What is CMS Administrator Verma’s Vision for “Reframing” Medicaid?

Last week, CQ Roll Call posted an interview with Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma on the “Future of Medicaid Flexibility.”  In it, she is quoted as follows:

“As I look at the Medicaid program, we really want to reframe how we’ve been operating for the last 50 years.  It’s really crowding out other priorities on the state level and at the same time we have to ask ourselves what have we actually delivered for our beneficiaries?  Can we say that we have actually delivered high-quality care and improved health outcomes for these beneficiaries? I don’t think we can say that.”

This is not an excerpt from a speech that has been drafted by a public relations firm hired at taxpayer expense; it reflects what the top federal Medicaid official actually thinks.  Simply put, the statement is astonishing.

Let’s start with this.  Before Administrator Verma was appointed to her current position by President Trump, she owned a consulting firm that advised states on their Medicaid programs.  According to her March 20, 2017 recusal letter, her clients included Arkansas, Indiana, Iowa, Kentucky, Ohio, South Carolina, and Virginia. Is she now saying that none of those states “actually delivered high-quality care and improved health outcomes?” Or is she just referring to the states that were not clients of her firm?

Let us agree that Medicaid is not perfect.  The recent request by Senator Bob Casey (D-PA) for an Office of Inspector General investigation of coverage denials by Medicaid managed care plans is but one indication that there are significant problems that need to be fixed.   But there is a growing body of research that shows Medicaid actually delivers high-quality care and improves health outcomes for children and other low-income populations.  The Medicaid expansion to newly eligible adults, which Administrator Verma regularly criticizes, is associated with reduced mortality among adults, decreased rates of  uninsurance, and improvements in access and self-reported health status.  It is also associated with lower rates of infant and maternal mortality.  Not to mention reducing racial health disparities in access to cancer treatment.   

Most people would consider a reduction in mortality for infants, mothers, or adults in general an improved health outcome.  Actually.

So what is Administrator Verma’s solution to a problem that evidence shows does not exist?  Cap federal Medicaid payments to states: “I like to think about the future in Medicaid where we can say if this is the amount of money we have, these are the flexibilities, and we’re going to hold you accountable for health outcomes.”

In the Administrator’s vision, the federal government will give a state a fixed amount of money each year to match the state’s costs of providing health and long-term care services to its low-income citizens.  The state will be on the hook for any costs above that amount. To stay under that amount, the state will have “flexibilities”— code for cutting eligibility, benefits, and payments to providers. This, by the way, is hardly a new idea.  It began with David Stockman, President Reagan’s OMB director, in 1981, and has reappeared in various forms since then. As my colleague Joan Alker noted, capping Medicaid is “the Holy Grail.”

Capping federal payments to states is a fabulous fiscal deal for the federal government, because it shifts the financial risk of health care inflation (think soaring drug prices), demographic changes (think Baby Boomer demand for long-term care), public health emergencies (think opioid epidemic), and climate change-induced natural disasters (think hurricanes or severe flooding), not to mention economic downturns (think the Great Recession) from the federal government to states.  It’s less clear why state governments would want to let the federal government walk away from these risks, much less from the populations their Medicaid programs now cover.

The Administrator argues that Medicaid is “crowding out other priorities on the state level.”  This fundamentally misunderstands the role of federal Medicaid funds in state budgets. Federal Medicaid funds are an important source of financing for the health care sector of state economies.  They also help support a range of state and local agencies, including state university medical schools and hospitals, public health departments, mental health agencies, and school districts.  Just ask any state Medicaid consultant. Well, almost any.

The Administrator says that once the federal government caps its payments to states, it will hold them “accountable for health outcomes.”  She has already shown us what that means. Last November, when nearly 8,500 Arkansas beneficiaries had been disenrolled because they did not report “community engagement” activities, the Medicaid and CHIP Payment and Access Commission (MACPAC) wrote a letter urging the Secretary to pause disenrollments.  Administrator Verma, the architect of the work reporting requirements waivers, declined to do so and the disenrollments rose to 18,000.  It was not until a federal district court judge held the Secretary and Administrator Verma accountable under the Administrative Procedure Act in March of this year that the disenrollments stopped, at least for now.  

Administrator Verma thinks it is time to “reframe” Medicaid.  It’s clear that what she means by this is capping federal matching payments to states, either through a block grant or a per capita cap.   That is how the most recent Administration budget proposes to execute cuts in federal Medicaid spending by $1.5 trillion over the next 10 years.  The Administration is correct on one important point: if the Executive Branch wants a fundamental change in Medicaid law, it needs to persuade Congress to rewrite it.  Fortunately, the Congress is having none of it.

Unfortunately, Administrator Verma doesn’t appear to acknowledge these constitutional guardrails; CMS has just sent to OMB, for clearance, a guidance document that appears to try  cast her “reframing” as a “Medicaid Value and Accountability Demonstration Opportunity.”  We’ll have to wait to see the details, but given the Administrator’s track record in the federal courts to date—she’s 0 for 3—it’s unlikely that this new end run around the democratically-elected U.S. Congress will succeed.

From a false premise to a drastic policy overreach.  There’s a word for this, but it’s already been used.

Andy Schneider is a Research Professor at the Georgetown University McCourt School of Public Policy.