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Trump is looking for a new way to cut Medicaid — without Congress

Block grants could be the next front in the Trump administration’s war on Medicaid.

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President Donald Trump and CMS Administrator Seema Verma, who oversees Medicaid.
Alex Wong/Getty Images
Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

Two years in, senior Trump administration officials are still hunting for new ways to cut Medicaid.

Seema Verma, who runs the Centers for Medicare and Medicaid Services for President Trump, has been exploring whether the agency could implement Medicaid block grants, Politico reported last week. It would represent the most aggressive action yet by the Trump White House to cut Medicaid spending. (The program is unaffected by the ongoing government shutdown, however, because it is considered mandatory spending.)

The details are still to be determined, and the plan might not even be legally permissible: Some experts argue CMS lacks the authority to change Medicaid’s funding formula without congressional approval.

Block-granting Medicaid would be a fundamental change to the program. Under block grants, states would receive a set amount of federal funding, instead of the open-ended funding commitment they currently receive from the feds. The Medicaid spending caps proposed as part of Obamacare repeal were projected to lead to hundreds of billions of dollars in spending cuts and millions of people falling off the Medicaid rolls. Clinton-era welfare reform, which block granted other federal assistance programs, show how dramatic the impact can be.

But this new plan would be merely the latest step in a two-year crusade by the Trump administration to cut Medicaid and fundamentally change the program. CMS has already approved the first Medicaid work requirements under Trump, and thousands of people in the states implementing them have lost coverage. Other smaller restrictions in benefits that had been off the table during President Barack Obama’s tenure are finding a much more receptive audience under Trump.

Embedded in this war over the 52-year-old program, a product of President Lyndon B. Johnson’s Great Society, is a question about the role of Medicaid. Is it something you are entitled to if you meet certain requirements? Or is it more like welfare, or Temporary Assistance for Needy Families, has become: a short-term boost until enrollees can get back to work.

Right now, Medicaid is as big as it’s ever been: 75 million Americans get coverage under the program. The Republican Congress tried and failed, as part of its Obamacare repeal crusade and with Trump’s endorsement, to undo the Affordable Care Act’s historic expansion of Medicaid and to fundamentally overhaul its financing with a federal spending caps. But the Trump administration is still dramatically changing the program through administrative action.

Under President Obama, Medicaid very nearly became a universal health care program for America’s poor. That guarantee is becoming more tenuous.

“In real life, what I think is most concerning is it will lead to losses of coverage, and that is not what the Medicaid program is supposed to be doing,” Cindy Mann, who oversaw Medicaid under Obama, told me last year. “It’s supposed to be promoting coverage and promoting affordable coverage.”

The Trump administration is working hard to undo much of that progress and turn Medicaid into something the nation’s most disadvantaged people must earn.

Now that Republicans are in charge, they’re chipping away at Obamacare’s Medicaid expansion

Seven states have received approval from the Trump administration to establish work requirements and set other restrictions for many of their Medicaid recipients. Nine others have requests pending. Almost all of them are led by Republicans at the state level.

Much of Medicaid should be safe, or safer, from the Trump administration’s meddling. About 50 million of the program’s 75 million enrollees are children, elderly, disabled, or pregnant. Those populations are usually exempt from work requirements and these other restrictions, like time limits, and states are required to cover them under federal law.

Cara Stewart, a legal advocate opposing Medicaid work requirements in Kentucky, ‘pinky-swears’ to help Pauline Creech after they talked about Pauline’s cancer coming back in Covington, Kentucky, on January 15, 2018. Pauline is disabled and is concerned th
Cara Stewart, a legal advocate opposing Medicaid work requirements in Kentucky, “pinky-swears” to help Pauline Creech after they talked about Pauline’s cancer coming back in Covington, Kentucky, on January 15, 2018. Pauline is disabled and is concerned that between her disability and her frequent doctors appointments for cancer treatments, she won’t be able to meet the work requirement of 80 hours per month.
Carolyn Van Houten/The Washington Post via Getty Images

But that still leaves about 25 million non-disabled, non-elderly adults who could potentially be subject to work requirements and other eligibility conditions, according to the Kaiser Family Foundation’s estimates. That figure is a starting point for understanding how much the Trump administration could pare back the Medicaid rolls.

