The Trump administration released guidelines Thursday for letting states accept a limited amount of money to cover poor people in exchange for flexibility in spending the funds.
The program, commonly known as a "block grant," is an approach long favored by conservatives for limiting spending on Medicaid, which pays for healthcare for poor and vulnerable people. Democrats, however, criticize the idea as stripping healthcare benefits from needy people.
Thursday's move is the latest example of Trump administration efforts to overhaul Obamacare after the Republican-controlled Senate failed to pass legislation to do so in 2017.
Joe Grogan, director of the Domestic Policy Council, said in a phone call with reporters Thursday that Seema Verma, who runs the Medicaid program, had worked "vigorously" to change Medicaid absent of congressional action. The administration is framing the move as one that will "protect and strengthen" Medicaid.
The Trump administration is calling the program "Healthy Adult Opportunity," and it's expected to face legal hurdles. Under the current Medicaid structure, the federal government matches a majority of what states pay for Medicaid every year. The change proposed by the Trump administration would mean the federal government gives states a set amount of money each year instead.
The plan applies only to the Medicaid expansion population that gained coverage under Obamacare. Before Obamacare, states varied in who got Medicaid, but the program generally went toward pregnant women, people with disabilities, and the elderly. Those groups still get Medicaid now, but the program added low-income people as well, who qualify if they make less than roughly $17,000 a year.
Conservative lawmakers have opposed the Obamacare expansion of Medicaid, saying that the program should pay for healthcare for the most vulnerable, and alleviate massively long wait lists in states for people with disabilities who are seeking housing and community care. Fourteen states have not expanded Medicaid, in part because of this philosophical difference, but also as a political stance to oppose former President Barack Obama's healthcare law.
States that participate in the program will need to regularly report back to the federal government to show how beneficiaries are doing. They would not be allowed to limit Medicaid enrollment but would have to stick to the Obamacare income rules.
Under the guidelines released Thursday, states would be allowed to exclude certain types of prescription drugs or ask patients to try cheaper versions before moving to more expensive ones, but they must continue to cover all drugs for mental health and HIV. The current Medicaid program requires that all drugs be covered, so the move would put Medicaid more in line with private health insurance practices.
Critics, including Democrats, say block grants amount to cuts to the program. They also have warned that states may incur costs that they don't expect, including if a high-cost drug hits the market or in the case of a natural disaster.
Todays announcement is the cruelest step yet by the Trump administration to slash American healthcare and dismantle basic safety net programs like Medicaid, said Sen. Ron Wyden, an Oregon Democrat.
Tennessee, Oklahoma, and Alaska are among the states that have considered the block grant trade-off. States wouldn't be able to change right away but would need to apply for the program and then go through an approval process with the federal government. Once states get the funds, however, they wouldn't have to apply for as many changes when deciding how Medicaid dollars are spent.
Under the current structure, federal officials have a lot of say about how states spend Medicaid dollars since the federal government covers the majority of costs. State officials have complained that Medicaid is inflexible and doesn't allow them to meet the various needs of their residents. Every time officials want to make a change to the program, such as letting more people receive substance abuse treatment, they have to go through a long application process with the federal government.
States have complained that filing waivers is cumbersome, involving piles of paperwork and months of work with no guarantee of approval. It can involve top officials from the Department of Health and Human Services and the Office of Management and Budget, as well as state officials and governors.
In the phone call with reporters Thursday, Verma said the administration's latest move was also intended to help Medicaid become more sustainable.
"Medicaid is the first or second budget item for states, crowding out other priorities such as transportation and education," Verma said.
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