In the past week, several publications have reported that the Administration is readying a proposal to allow states to take a block grant of Medicaid funding. Publications, including the Wall Street Journal and Politico, are describing efforts by CMS Administrator Seema Verma to develop the policy. The proposal would be issued through a letter to state administrators on how they can receive waivers that will give the state a health care block grant based on a state’s Medicaid coverage of certain adults covered under the ACA. Over the past year, CMS has been pushing states to use waiver authority toward block grants and restrictions on Medicaid access, such as new work requirements.

The new information comes out days after widespread new reports that the President excoriated HHS Secretary Alex Azar over internal polling data showing the President losing on the issue of which party is best able to address the health care issue in the upcoming election. The block grant strategy also comes after several months of feuds between HHS Secretary Azar and CMS Administrator Verma over their health policies, particularly regarding how to restrain prescription drug prices. CMS is under the authority of the HHS Secretary.

The Administration and some Republican members of Congress have been pushing Medicaid block grants in some form over the past several years. In 2017 the House of Representatives passed the American Health Care Act (AHCA) that converted the Medicaid program into a “per capita cap” block grant. Under the per capita cap, health care costs would have been calculated for each of five groups: children, the elderly, disabled, adults on Medicaid due to the ACA, and all other adults.

The base grant (in that legislation it would have been based on 2016 data) would be adjusted by an inflation factor each year times the number of people in each category. That formula would result in each state eligible for a maximum amount of federal Medicaid dollars. If any state reached that federal amount in a year, the state would have to pay for anything above that cap — a block grant.

A study in 2017 by the Center for Health Policy at the Brookings Institution showed states losing more than $17 billion in Medicaid spending through the per capita cap if the proposal had been in effect in 2017. The analysis, Effects of the Medicaid Per Capita Cap Included in the House-Passed American Health Care Act, showed a range of no losses for some states to losses requiring some states to spend 75 to 25 percent more in Medicaid health care spending. Losses would grow over time.

Medicaid, enacted in 1965 and implemented in 1967, matches state health care spending by a low of 50 percent to a high of more than 75 percent based on an economic formula adjusted annually. A state like New York or California gets a 50 percent match while a state like Mississippi receives a 75 percent match or more. One Medicaid dollar in New York means the federal government is picking up 50 cents on the dollar. In a 75 percent match state, one Medicaid dollar means the federal government is picking up 75 cents on the dollar. In addition, the ACA allows states to expand Medicaid to all people up to 138 percent of the poverty level, with the federal government providing up to 90 percent of that cost. Although it wasn’t clear in the 2017 House bill, it is assumed that such a structure ends the individual entitlement to Medicaid health care coverage.

The Medicaid proposal could also be included in the upcoming budget for 2021. The President’s budget is scheduled to be released the week of February 10. Some reports indicate there have been some strategy discussions on how to avoid the use of the term “block grant.” CWLA has always opposed Medicaid block grants in the past as well as other block grants of Title IV-E child welfare funding.

The history of the Social Services Block Grant (SSBG) and the Temporary Assistance for Needy Families (TANF) block grant are similar in that they were both entitlements converted in 1981 and 1996, respectively, and in both cases, the block grants were cut and then lost value due to inflation. SSBG peaked at $2.9 billion in the 1980s, and the TANF base grant, currently at $16.5 billion, absorbed a $300 million cut, and inflation has eroded its value by more than 35 percent. In the President’s first three budgets he has proposed the elimination of SSBG now funded at $1.7 billion.