The most vulnerable populations are likely to be the childless adults covered by Obamacare’s Medicaid expansion. “There are a lot more childless adults,” Mark McClellan, who led CMS under President George W. Bush, told me last year. “You have people who think the program should evolve.”

Work requirements, in other words, could become a tool by which states can partially roll back Medicaid expansion or implement a neutered version of it. The same could be said of waiver provisions that would lock people out of Medicaid coverage for failing to pay a premium and that put a time limit on how long people can be eligible for Medicaid.

It is a remarkable reversal, Medicaid experts say, from the way waivers have been used in the past to expand health coverage.

“We’re just talking about ways to cut coverage,” Joan Alker, executive director of Georgetown University’s Center for Children and Families, told me. “Under any previous administration, waivers have not been used to devise ways to cut coverage.”

That contradiction could also prove to be the legal undoing of the Trump administration’s Medicaid crusade. A federal judge has actually blocked Medicaid work requirements from taking effect in Kentucky, ruling they were contrary to the program’s purposes. But in other states, work requirements are now in force — and people are losing health coverage.

In Arkansas, Medicaid work requirements have now led to 17,000 people being locked out of the program.

Vivian Hunter, 4, pretends to give her mother Teresa Loman a shot at their home in Erlanger, Kentucky, on January 15, 2018. Teresa works two part-time jobs and is concerned about the Medicaid work requirements.
Carolyn Van Houten/The Washington Post via Getty Images

A recent report from the state human services department showed that another 4,655 people have been locked out of coverage because they had failed for three months to comply with the state’s requirement that they work 80 hours a month (or some equivalent activity) as a prerequisite for receiving Medicaid. Add those folks to the 12,277 people who had already lost coverage in prior months, according to the Arkansas Times, and 16,932 low-income Arkansans have now been moved off the health insurance program under the Medicaid work requirement.

For context, about 250,000 people are covered by Medicaid expansion in Arkansas; however, many of those people are exempt from the work requirement. Roughly 65,000 Arkansans actually needed to fulfill the state’s work requirement. About 8,400 failed to do so, and for 4,655 of them, it was their third month of noncompliance — meaning they are now locked out of coverage through the end of the year. They will be eligible to re-enroll in January.

Most adults on Medicaid already work — about 60 percent, according to the Kaiser Family Foundation’s estimates — and those that don’t are often in school, or caring for a loved one, or they might have a physical or mental illness that makes it difficult to work, even if they are not technically disabled.

Health policy experts expect that bureaucracy will actually be responsible for much of the enrollment cuts. People who do qualify for coverage and either meet or are exempt from work requirements could fall off the rolls if they don’t file their paperwork or encounter an administrative mishap.

In Arkansas, about 10,000 people were required to report their work activities to the state. Only 1,428 actually satisfied the reporting requirement, continuing a trend from previous months; more than 8,300 people did not report any work activities at all.

“The people who policymakers and the public would want to protect, with medical conditions, barriers to employment, they’re going to be exempt. But the system isn’t geared to get these people out of harm’s way,” Mann said. “It’s the people who are least able to gather the paperwork required that will get caught in the cracks and will lose their coverage.”

Not to mention that parents losing coverage can adversely affect their children: Their families would be more at risk of medical bankruptcy, sicker parents are worse parents, and kids will be more likely to fall off the rolls themselves if their parents have lost health coverage.

Red states that didn’t expand Medicaid still want to restrict coverage

In addition, at least five states that didn’t expand Medicaid have nonetheless proposed work requirements and other restrictions, like premiums and time limits, on parents and other adults on Medicaid. The Trump administration has not yet decided whether to allow those proposals to go forward, but Medicaid advocates fear the consequences if they do.

