Blog: GOP block grant model sours Obama's Medicaid expansion sweetener

The White House has come up with a good way to convince more states to expand Medicaid to low-income adults, but congressional Republicans are almost certain to reject it.

Instead, they and many GOP governors are demanding that Medicaid be converted into a state block grant program, in which the federal government would give states a fixed pot of money and allow them much greater leeway to determine eligibility, benefits, and provider pay rates. Beyond that, the Republican-controlled Congress wants nothing to do with Medicaid expansion. It recently passed a bill repealing the expansion entirely, along with most of the rest of the Affordable Care Act.

The White House said Wednesday that President Barack Obama's fiscal 2017 budget, to be released Feb. 9, will include a proposal to have the federal government assume 100% of the cost of Medicaid expansion for the first three years, no matter when a state implements the expansion.

That would apply to the 19 states that have not yet chosen to expand the program to adults with incomes up to 138% of poverty, plus Louisiana, whose new Democratic governor this week signed an executive order expanding Medicaid by July 1. It also may apply to states including Alaska, Indiana, and Pennsylvania that joined the Medicaid expansion party only last year, and to Montana, which is joining this year.

The ACA provided 100% federal matching funds for the expansion population from 2014 through 2016, with the match dropping off to 90% by 2020. In states that currently are considering expansion, including Alabama, South Dakota and Wyoming, Republican opponents argue that paying the 10% share will overburden their state's budget. Supporters say the new federal dollars would bring health and economic benefits that far outweigh the cost.

The funding extension proposal is part of the president's effort in his last year in office to get more states to expand Medicaid coverage, a key ACA mechanism for insuring more Americans. He traveled to Nebraska and Louisiana this week to promote expansion. The big prizes would be Florida and Texas, which have the bulk of the three million or so Americans who would qualify under the eligibility expansion but where GOP elected officials have been the most resistant.

“This common-sense proposal makes the expansion as good a deal for states that expand now as it (is) for the states that already have done so,” two administration officials wrote in a blog post.

While some governors and lawmakers in hold-out states who favor expansion will welcome Obama's proposed federal funding extension, there's little or no chance that Republicans in Congress will approve it barring a march on Washington by Republican state officials. “It is a sound idea and might entice some states, but it seems unlikely that Congress will pass this in 2016,” Joan Alker, a Medicaid policy expert at Georgetown University, told Kaiser Health News.

“Before we can even begin having a debate” about expansion, “we need to reform the way (Medicaid) is funded and the way it's run,” John Davidson, health policy director of the conservative Texas Public Policy Foundation, told Politico Pulse.

Instead of expansion, Republican policymakers insist that Medicaid control and federal dollars should be handed over to the states to better control costs, increase efficiency, and improve quality of care for beneficiaries. Rep. Paul Ryan, when he was House Budget Committee chairman before becoming House Speaker, won House approval of budgets that would have converted Medicaid into a capped block grant program.

In early 2015, Ryan wrote that his budget proposal to convert Medicaid into a block grant indexed for inflation and population growth “ends the misguided one-size-fits-all approach that has tied the hands of so many state governments. States will no longer be shackled by federally determined program requirements and enrollment criteria. Instead, they will have the freedom and flexibility to tailor a Medicaid program that fits the needs of their unique populations.” He added that it would improve “the safety net for low-income Americans by giving states the ability to offer their Medicaid populations more options and better access to care.”

In 2014, Ryan's budget blueprint for fiscal year 2015 would have cut federal Medicaid spending by $732 billion over a decade, a 19.3% reduction, not counting its repeal of the Medicaid expansion.

Last year, the House's version of Ryan's Medicaid capped block grant plan for fiscal 2016 would have combined Medicaid and Children's Health Insurance Program funding into “state flexibility funds” and cut an estimated $1.8 trillion from Medicaid over a decade, including eliminating the Medicaid expansion.

In an analysis of Ryan's earlier Medicaid block grant proposal, the Congressional Budget Office concluded in 2012 that the plan would prompt states to cut eligibility, benefits, and provider payment rates unless they substantially increased state funding for the program.

But the concept of block granting Medicaid and capping federal spending remains strong among Republicans. Last month, a group of conservative health policy experts recommended that Republicans implement a major Medicaid restructuring that would involve giving states fixed, per-capita payments for Medicaid beneficiaries, and creating separate programs and funding streams for able-bodied and disabled recipients. In addition, they want to give Medicaid beneficiaries tax credits to buy coverage in the private insurance market.

The bottom line is that the Obama administration's financial sweetener to get more red states to expand coverage to low-income adults is going nowhere, and the November elections will determine the future shape of the Medicaid program.

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