Medical Groups Criticize Trump Bid to Limit Federal Medicaid Funding

Kerry Dooley Young

January 31, 2020

WASHINGTON — Physician and consumer organizations criticized a Trump administration proposal they described as an initial step toward limiting Medicaid spending through a block-grant approach.

The Centers for Medicare & Medicaid Services (CMS) on Thursday unveiled an effort to allow states to test new approaches to covering the working poor. CMS pitched its idea as a bid to allow state officials more flexibility for administering the giant health program, which covers about 65 million Americans.

But major medical organizations described it as an attempt to erode gains made in recent years in helping working Americans secure healthcare.

Six physician groups on Thursday issued a joint statement firmly opposing CMS' plan. These were the American Academy of Family Physicians (AAFP), the American Academy of Pediatrics, the American College of Obstetricians and Gynecologists, the American College of Physicians, the American Osteopathic Association, and the American Psychiatric Association.

"The CMS guidance issued today fundamentally alters the Medicaid program in a way that disproportionately burdens states, threatens the public safety net and makes it more difficult for our patients to get the care they need," said the groups in their statement.

The CMS Plan

In a letter on Thursday, CMS spelled out guidance to state Medicaid directors on how to apply for permission to conduct demonstration tests of the redesigning of benefits for adults who are younger than 65 and are not disabled. In exchange for accepting new limits on Medicaid funding, CMS might allow states more flexibility in redesigning benefits.

CMS described its aim as a bid to bolster "the sustainability of government health care spending through use of an annual budget neutrality limit."

"Demonstrations approved utilizing this approach will offer states far greater flexibility and discretion than is available under ordinarily-applicable Medicaid rules as well as the freedom to manage their programs within certain parameters and expectations without the need for complex amendments or advance federal approval of certain changes," CMS said in the letter.

In its letter to Medicaid directors, CMS pitched the idea of allowing more limited drug formularies as a way to improve states' bargaining clout on pharmaceutical prices.

The CMS proposal, dubbed Healthy Adult Opportunity, is targeted largely toward people who gained Medicaid coverage through President Barack Obama's signature domestic law, the Affordable Care Act (ACA) of 2010.

In a Thursday speech, CMS Administrator Seema Verma noted that about 15 million people have qualified for Medicaid since 2014 through provisions of the ACA. This law provides states with federal money to enable states to raise income thresholds and thus allow more people to qualify for Medicaid.

"The program was not originally designed for this group," Verma said in a statement.

CMS said Healthy Adult Opportunity would not directly affect others covered by the state-federal program, such as children, pregnant women, senior citizens, and people with disabilities. In CMS' view, these groups could see improvements in care "that result from states reinvesting savings to improve and sustain Medicaid for everyone."

In a press release, CMS pitched this initiative as an attempt to clear administrative red tape that can thwart experimentation with healthcare policy. The agency said it intends to use a "streamlined application template" for proposing changes, such as the waiving of retroactive coverage periods and the instituting of premiums and cost sharing.

States will "have the opportunity to customize the benefit package for those covered and make needed program adjustments," CMS said in the letter. "This will be in real-time without lengthy federal bureaucratic negotiations or interference."

"Drastic Changes" to Safety Net

AAFP and other signers to the joint statement saw another motive for CMS' proposals.

"Block grants and per capita caps have a singular purpose: to reduce federal funding to states," the groups wrote in the letter. "These drastic changes to Medicaid threaten to force states to choose between cost-saving measures like eliminating benefits, implementing waitlists, reducing eligibility, or cutting payments to physicians and other clinicians when federal funds run out."

CMS has framed its proposal so as to pave the way for a series of demonstration projects to test a new approach to funding Medicaid. AAFP and the five other groups pointed out that there already is a clear example of how capping Medicaid payments works.

"As we've seen in Puerto Rico, a block grant model leaves states and localities much more vulnerable to unpredictable events like natural disasters when more people need to enroll in the program," AAFP and the other groups said. They urged CMS to rescind the new guidance on Medicaid.

The American Medical Association (AMA) on Thursday said it opposed the idea of caps on federal Medicaid funding, such as block grants. These would decrease the number of Americans with health insurance and "undermine Medicaid's role as an indispensable safety net," said Patrice A. Harris, MD, president of the AMA, in a statement.

Also opposed to the CMS proposal were such diverse groups as the American Society of Clinical Oncology (ASCO), AARP, the consumer group Families USA, and the Association of American Medical Colleges (AAMC). AAMC CEO David J. Skorton, MD, said the CMS initiative "would give states the option to receive federal Medicaid funding in what essentially are block grants.

"This guidance would limit the federal government's congressionally mandated responsibility to the Medicaid program and could result in reductions in coverage, access, and quality care for the millions of vulnerable patients who rely on this critical program," Skorton said in a statement.

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