Medicaid Block Grant: Not a Rational Way Forward on Coverage Expansion (February 2020 Update)

On January 30, 2020 the Department of Health and Human Services (HHS) released a new Medicaid guidance inviting states to submit Section 1115 waiver applications for block grant demonstration projects.  The demonstration project population could include adults covered by Medicaid expansion under the Affordable Care Act, or optional populations of non-elderly, non-disabled adults.  States may shift existing Medicaid populations to the capped funding demonstration, or use the demonstration to extend coverage to new populations.  Yet block granting Medicaid is the wrong way forward.

Courts have already struck down other recent Medicaid waivers from the Administration attempting to similarly reduce coverage. HHS has attempted to use the same authority to implement numerous other harmful waivers that reduce coverage — such as work requirements and premiums — and this has been confirmed illegal in multiple court cases.  Block grants may seem like an appealing pathway to expansion, but with legal challenges highly likely, associated costs and uncertainty run high.

HHS cannot force Florida to block grant Medicaid.  The new guidance invites states to implement a block grant, but HHS cannot force states to do so. Thirty-six states and the District of Columbia have already chosen to expand coverage for low-income adults.  Because there are no rational arguments against expansion, and a growing and uncontroverted body of evidence in favor, it is reasonable to assume that Florida will ultimately join these other states in providing expansions coverage for this population at a 90/10 match.

Thus, if/when Florida chooses to expand Medicaid to low-income adults, doing so through the new proposed block grant option would be extremely disfavorable to our state budget, and would go against the interest of Floridians. A block grant would eliminate  Florida’s guarantee of federal funding for 90% of the healthcare costs of the expansion populations.  This would harm rural communities, worsen the opioid epidemic, and ultimately decrease health coverage.

HHS will also approve other harmful and illegal waivers with the block grant. Along with the block grant, HHS has offered states other waivers that would also serve to reduce coverage — for example, CMS will allow states to charge unlawful premiums and cost-sharing to people living in poverty.

States already have significant “flexibility” in their Medicaid programs.  Florida already has a wide range of options in how we structure our Medicaid programs, including for the expansion population.  Many of the policy options/program changes offered have been approved in other waivers without caps on federal Medicaid funding.

Block grants are not the “good deal” that they may appear at first glance.  Because of the 90/10 match by the federal government for state Medicaid dollars spent toward the expansion population, most of the savings in spending will accrue to the federal government rather than to Florida.  The health care costs of the expansion population, or any population, do not go away under capped funding.  Rather, costs can only be shifted back to providers, the beneficiaries, or the counties, none of which can afford to be on the hook for inevitable and unpredictable increases in health care costs.  And we can assume there will be surges in fiscal exposure when we are confronted with a pandemic, for instance, or coverage of a significant new drug able to cure an otherwise serious or even deadly disease.