HHS Talking to States About Medicaid Block Grants

In the absence of legislation to turn Medicaid into a block grant program, the U.S. Department of Health and Human Services is talking to some states about granting waivers that permit them – voluntarily – to turn their individual Medicaid programs into block grants.

HHS Secretary Alex Azar acknowledged this last week during a hearing of the Senate Finance Committee.  He did not disclose which states, or how many, with which HHS has had such discussions and he also noted that his staff is talking to state officials about waivers to permit them to adopt Medicaid per capita spending limits.

NASH has long been concerned about any effort to impose artificial limits on state Medicaid spending; such limits could be especially harmful to private safety-net hospitals because they care for so many Medicaid patients.  NASH’s most recent expression of this concern can be found in its 2019 advocacy agenda.

Learn more from the article “Trump health chief reveals talks with states on Medicaid block grants,” which can be found in the online publication The Hill.

End Run Around Congress for Medicaid Block Grants?

The Trump administration reportedly is considering introducing Medicaid block grants through regulations rather than legislation, according to published reports.

Those reports explain that the administration may seek to offer states an opportunity to apply to the federal government to use Medicaid block grants by obtaining section 1115 Medicaid waivers, a commonly used tool for states seeking exemptions from federal legislative or regulatory requirements.

As reported by the online publication The Hill,

…the Trump administration is now considering issuing guidance to states encouraging them to apply for caps on federal Medicaid spending in exchange for additional flexibility on how they run the program, according to people familiar with the discussions.

Proposals to implement Medicaid block grants have arisen periodically over the past decade but have never gotten beyond the discussion stage because of how difficult it would probably be to gain congressional approval for such a program.  This latest proposal would seek to circumvent that problem by making Medicaid block grants optional for states and permitting those states interested in using them to apply for a Medicaid waiver from Centers for Medicaid & Medicaid Services to do so.

It is not clear whether such an approach would be legal.

NASH has long been skeptical about Medicaid block grants, concerned that the manner in which such block grants are implemented could impose artificial limits on state Medicaid spending that could be especially harmful during economic downturns when Medicaid enrollment typically rises and the demand for Medicaid-covered services falls especially heavily on private safety-net hospitals.  NASH’s advocacy agenda for 2019 addresses this very issue, explaining that

Block grants, whether based on individual states’ Medicaid enrollment or on their past Medicaid spending, could impose unreasonable limits on Medicaid spending that could potentially leave private safety-net hospitals unreimbursed for care they provide to legitimately eligible individuals. NASH will work to ensure that any new approach that involves Medicaid block grants continues to give states the ability to pay safety-net hospitals adequately for the essential services they provide to the low-income residents of the communities in which those hospitals are located.

Learn more about this latest proposal in The Hill article “Trump officials consider allowing Medicaid block grants for states.”

CMS Reinforces Need for Budget Neutrality in Medicaid Waivers

States that seek federal waivers for permission to employ new approaches to serving their Medicaid population will have to pass more rigorous tests to ensure that those new approaches are budget-neutral, the Centers for Medicare & Medicaid Services has announced.

In a detailed letter to state Medicaid directors, CMS outlines some of the current methodologies employed by states to demonstrate the budget neutrality of their waiver requests and details instances in which it will judge those methodologies differently in the future.  A news release accompanying the letter explains that

….this letter marks the first time that CMS has formally outlined how states must calculate budget neutrality for demonstration projects, in order to strengthen fiscal accountability. The guidance also comes a day after Administrator Seema Verma testified before the Senate Homeland Security and Government Accountability Committee on improper payments in the Medicaid program, which often result in higher federal spending.

The news release also states that

“CMS welcomes smart new approaches to coverage and delivering care through Medicaid demonstration projects, but we won’t approve them without a careful analysis of their impact on taxpayers. Federal spending on the program has increased, growing by over $100 billion between 2013 and 2016,” said CMS Administrator Seema Verma. “Today’s guidance is a comprehensive explanation of how CMS and our state partners can ensure that new demonstration projects can simultaneously promote Medicaid’s objectives and keep federal spending under control.”

 See the CMS news release on its revised approach to determining Medicaid waiver budget neutrality and go here to see CMS’s letter to state Medicaid directors on this subject.

Medicaid Changes: More Than Just Work Requirements Coming?