Mississippi is the poster child for this new kind of waiver. That state’s proposed work requirement, according to Alker, targets only parents and caretakers whose income is 27 percent of the poverty line or less. They make $3,250 or less in an entire year.

These people are truly impoverished and are much closer to the historical Medicaid population than the people covered by Obamacare. And yet here, a state like Mississippi — or Alabama or Tennessee — wants to require them to work or look for work or risk losing their health coverage.

A member of the Senate Medicaid Committee reviews a Medicaid handout that reviews the managed care rule at the Capitol in Jackson, Mississippi, on January 24, 2018.
A member of the Senate Medicaid Committee reviews a Medicaid handout that reviews the managed care rule at the Capitol in Jackson, Mississippi, on January 24, 2018.
Rogelio V. Solis/AP

Mississippi is projecting about 20,000 people will fall off its Medicaid rolls over five years, according to Alker. It is virtually assured almost all of them would become uninsured; they do not have the money to pay for private health coverage.

This seems new to people who know the program well, and it means lots of Medicaid dollars will be spent on the administrative work necessary to make these requirements work instead of on health care or other improvements.

“I can’t think of any waiver that has been granted that actually constrained the eligibility of a mandatory group,” Mann said. “By making these kinds of changes to Medicaid, we’re trading investments in better care for more ideological ambitions.”

There might be a bigger game afoot here, Medicaid advocates fear, one that is even bigger than unwinding Medicaid expansion or adding work requirements for some of the longer-standing Medicaid populations. They worry that Republicans are trying to use these new restrictions, particularly the work requirements, to stigmatize Medicaid as a program.

Conservatives confronted an uncomfortable reality during the Obamacare repeal debate: Medicaid, particularly the ACA expansion, had become quite popular. Too popular to roll back, as it turned out, with several GOP senators balking at undoing the expansion and at putting a federal spending cap on the program.

But conservative purists haven’t let go of those dreams yet. House Speaker Paul Ryan was still talking about codifying Medicaid work requirements into federal law, applying them to all states, after repeal failed. The new Democratic majority has probably saved the program for an overhaul for now, but spending caps could be introduced in a future Congress.

“From a larger perspective, I think this is very concerted effort to stigmatize Medicaid and to set up for the next round of block grants or per capita caps. That’s the holy grail,” Alker said. “To reinforce inaccurate notions of who is on Medicaid, to reinforce stereotypes that it’s lazy people who are not working, even though we know that’s not true.”

Medicaid escaped welfare reform in the 1990s. But if Republicans had their way, it wouldn’t be spared in the next round. The stakes are huge: Work requirements for food stamps have been linked to substantial drops — up to 50 percent in some isolated cases — in the program’s enrollment. As many as 25 million people population that could be subject to Medicaid work requirements if they were instituted nationwide.

In a very real sense, health coverage for millions of Americans who rely on Medicaid could be at risk under the agenda Trump is advancing.

Medicaid’s history is one of covering more and more poor Americans

Trump’s overhaul of Medicaid rests on a fundamental question: What kind of program is Medicaid going to be?

For decades, Medicaid has been a program that millions of vulnerable Americans — children, the elderly, people with disabilities, pregnant women — were entitled to. If you fell into one of those categories, and your income was low enough, you qualified for benefits.

Medicaid expanded over the years, covering more populations — parents, some impoverished childless adults — and health care services. Obamacare was, from a progressive perspective, the natural end to that evolution: Anybody with an income in or near poverty ($27,000 and below for a family of three) would be eligible for Medicaid.

The US Supreme Court prevented a perfect realization of that vision, giving states the choice to opt out of the ACA’s Medicaid expansion. But the course was set. To entice some Republican-led states to accept the ACA expansion, the Obama administration even permitted some policies like charging nominal premiums for childless adults.

