The Trump administration is proposing a sharp slowdown in Medicaid spending that would shift more than $1 trillion over 10 years by steering the entitlement program into a system of block grants that would give states far more freedom to set their own rules over how to cover the poor.
The budget released by the White House on Monday calls for Medicaid block grants to states – or a related idea that would create per-person funding caps – which both would be firsts in the program’s half-century history. They would limit the program’s growth to the pace of inflation.
Since health-care spending typically rises more swiftly than the consumer price index, tying it to the nation’s overall inflation rate would put a strong squeeze on the public insurance system that covers tens of thousands of poor, vulnerable people, some of them elderly.
The spending plan calls for a cut of nearly $1.5 trillion in Medicaid over 10 years and for $1.2 trillion to be added for a new “Market Based Health Care Grant” – that is, the block grants that would start in 2021. It also would eliminate funding for Medicaid expansion under the Affordable Care Act that has gone to about three dozen states over the past five years.
The budget does not make explicit whether the administration is asking Congress to consider converting Medicaid to a system of block grants once again – or whether it seeks to make such a switch on its own. Congressional Republicans included the idea in their failed 2017 efforts to repeal large aspects of the ACA. Opposition to block grants, including from some GOP governors who feared they would be saddled with escalating health-care costs, was a major reason behind the Senate’s inability to pass such bills.
Last year’s White House budget – an annual exercise that usually is more wish list than actual harbinger – also endorsed the Medicaid block grant idea, assuming it would be part of an ACA repeal. The new proposal comes as the House is in Democratic hands and even congressional Republicans have largely turned their attention away from dismantling the ACA.
Federal health officials have quietly been exploring the controversial idea of giving individual states permission to convert their Medicaid programs to block grants or a system of caps. Senior officials of at least one state, Utah, have said publicly they have been discussing the idea with leaders of the Department of Health and Human Services’ Centers for Medicare and Medicaid Services, and leaders of other conservative states also appear to be interested.
The Trump budget also proposes cutting spending on Medicare, the federal program that gives health insurance to older Americans, by $845 billion over the next 10 years, in part by limiting fraud and abuse and payments to hospitals. During the 2016 presidential campaign, President Trump said he would not cut Medicare or Social Security, the retirement program for the elderly, but his budget last year also included a proposed cut of more than $550 billion to the program.
The White House budget calls for a number of new programs to reduce Medicare spending, including by increasing audits of payments through Medicare Advantage, instituting new changes to reduce other forms of “fraud and abuse,” and changing hospital reimbursement rates.
The increasingly ambitious cuts to Medicare in the White House budget reflect the administration’s narrowing budget math, as the federal deficit has continued to balloon under its watch. They also come at a time when many Democrats have embraced plans for expansions of Medicare, including a “Medicare-for-all” system that would increase federal spending on the program by as much as $30 trillion.
The changes are expected to encounter fierce resistance from industry lobbying groups, as well as from members of Congress who are traditionally nervous about backing cuts to health-care programs.
“Administrations have been proposing to do these sort of things forever and they never happen. I suspect that’s what’s going to happen this time,” said Howard Gleckman, a budget expert at the Tax Policy Center, a nonpartisan think tank.