While the green light for state applications to impose work requirements on their Medicaid recipients is receiving all of the attention, the Trump administration has issued guidance that appears to pave the way for other major changes in the Medicaid program as well.

Specifically, the Centers for Medicare & Medicaid Services has issued guidance that will enable states to pursue section 1115 waivers to test different ways of serving Medicaid patients that are otherwise not permitted under federal Medicaid law, including:

  • establishing time limits on how many months or years individuals may be enrolled in Medicaid;
  • locking out for a specified period of time Medicaid recipients who have not gone through annual eligibility redetermination or have failed to pay Medicaid premiums;
  • prohibiting hospitals from making presumptive eligibility determinations when they encounter new, low-income patients who are not enrolled in Medicaid at the time;
  • tightening their eligibility requirements;
  • excluding family planning providers like Planned Parenthood; and
  • establishing closed drug formularies for their Medicaid population.

Learn more about how the foundation has been laid for such changes if states are so inclined to pursue them and the implications of such changes if they are implemented in the article “State Waivers as a National Policy Lever:  The Trump Administration, Work Requirements, and Other Potential Reforms in Medicaid, which can be found here, on the Health Affairs Blog.


The Medicaid and CHIP Payment and Access Commission met last week in Washington, D.C. to discuss a variety of Medicaid and Children’s Health Insurance Program issues.

MACPAC, the non-partisan legislative branch agency that performs policy and data analysis and makes recommendations to Congress, the administration, and the states, addressed a number of issues during the meeting.  Among them it discussed Medicaid managed long-term services and supports (MLTSS) and voted to recommend that states be given the opportunity to seek permission to make Medicaid beneficiary enrollment in managed care plans mandatory through revisions of their state plan amendment rather than by seeking Medicaid waivers.

The commission also heard presentations on and discussed:

  • the integration of substance use disorder treatment with other Medicaid-covered services
  • residential substance abuse treatment and the exclusion of institutions for mental disease from treatment options
  • stakeholder experiences with MLTSS
  • Medicaid hospital payments
  • Medicaid managed care
  • the “Money Follows the Person” demonstration program
  • appeals for the dually eligible

MACPAC’s deliberations are important to private safety-net hospitals because those hospitals serve so many Medicaid patients.  While MACPAC’s recommendations are binding on neither the administration nor Congress, it is a respected source of insight and ideas and its recommendations often find their way into future regulations, legislation, and policy.

Go here for a summary of the meeting and links to the presentations used for these subjects.

A New Use for Section 1115 Medicaid Waivers?

Historically, states have pursued section 1115 Medicaid waivers as a means of expanding Medicaid eligibility.

But the Centers for Medicare & Medicaid Services now appears to be looking at granting 1115 waivers to help states reduce their Medicaid populations.

According to a new report published by the Commonwealth Fund, CMS is encouraging states – both Medicaid expansion and non-expansion states – to launch demonstration programs designed to reduce enrollment in “means-tested public assistance” programs such as Medicaid.  In their efforts to cut spending and reduce Medicaid enrollment, states are expected to seek section 1115 waivers to experiment with means of doing so such as:

  • establishing monthly premiums for Medicaid recipients
  • eliminating retroactive eligibility
  • imposing lifetime limits on how long individuals may participate in Medicaid
  • excluding people with substance abuse problems
  • shifting Medicaid enrollment to a single annual open-enrollment period
  • implementing more frequent eligibility determinations

And just last week CMS signaled states that it was now welcoming waiver applications to impose work requirements on some Medicaid recipients.

In a recent section 1115 waiver application, the state of Kentucky, for example, projects that the combination of establishing premiums for Medicaid participation and locking out those who do not make their payments, eliminating retroactive eligibility, and imposing a work requirement would reduce its Medicaid population 14.8 percent in the sixth year such changes were implemented.  That waiver was granted last week.

Learn more about how CMS is preparing to use section 1115 Medicaid waivers to enable states to reduce their Medicaid enrollment in the Commonwealth Fund report “State 1115 Proposals to Reduce Medicaid Eligibility: Assessing Their Scope and Projected Impact,” which can be found here.

CMS Shares Vision for Medicaid

Medicaid is about to undergo major changes, CMS administrator Seema Verma outlined in a news release yesterday and in a speech to state Medicaid directors.

