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When Donald Trump ran for president in 2016, he distinguished himself from the rest of the Republican field by declaring himself a champion of programs designed to help the poor and the elderly — Medicare, Medicaid, and Social Security.
While the other candidates promised to slash so-called entitlement programs to reduce the deficit, Trump pledged that he would not cut any of those programs. Here's an excerpt from an interview in May 2015:
I’m not going to cut Social Security like every other Republican and I’m not going to cut Medicare or Medicaid. Every other Republican is going to cut, and even if they wouldn’t, they don’t know what to do because they don’t know where the money is. I do.
He repeated his pledge not to cut any of the programs a few weeks later when he officially announced he was running for president.
This is a pledge Trump has already broken. Trump's last budget proposed $1.9 trillion in cuts to Medicare and Medicaid, and $26 billion in cuts to Social Security. (Congress stripped Trump's proposed entitlement cut from the budget.) But, in an interview last week with CNBC, Trump said he would again look to cut entitlements "at the right time."
That time is now. This week, the Trump administration will propose new regulations allowing states to replace the federal contribution to the Medicaid program with a "block grant." The impact of the proposal would be to slash spending and reduce coverage. And he's trying to do it without Congress.
What happened when America expanded Medicaid
Under the current system, Medicaid funding is not fixed. Anyone who is eligible for the program can enroll, and there are no waiting lists or caps on enrollment. The state and federal government share the costs, and, under federal law, states are required to meet federal standards. (States are able to get waivers on some standards.)
Medicaid expanded under Obamacare, which encouraged states to expand coverage to people with slightly higher incomes. The 37 states that have chosen to do so initially receive all of the funding for the expansion from the federal government. Over time, the state contributions increase to about 10%.
It's a good deal. The states that have refused to expand Medicaid have done so for ideological reasons. If the holdout states expanded Medicaid, 4.8 million more adults would be eligible for coverage.
According to studies, "Medicaid expansion states experienced significant coverage gains and reductions in uninsured rates among the low-income population broadly and within specific vulnerable populations." Moreover, "improved access to care, utilization of services, the affordability of care, and financial security among the low-income population," resulting in "state budget savings, revenue gains, and overall economic growth."
In short, expanding Medicaid has been a notable success. Now the Trump administration is proposing moving in the opposite direction.
How to break something that doesn't need to be fixed
This week, the Trump administration will issue a letter to states, "explaining how states could seek waivers to receive defined payments for adults covered by Obamacare's Medicaid expansion."
What does this mean?
This means that instead of receiving federal money based on how many people enroll in Medicaid and the services they use, states could receive a fixed amount of money.
This ends up cutting the Medicaid program in a couple of ways. First, it incentivizes states to reduce enrollment and services. In return for block grants, states request waivers from various federal requirements. The states then get to pocket some or all of the money that's saved by reducing access to care. Second, in general, these block grants increase more slowly than the costs of running the uncapped program. This might force states to cap enrollment or reduce services.
This is a bad deal for states and their citizens, but that is the point. The block grant system has been advocated by people looking to shrink or cripple the Medicaid system. It was proposed by Republicans during their effort to repeal Obamacare. Congress rejected the proposal, and so this is an effort to pursue the same strategy without the approval of Congress.
The Tennessee example
In November, Tennessee requested a waiver to receive its federal Medicaid funds in the form of a "modified block grant." The state estimates that, in the first year, this would amount to about $7.9 billion. Tennessee has not expanded Medicaid, so this waiver would be to funds it receives under the traditional program.
Each year, the federal government would calculate how much Tennessee and the federal government would have spent on Medicaid without the waiver. Tennessee would then be able to pocket all of the state savings plus half of the federal savings.
The waiver proposal "does not require the state to maintain its current eligibility or benefits." As a result, "the shared savings provision could create an incentive to reduce eligibility or benefits so that the state can achieve savings."
The legal question
Is transforming Medicaid into a block grant program by executive fiat legal? Not according to key members of Congress.
On January 14, Congressman Frank Pallone (D-NJ), the chairman of the House Energy and Commerce Committee, and Senator Ron Wyden (D-OR), the ranking member of the Senate Finance Committee, wrote a letter to the Inspector General of the Department of Health and Human Services, expressing concern that the Trump administration was planning to approve the Tennessee waiver illegally .
While the Secretary of Health and Human Services (HHS) does not have the legal authority to approve a waiver that would convert Medicaid's financing to a block grant, the Administration continues to encourage states to apply for these illegal waivers. We are deeply troubled by this...
The purpose of these waivers, Pallone and Wyden write, is to "fundamentally alter and weaken Medicaid's financing structure."
The politics of Medicaid
Trump knows that publicly championing Medicaid is good politics.
Medicaid is not only popular, but it's a program that many Americans personally see working. This was the results of a Kaiser Family Foundation poll in 2018:
Seven in 10 Americans report a personal connection to Medicaid at some point in their lives – either directly through their own health insurance coverage (32%) or their child being covered (9%), or indirectly through a friend or other family member (29%).
Three in four (74%) hold favorable views of Medicaid, including significant majorities of Democrats (83%), independents (74%) and Republicans (65%).
At the same time, Trump has aligned himself ideologically with a group of people who are eager to undermine Medicaid precisely because it is a popular government program. Trump wants to give these people what they want, but avoid any political fallout.
According to Politico, Trump has "recently voiced concerns about fueling perceptions that he's cutting Medicaid and other health care services during an election year."
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