What Does New Block Grant Guidance Mean for Medicaid?

– The Commonwealth Fund

The Trump administration has issued sweeping new Medicaid guidance, continuing its efforts to cap federal Medicaid funding. The new policy relies on untested legal theories to implement the fundamental “bargain” of block grant arrangements through Medicaid Section 1115 demonstrations. States would get less federal money and bear more financial risk in exchange for more flexibility and less oversight.

The policy, released not as a new regulation but as guidance to states, invites states to apply for what the Centers for Medicare & Medicaid Services (CMS) refers to as the “Healthy Adult Opportunity.” Targeted to the adult expansion population—that is, parents and other adults who can be covered through the Medicaid expansion created by the Affordable Care Act (ACA)—the central feature of the initiative is the imposition of capped funding. Under Medicaid, states and the federal government jointly finance the cost of the program. All program expenditures are shared without a cap. That means that when spending increases as a result of rising drug prices, newly available treatments or an enrollment surge during an economic downturn, the federal contribution automatically adjusts. For states that opt into a capped funding waiver, that would no longer be the case.

In a post for The Commonwealth Fund’s To the Point blog, Manatt Health explains how capped funding would work, including the options available to states (per capita caps versus aggregate caps), the process for calculating caps, the flexibilities available under the new guidance, the added incentive to divert block grant funds to health-related services outside of Medicaid, and the relief from oversight and delivery system rules. The blog post also highlights some key issues raised by the new policy, including the risks to care access and the inevitable legal battles.

Click here to read the full blog post.




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