Deborah Dion and other protesters gather in the office of Florida State Rep. Manny Diaz as they protest his stance against the expansion of healthcare coverage on September 20, 2013 in Miami, Florida.
Deborah Dion and other protesters gather in the office of Florida State Rep. Manny Diaz as they protest his stance against the expansion of health care coverage on September 20, 2013, in Miami, Florida.
Joe Raedle/Getty Images

But they forbade states from kicking people in poverty off of Medicaid for failing to comply. It went back to this fundamental understanding of what Medicaid is about: giving people health insurance. Work requirements, in particular, were off the table for Obama for that reason.

“It’s a health insurance program and not one that’s aimed at supporting or requiring people to be engaged in work activities,” Mann told me. “It’s about medical assistance. It’s about insurance.”

In the end, Medicaid was expanded in more than 30 states under Obama and covered 15 million more Americans than it had before the ACA.

The conservative case against the Medicaid expansion

But conservatives tell a very different story. In their telling, Medicaid has ballooned far below its original mission in 1965 of covering a certain set of health care services for only the most vulnerable Americans. Obamacare’s Medicaid expansion was simply the latest offender, bringing adults without children — who Republicans think we should be trying to move up in the workforce, not tethering to the safety net — fully into the program.

Republicans who oversaw Medicaid in the past are receptive to the idea that some of these standards for Medicaid eligibility should be reevaluated now that new populations, like the childless adults covered by Obamacare, are being brought into the program.

“Now that we’re covering different populations, expanding the program, maybe there are some new considerations that should come in, like whether or not people choose to work,” McClellan told me. “People are questioning whether its benefits structure and requirements that worked pretty well before are best designed for this new population. I do think that’s a reasonable discussion to have.”

Medicare Administrator Mark McClellan testifies at a Senate Finance Committee hearing on the Medicare Drug Card program on Capitol Hill on June 8, 2004.
Medicare administrator Mark McClellan testifies at a Senate Finance Committee hearing on the Medicare Drug Card program on Capitol Hill on June 8, 2004.
Matthew Cavanaugh/Getty Images

These Republican arguments had success in the past when it came to welfare. As Vox’s Dylan Matthews explained in his epic piece on the effects of welfare reform in the 1990s, the changes to work requirements almost certainly increased deep poverty for Americans living in the United States:

When you look at overall poverty from 1993 to 2012 (again, measured accurately rather than through the official measure), you see that it fell substantially in the 1990s and then stayed down.

That was true even in economic downturns. In 1993, as the nation recovered from the early ‘90s recession, the poverty rate was nearly 21 percent. In 2012, in the wake of the worst recession in post-WWII history, it spiked up to 16 percent, a huge improvement.

The same can’t be said of deep poverty. That fell in the ‘90s too — but by a comparatively tiny amount. And by 2012, it was back fairly close to its 1993 level.

Tellingly, the deep poverty rate in 1996, when welfare reform passed, was 4.6 percent. Since the end of the late-’90s boom in 2001, the rate has never been that low again.

If you try to isolate the effects of welfare reform, it appears that if anything it probably increased deep poverty in the US. The most disturbing evidence in this regard comes courtesy of the University of Michigan’s Luke Shaefer and Johns Hopkins’s Kathryn Edin, who have documented an increase in the share of Americans living on $2 a day or less in cash income.

The Trump administration officials clearly don’t see the problem with putting work requirements on the program. And they have specifically cited Medicaid expansion in justifying proposals to require work, charge premiums, limit the length of benefits, and all the other provisions Republican-led states are pursuing.

“This policy is about helping people achieve the American dream,” CMS administrator Seema Verma told reporters last year. “People moving off of Medicaid is a good outcome because we hope that means they don’t need the program anymore.”

Seema Verma with President Trump during a meeting on women in healthcare at the White House on March 22, 2017.
Seema Verma with President Trump during a meeting on women in health care at the White House on March 22, 2017.
Evan Vucci/AP

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