Before joining the Trump Administration, Medicare and Medicaid administrator Seema Verma spent years battling the federal bureaucracy on behalf of states that were pleading for more flexibility in running their Medicaid programs.
Yesterday in Washington, she announced a new program to give states greater flexibility in providing coverage to one segment of the Medicaid population—working-age, non-disabled adults, including those newly-eligible after Obamacare’s Medicaid expansion.
The voluntary program Verma announced yesterday, called Health Adult Opportunity (HAO), gives all states the option of taking the federal share of Medicaid spending for these able-bodied adults, either as a total annual lump-sum payment or a lump-sum payment based on the number of able-bodied adults in a state’s program.
In exchange, states get flexibility in benefit design, on cost-sharing and premiums, delivery systems, and drug formularies, for example. The financing arrangement is designed to give them incentives to manage spending more responsibly while still maintaining Medicaid’s built-in recipient protections.
“During her three years overseeing CMS, Verma has sought to expand states’ flexibility in running their Medicaid programs, and Health Adult Opportunity folds in essentially everything she had advocated, even allowing states to make furtherchanges after winning federal permission upfront,” the Washington Post observed.
Two HAO innovations we hope states adopt:
- “Premium support” that can allow people who are offered health insurance at work use their Medicaid allotment to enroll in the private employer plan.
- Designing programs to provide focused care for recipients with diabetes, hypertension, or other chronic illnesses.
States have proven to be relentless in finding ways to draw down as much federal Medicaid funding as possible, including enrolling people who aren’t eligible, as Brian Blase has well documented. They draw federal matching funds no matter how many eligible people enroll or how much they spend.
“The open-ended federal financing of new adult Medicaid enrollees at elevated match rates—in excess of 90 percent—creates incentives for states and healthcare providers to improperly enroll new beneficiaries and inadequately monitor costs and eligibility,” he writes.
It’s essential that CMS not use inflated, erroneous spending on Medicaid expansion as a baseline for the new block grants to states, which Brian Blase says exceed 20 percent of federal expenditures. An audit of existing spending, especially for those states that have expanded and are seeking HAO flexibility, is an essential first step before approval of block grant funding.
States that rejected expanding Medicaid to able-bodied adults have chosen instead to focus resources on traditional vulnerable populations, including the disabled, the elderly, moms and babies, and the very poor. We have concerns that states who have held the line will now expand the program beyond its core focus. They should, instead, look at other ways to gain Medicaid flexibility through existing 1115 waiver authority, as Tennessee is doing.
On the one hand, anything that moves in the direction of more state flexibility, more accountability, and the potential for savings and program efficiency is good and should be encouraged. But we hope this doesn’t become just another option states use to further expand the Medicaid program, which already covers more than 70 million Americans.
To try to get better control over Medicaid spending, Tennessee in November became the first state to ask CMS to change its Medicaid program into a block grant under existing rules.
Even with the open-ended call on federal dollars, states’ share of Medicaid funding is becoming a big fiscal problem for many states, crowding out spending for education, transportation, public safety, and other needs.
And at the federal level, well over half of spending is on autopilot, and its unchecked growth threatens America’s future economic growth and even our national security.
States and the federal government need to work together on fiscal control. States need broader flexibility than just for these HAO recipients to better manage their Medicaid programs, and the federal government needs to do a better job in containing improper spending.
Oklahoma Gov. Kevin Stitt spoke at the announcement event yesterday and said his state wants to take up the offer of the new HAO authority. He said this can “be a trampoline to the future” to help people transition to private health insurance. He also thanked CMS for “putting healthcare back where it belongs—with the states.” But that means that deep-red Oklahoma is likely to become a Medicaid expansion state.
Energy and Commerce Committee Republican Leader Greg Walden said, “The Administration’s innovative proposal to modernize and preserve Medicaid is precisely the offer of state flexibility that Democrats and Republicans in Oregon begged for when I was in the state legislature,” adding, the “Health Adult Opportunity proposal gives our states the flexibility to respond to the specific needs of their constituents.”