Pending CMS Guidance on Medicaid Block Grants: Executive Overreach Strikes Again

It has been reported that CMS is developing guidance to encourage states to pursue a new “block grant” or “per capita” cap on federal Medicaid funding through Section 1115 waiver requests. And sure enough, this “Dear State Medicaid Director” letter has appeared on the Office of Management and Budget’s website signaling that it is under review by the White House.

For a President and his Administration that have shown little regard for legal boundaries and the separation of powers, it is perhaps not surprising that CMS is pursuing such a radical change. A paper released today by the Center on Budget and Policy Priorities outlines the many dangers of this approach. But fundamentally altering the structure of Medicaid’s financing is clearly a decision that only Congress can make with the President’s assent.

Medicaid block grants have been around the block a few times. As I was cutting my teeth on Medicaid, then Speaker Newt Gingrich led an effort in 1995 to block grant Medicaid, but President Clinton didn’t sign the bill, and it didn’t become law. Prior to that effort, Congress had considered and rejected Medicaid block grants in 1981.

In the most recent legislative consideration of Medicaid block grants, Congress rejected the plan to cap and cut Medicaid, which was included in the bill to repeal the Affordable Care Act in 2017. Indeed, the Trump Administration has tacitly acknowledged that block granting Medicaid requires a change in law and included such a proposal in the President’s FY2020 budget (see page 69).

It is a consequential decision for so many reasons – most importantly for the millions of people who rely on Medicaid for their life-saving health care as well as for state and local governments and for the economy and health care system in general. My colleague Andy Schneider recently outlined the many impacts through a series of questions.

We haven’t seen the proposed guidance yet, but no doubt it will emphasize that this would just be an experiment – not a wholesale and unauthorized change.

However, even testing this proposition of fundamentally altering the structure of Medicaid financing through a Section 1115 waiver is not permissible. Section 1115 only allows states to request waivers of state Medicaid plan requirements in section 1902 of the Medicaid statute, and only if the waivers are likely to promote the objectives of the Medicaid program.   The statute doesn’t permit the Secretary to waive Sections 1903 and 1905, and that is where the financing structure of the program, including the formula for open-ended federal matching payments, is located.

So this  is a job for the legislative branch. This effort by the Administration to  make such a radical change in policy unilaterally through a State Medicaid Director letter would recklessly put the health care of vulnerable people at stake and is yet another disturbing example of overreach by the Executive Branch.

Joan Alker is the Executive Director of the Center for Children and Families and a Research Professor at the Georgetown McCourt School of Public Policy.