State Flexibility Has Its Limits — Even for the Trump Administration

Like many others, I was out of Washington for the second half of August. That tends to be the period of time when Administrations publicly announce decisions they want buried. And when it comes to Medicaid waivers, the timing may not have been intentional, but what happened in August is worth unearthing to examine more closely.

Much of the action occurred in response to Section 1115 waiver requests and a Section 1332 waiver request (a new category of waivers established by the Affordable Care Act) from the states of Utah and Idaho. Both states had successful voter-passed Medicaid ballot expansions last fall; legislatures and the Governors in both states responded by trying to roll them back.

Utah passed an extremely complex state law which included as a foundation a request for a partial expansion to 100% at the enhanced expansion match rate. In exchange, it appeared the state had agreed to take a per capita cap from the feds – an ideological objective of this Administration that Congress had rejected during the failed ACA repeal effort. As seasoned waiver watchers know, both Massachusetts and Arkansas had previously requested a partial expansion at full match and this Administration turned them down – but left themselves some wiggle room by saying the request would not be approved “at this time.” Despite very public encouragement by CMS Administrator Verma, who stood up with Utah’s Governor to praise their waiver, in the end the White House stepped in and said no.

Waiver tea leaf readers like myself knew that getting to “yes” would be a heavy lift because of the fiscal consequences for the feds – who would end up paying more for the group of expansion enrollees from 100 to 138 percent of the poverty line if they remained in the subsidized ACA marketplace instead of Medicaid. And there were the political calculations too – allowing states to do a partial expansion might encourage states like Georgia to come forward and embrace the ACA’s Medicaid expansion.

So the Trump Administration ended up in the same place on the partial expansion question as the Obama Administration, which previously had said no to a similar request from former Wisconsin Governor Scott Walker. (Note: Gov. Walker did the expansion anyway at regular match – a decision which has cost the state more than a billion dollars and counting.)

While this decision received a fair amount of attention due to the Washington Post story, the follow up letter from CMS to Utah dated August 16 also notably rejected their request for an enrollment cap on the expansion population. This is an important and positive decision – not necessarily for the right reasons – but a good one nonetheless. The original Utah waiver approval at the end of March allowed the state to impose an enrollment cap for the new expansion group while receiving regular match – which is the current state of play on the ground. This too needs to be reversed – as I said at the time – this is a fundamental attack on Medicaid’s guarantee of coverage.

Idaho’s version of expansion included a different twist – a “Choice” Section 1332 waiver that would supposedly allow Medicaid beneficiaries to choose between the Marketplace and Medicaid (even though the state was intending to heavily influence their “choice” by automatically enrolling people in the marketplace – but that is another story). This waiver proposal was also  turned down by CMS last week citing its inability to meet deficit neutrality guardrails. In other words, the feds would have to spend more money so they said “no”.

Meanwhile, rumored block grant guidance from the Trump Administration, which was at the Office of Management and Budget for final review when the summer began, is not out yet.

Finally, the DC Court of Appeals will hear the Trump Administration’s appeal of Judge Boasberg’s decision striking down Medicaid work reporting requirement waivers in Kentucky, Arkansas and New Hampshire on Friday Oct 11.

Joan Alker
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