to the finish line."

Other state proposals to pursue capped Medicaid financing —notably Tennessee's, which is pending with the Department of Healthand Human Services — are much different from what the new Trumpapproach telegraphs. That said, some Republican-led expansionstates are also likely to find it appealing.

"Waivers will never be long-term substitutes for congressionalaction. But this does represent a significant opportunity to testnew ideas to see what works and especially to better understand howmuch risk states are willing to accept in exchange for greatercontrol," said Dennis Smith, who ran Medicaid during the George W.Bush administration and is now a senior adviser for Medicaid andhealth reform for Arkansas Gov. Asa Hutchinson. "If one expects aharvest, a person first has to plant the seed."

The impact won't be felt anytime soon.

The federal government generally moves at a glacial pace inapproving new state projects, particularly for ones that set newprecedent or are controversial. Given that, it's unlikely any statewould get a waiver before 2021 — when there could be a change infederal administrations.

Plus, there is all but certain to be litigation that couldthwart the entire effort.

"The document issued today by CMS appears to rewrite bedrockprovisions of Medicaid, an activity which is beyond the scope ofCMS' power. Only Congress is tasked with making these changes,"said Jane Perkins, legal director of the National Health LawProgram, a legal aid group that has sued over the Trumpadministration's approval of work requirements for many Medicaidenrollees in five states. It is evaluating litigation options onthe block grants.

Kaiser Health News isa nonprofit news service covering health issues. It is aneditorially independent program of the Kaiser Family Foundation,which is not affiliated with Kaiser Permanente.

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