According to the news release, those changes include:

  • re-establishing a state-federal partnership that Verma believes has become too much federal and not enough state
  • giving states greater freedom to innovate
  • offering new guidelines for how states can align their individual programs with federal Medicaid objectives
  • new guidance on section 1115 waivers
  • longer section 1115 waivers with simpler review processes
  • CMS willingness to consider proposals to impose work requirements on Medicaid beneficiaries
  • Medicaid and CHIP “scorecards” that track and publish state and federal Medicaid and CHIP outcomes

Urban safety-net hospitals serve more Medicaid patients than the typical hospital and would therefore be affected more by any major changes in how Medicaid operates.

Go here to see CMS administrator Verma’s full new release and to find links to relevant documents, web sites, and Ms. Verma’s speech about the changes.  Go here to read a Washington Post report on Ms. Verma’s speech and here to see a Kaiser Health News report.

CMS to Expedite Review of Some Medicaid Waiver Applications

The federal government will streamline the renewal process for state Medicaid waivers for demonstration programs that are established and achieving their goals and for which major changes are not being proposed.

According to an informational bulletin issued by the Centers for Medicare & Medicaid Services (CMS),

This process is designed to facilitate faster review of and federal decisions regarding state requests to extend established 1115 demonstrations, reducing administrative burden on states and the federal government.

This approach streamlines the extension process for those states with established demonstrations that are working successfully and who are not proposing to make major or complex policy changes to the demonstration. Timeframes for these reviews will be comparable to those CMS uses to make decisions on Medicaid section 1915 waivers or state plan amendments. This new approach provides for a more efficient federal review process, as well as a more effective assessment of demonstrations’ progress in promoting high quality, accessible, and affordable health care coverage to beneficiaries.

cmsThe length of time such reviews are taking was the subject of two recent congressional hearings.

The informational bulletin outlines how waiver application renewals qualify for this new process, how the fast-track process will work, and how long the streamlined reviews should take.

To learn more about this new approach to Medicaid waiver renewals, see CMS’s July 24 informational bulletin.

GAO Examines Medicaid Section 1115 Waivers

The U.S. Department of Health and Human Services (HHS) frequently exercises the authority granted to it under section 1115 of the Social Security Act to authorize Medicaid expenditures for uses not strictly permitted under that law if those uses extend Medicaid coverage to populations not already served by Medicaid or promote Medicaid objectives.

gaoAt the request of the chairmen of the Senate Finance Committee and the House Energy and Commerce Committee, the U.S. Government Accountability Office (GAO) examined recently approved section 1115 waivers to evaluate whether those waivers met the criteria for the exemptions and whether the documents HHS issues when approving those waiver requests adequately convey what the approved expenditures are for and how they will promote Medicaid’s objectives.

As part of its investigation, GAO reviewed waiver requests from 25 states covering 150 programs and found that HHS lacked formal, written criteria for waivers and suggested that the agency more clearly express, in its approval documents, the objectives it expects programs to achieve in return for their exemption from some federal Medicaid requirements.

For a closer look at the study and its findings, see the report Medicaid Demonstrations: Approval Criteria and Documentation Need to Show How Spending Furthers Medicaid Objectives here, on the GAO web site.

States Using Medicaid Expansion to Pursue Innovation

While many of the states that have chosen to expand their Medicaid programs under the terms of the Affordable Care Act did so by embracing those terms, others are viewing Medicaid expansion as an opportunity to pursue wholesale changes in how they serve their low-income residents.

Arkansas and Iowa have already received federal waivers to expand their Medicaid programs – exemptions from selected aspects of existing Medicaid law.  Under these waivers, the states operate demonstration programs to test the effectiveness of their variations on ordinary Medicaid practices.

Health Care Reform/FlagIn addition to Arkansas’s and Iowa’s successful waiver applications, Pennsylvania, Virginia, New Hampshire, Indiana, and possibly a few other states are expected to seek federal waivers in 2014.

Many states remain opposed to expanding their Medicaid programs under any conditions.  The National Association of Urban Hospitals (NAUH) supports Medicaid expansion everywhere.

Learn more about Medicaid waivers, how states pursue them, the challenges states face in pursuing them, and the kinds of innovations they can make possible in this Stateline report.