Medicaid Policy And Partisan Politics: A New Dynamic

NOTE: This blog was originally published in Health Affairs on October 15, 2019. 

On September 18, 2019, Tennessee announced a long-anticipated proposal to block grant its Medicaid program, TennCare. This proposal is deeply flawed in ways that will both concern fiscal conservatives and endanger Medicaid beneficiaries. Yet the Trump Administration may well seize on Tennessee’s proposal as a chance to salvage a victory from its otherwise failing Medicaid agenda.

A Blank Check For State Budget Priorities

Like all Medicaid block grant proposals, the proposed Tennessee waiver would place the state in the position of having to  use state-only funds for any Medicaid expenditures above a cap instead of being able to cover a sizable portion of the costs with the statutory federal match, which is over 65 percent in Tennessee.

Unlike a traditional block grant, however, Tennessee’s proposal includes a one-way federal adjustment for enrollment levels; if enrollment exceeds the average during the three-year 2016-18 “base period,” the block grant increases based on the per-capita cost per enrollee, but if enrollment falls short of projections, Tennessee retains a portion of the federal funds that would have paid for the projected higher enrollment. The proposal also would enable the state to make cuts to eligibility, optional benefits, and even mandatory benefits with virtually no public review, comment, or federal oversight.  In addition to eliminating these core federal beneficiary protections in Medicaid, Tennessee proposes to waive federal managed care standards, including mental health parity requirements, appeals and sanctions processes, and network adequacy requirements, a particularly dangerous step in a state that operates its whole Medicaid program through managed care.

Even more concerning, the state proposes to use the federal-only dollars that could be generated from eligibility or benefits cuts for a wide range of unspecified state budget priorities. The proposal would provide the state with new authority to use Medicaid funds to cover spending broadly related to health but not typically covered by Medicaid “if the state determines that such expenditures will benefit the health of members or are likely to result in improved health outcomes”. That is, the state could use Medicaid block grant funding to help fund state psychiatric hospitals, anti-pollution efforts, or even education. Essentially, Tennessee is proposing a blank check to be paid for with cuts to Medicaid eligibility,  benefits, and enrollee protections.

Tennessee’s proposal has the unusual distinction, then, of creating major new and entirely avoidable risks for state taxpayers, federal taxpayers, and most of all low-income, Medicaid-eligible children, seniors and people with disabilities. Despite these risks, the Trump Administration was reportedly in regular communication with Tennessee as the state developed the proposal. The Administration’s consideration of such a bizarre framework comes in the context of the growing failure of other elements of its Medicaid agenda.

Shifting Dynamics In Red States

First, there is striking evidence of growing momentum for Medicaid expansion in a series of non-expansion states. On July 27, 2019, the Republican governor and legislative leadership of deeply-red Utah released a statement declaring “deep disappointment” that despite earlier assurances from CMS, the White House would turn down their request for enhanced match for partial implementation of the ACA Medicaid expansion.

Similarly, on August 29, the Republican governor and legislative leadership of Idaho said, “We are disappointed and surprised by the assessment from CMS about our 1332 waiver application after the amount of work and coordination Idaho spent with our federal partners in developing the application. Simply put, CMS pulled the rug out from under us.” At issue was a similar state plan to partially expand Medicaid, paired with a 1332 marketplace waiver application.

In its letter to Utah, the Administration explicitly cited opposition to the ACA. Although the Idaho letter did not specifically mention this position, the Administration’s rationale for rejecting the proposal signaled the same basic discomfort with making Medicaid coverage for low-income adults more palatable in conservative states. In the Idaho rejection letter, the Trump Administration indicated it almost certainly would not consider marketplace coverage of the Medicaid expansion population to be “deficit neutral” relative to Medicaid coverage, thus effectively foreclosing use of 1332 waivers to cover the Medicaid expansion population.

Ironically, these CMS letters were important victories for Medicaid expansion supporters, who generally oppose partial Medicaid expansion with enhanced match on both policy and legal grounds. But the aggrieved statements of the Utah and Idaho governors have a larger significance: they are an important sign of shifting politics of Medicaid expansion in highly conservative states. Almost at the same time, these Republican governors cried foul, a candidate running on a pro-Medicaid expansion platform almost upset the Mississippi Lieutenant Governor in a Republican gubernatorial primary. In a growing number of non-expansion states, the Trump Administration appears to be “losing the room.” The Administration is falling back into absolutist opposition to Medicaid expansion while governors and legislators are seeking to accommodate clear public support for getting low-income people covered at 90 percent federal expense.

The New Medicaid Landscape

At the same time that state-level opposition to expansion has softened, momentum for Medicaid work requirements has ground to a halt. This is a result of successful litigation challenging the legality of work requirements under section 1115 waiver authority, as well as mounting evidence that documentation requirements cause massive levels of disenrollment for working people even when states engage in major good-faith efforts to inform people of the new requirements.

The Trump Administration is in grave danger of failing to advance the two signature items on its Medicaid agenda: work requirements and prevention of further expansion. In this increasingly pro-expansion, anti-work requirement environment, CMS may be particularly motivated to approve Tennessee’s deeply flawed proposal. That would be a dangerous development. Tennessee’s proposal gives the state unprecedented tools to cut Medicaid in ways not allowed by statute and creates an overwhelming financial incentive to do so.