Medicaid block grant proposal raises fears of funding, service cuts

March 15, 2020


While federal officials are pitching their proposal to offer block grants for Medicaid expansion funding as a way to give states more flexibility over their health care programs and expenses, CHA and others fear the change will ultimately mean less care and for fewer people.

A worker helps a resident of Joseph's Home, a homeless service provider in Northeast Ohio that is exclusively focused on medical respite care. Many of its residents rely on Medicaid. Joseph's Home is a ministry of Cleveland-based Sisters of Charity Health System.

The proposal, called "Healthy Adult Opportunity," was detailed in January by the Centers for Medicare and Medicaid Services. It focuses on what the agency calls a "limited population" — adults under age 65 whose eligibility for Medicaid is not based on pregnancy, a disability or a need for long-term care.

States could apply for waivers of traditional Medicaid rules and seek either an aggregate block grant to cover total costs for the demonstration population or a per capita grant based on the number of individuals enrolled.

Medicaid is funded as an entitlement and provides health care insurance for the one in five Americans who meet its criteria as low-income, elderly or disabled. The federal government and the states have shared responsibility for financing the program, with the federal government legally committed to match state spending on all authorized program costs.

Concerns about disruption
Paulo Pontemayor, director of government relations for CHA, said the proposal is a more limited version of the Trump administration's plan to repeal the Affordable Care Act and replace entitlement funding for its Medicaid expansion provision with fixed block grants. That plan fell short of passage by one vote in the Senate in 2017.

Medicaid provided coverage for Emily Nienaber, who faced complications with her pregnancy and delivered early at Mercy Hospital St. Louis in Creve Coeur, Missouri. Nienaber's story was featured as part of CHA's Medicaid Makes It Possible campaign, which was launched in 2018 to raise awareness about the value of Medicaid to America's health care system.

While the Healthy Adult Opportunity plan is, unlike that earlier plan, optional for states, Pontemayor said it poses the same risks, including the potential loss of coverage or services for current beneficiaries and lowered reimbursements for care providers.

A detailed statement on the plan that CHA crafted for members urges caution. "Capped funding arrangements, such as those proposed by this guidance, are likely to lead to substantial reductions in federal support for the program and would require states to assume financial risks related to increased program spending," the statement said. "As a result of these new financial realities, states that adopt capped funding will likely need to make significant cuts to coverage and benefits in order to avoid large increases in state spending."

The Partnership for Medicaid, a nonpartisan coalition that includes CHA and several organizations representing doctors, health care providers and safety net health plans, also pans the block grant proposal. Its statement on its position notes that a Congressional Budget Office analysis of the block grant proposal that was part of the repeal and replace legislation found that Medicaid spending "would be cut by 35 percent over 20 years and cause approximately 22 million beneficiaries to lose coverage across the country by 2026."


The American Academy of Family Physicians, which is part of the Partnership for Medicaid, also issued a separate denunciation of the Healthy Adult Opportunity proposal. The academy said the block grants would be a "disruptive" financing mechanism that "would reduce access to care in rural and other medically underserved areas; increase strain on state and local governments, physicians and other clinicians, and patients; and ultimately increase uncompensated care costs."

Shifting the burden to states
Heather Stoll, vice president of external affairs for the Cleveland-based Sisters of Charity Health System, said her system shares the concerns that the new block grant proposal, even with its initial limited scope and promise of flexibility, could be the start of a wave of changes that erodes the safety net provided to low-income individuals and families by Medicaid.

Graph"We are deeply concerned the proposal will constrain the ability of states to adequately finance their Medicaid programs and jeopardize Medicaid beneficiaries' access to care," Stoll said. "The federal Medicaid funding cap simply shifts the cost burden onto local and state governments, providers and individual beneficiaries, ultimately leading to a loss of Medicaid coverage for millions of individuals."

Stoll and others worry that the block grants pose a particular threat to the Medicaid expansion programs that Ohio and a majority of other states already have adopted under the ACA.

Data from the Ohio Department of Medicaid shows a steep drop in the uninsured rate for low-income adults in the state since the ACA expansion. Likewise, at St. Vincent Charity Medical Center in Cleveland, one of the system's subsidiaries, the percentage of patients covered by Medicaid has grown since the expansion, Stoll said, and the hospital's percentage of charity care has decreased.

While the Healthy Adult Opportunity plan could entice the 14 states that have yet to expand Medicaid coverage to do so, Stoll and others, including CHA, are concerned that the flexibility it promises to states to craft services is paired with the ability to limit access to prescription drugs and impose new copays on patients. "Those changes will disproportionately affect people with more serious health issues," Stoll said.

Innovation, but with strings
Executives at CHI Memorial in Chattanooga, Tennessee, are keeping a close watch on the block grant plan. Tennessee submitted a proposal last fall to become the nation's first state to convert its entire Medicaid program, known as TennCare, to block grant funding. That proposal, which is still being reviewed by CMS, goes well beyond the scope of the Healthy Adult Opportunity plan. Tennessee is not among the Medicaid expansion states and its block grant proposal wouldn't specifically change that, but TennCare's director has said that any savings the switch to block grant funding generates might allow for a narrow expansion of those who are eligible for coverage.


Andrew McGill, senior vice president of strategy, business development and advocacy for CHI Memorial, said the hospital stands with the Tennessee Hospital Association in calling for more discussion on the state's plan, even if it gets CMS approval. Before the plan would be adopted, the state legislature would have to approve it. Specifically, the association said changing to a block grant should maintain access, coverage and benefit levels for the current population insured by TennCare so as not to increase hospital and other providers' charity care costs.

CHI Memorial has satellite hospitals in Hixson, Tennessee, and Fort Oglethorpe, Georgia. McGill said 5.4% of the whole system's care goes to those insured by Medicaid, a figure that increased 13% from the previous year. (The percentage does not include patients who are insured by both Medicare and Medicaid.) "In Tennessee, TennCare pays 60 cents on the dollar for care, so anything that further degrades that, it's another hill to climb to maintain the care that we want to make certain that we can maintain for our fellow Tennesseans," he said.

Tennessee's proposal is being called a "nontraditional" block grant. That's because it has provisions for funding adjustments over time based on population and inflation as well as easing of some regulations and other modifications that could allow Medicaid funds to be used to treat a wider population than it currently does in the state.

McGill said he and others see "a whole host of things that, just on the surface, could be good but on the other hand, the details behind those requests are fairly significant and unknown."

Among the specific unknowns is how what the federal government calls "shared savings" that could result from the switch to block grants would be used. McGill said hospitals and care providers in Tennessee want assurances that the savings will go to improvements and enhancements in Medicaid services in the state and not get shifted into non-health programs.

"We applaud that notion of trying to be innovative and to get some freedom to do it in a way that those who are behind this think can be impactful, but let's just make sure that it works out for the best for those who need the care," he said.

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