By Sarah Ovaska and Liora Engel-Smith

The Trump Administration announced a proposal Thursday that could potentially transform how Medicaid functions in some areas. The proposal would let states opt into a lump-sum funding system to pay for the health care needs of low-income, working-age adults.

The proposal is already drawing fire from critics and Democrats who warn the optional block grant program threatens the bedrock principles of the federal healthcare safety net program. They also say the move could lead to rationed care, unmet health needs and financial risks on behalf of states.

But the block grant proposal, being called Healthy Adult Opportunity, could find some support in North Carolina, one of the 14 states that have so far resisted expanding Medicaid to low-income adults. A standoff between Gov. Roy Cooper, a Democrat, and Republican state lawmakers over Medicaid expansion has left the state without a budget, after Cooper vetoed a proposed budget in June because it didn’t have a path to expansion.

A map of the 14 states did not expand Medicaid
14 states, including North Carolina, have not implemented Medicaid expansion. That number may drop as Kansas is considering a proposal that may expend its Medicaid program next year, according to the Kaiser Family Foundation. Infographic source: The Pew Charitable Trusts.

State leaders may follow their current positions when it comes to the proposed block grants. The office of Republican state Senate leader Phil Berger (R-Eden) declined to comment, pointing to the complicated aspects of the block grant proposal. The office of State House Speaker Tim Moore did not respond to a phone call and email Thursday seeking comment.

Cooper thinks the block grants are a bad idea. His spokesman Ford Porter wrote in a statement, “Governor Cooper’s goal is to increase access to health care, not take it away, and he is focused on expanding Medicaid to help more hardworking North Carolinians get coverage which will lower health insurance premiums for everyone.”

An email from a North Carolina Department of Health and Human Services spokeswoman signaled reluctance as well.

“By design, block grants can take health care away from people and leave states on the hook for millions of dollars,” the statement said. “We remain focused on responsible solutions that help North Carolinians get affordable health care, not take it away from them.”

They don’t anticipate anyone being affected by the block grant proposal unless the state chooses to submit a request for a waiver.

‘An alternate lane’ for Medicaid expansion

The shift proposed Thursday by Trump Administration officials would be significant on the national and state levels, as the health care safety net program created in the 1960s currently sends states money through an open-ended, as-needed basis. The more money North Carolina spends, the more the feds are on the hook and in recent years, federal dollars have covered about 67 cents of every Medicaid dollar spent in North Carolina.

CMS Administrator Seema Verma stressed that states don’t have to participate in Healthy Adult Opportunity. She said that the program will only affect a portion of the Medicaid population, leaving poor children, seniors and disabled persons out of the funding block formula. But participating states will be granted the flexibility to design coverage for beneficiaries under the program, she said.

“It’s not permission for states to strip benefits or limit eligibility …” Verma said. “It is not a change in coverage for Medicaid’s traditional population. The Healthy Adult Opportunity is  limited to adults who are not eligible on the basis of a disability and for whom state coverage is optional.”

On Thursday, CMS sent letters to state Medicaid directors telling them they can now apply for the program.

CMS Letter to Medicaid Directors (Text)

Thursday’s announcement could open up an alternate lane in North Carolina for Medicaid expansion if the new block grant program can deliver on the pledge to keep costs fixed for the state, said Rep. Donny Lambeth (R-Winston-Salem). The state House lawmaker has been pushing his own Medicaid expansion-like proposal, which would have included work requirements.

Block grants have been discussed in public health care circles for years and could alleviate worries from Lambeth’s fellow Republicans about the cost of expansion, Lambeth said.

“One of the criticisms of whether it was my plan or expansion is some of the uncertainty from Washington about funding, would the state be left holding the bag?” he said. “If you have a little bit more clarity at the federal level of how funding is going to work, that might help that discussion be a little more productive.”

Critics: Medicaid Block grants would harm people, states

The administration drew expected criticism from those advocating for expanded access, with groups such as the National Health Law Program and others already weighing legal challenges. Advocacy organizations warned that the block grants would upend decades of federal commitments to pay for state’s Medicaid needs.

“These block grants would be devastating for any state that attempts to implement them,” said Leo Cuello, the health policy director for the National Health Law Program. “Any irresponsible state leader that pursues this policy will be acting against his or her state’s interests – harming the state budget, rural hospitals, state health insurance coverage—and the people who depend on Medicaid for their health insurance coverage.”

Advocates for expanded access also said the proposed block grant program could set a dangerous precedent that may lead to other cuts over time.

An infographic of Medicaid by the numbers
Infographic credit: Liora Engel-Smith.

“Whenever we think about capitating Medicaid, what we worry about as child advocates are cuts to children’s services eventually,” said Michelle Hughes, executive director of NC Child, the statewide advocacy group focused on children’s outcomes.

CMS administrator Verma acknowledged the coming legal challenges in remarks she made to press Thursday morning, saying “those that want Medicaid to be business as usual are willing to weaponize the legal system to thwart state innovation at every turn.”

In North Carolina, a state that didn’t expand its Medicaid program, only a small portion of the nearly 2.2 million people currently enrolled could be affected by the block grant proposal.

The vast majority of Medicaid enrollees are children, seniors or those with disabilities who qualify for the federal safety net program regardless.

Any real changes would come if state leaders decided to look at this new plan as a way to expand Medicaid access to as many as 550,000 low-income adults largely struggling to afford health care coverage of its own.

Medicaid expansion by another name? 

Medicaid has been the elephant in the room when it comes to any state budget discussions in North Carolina. The $14 billion entitlement program, funded with a mix of federal and state dollars, is among the biggest programs the state handles. Nearly 2.2 million North Carolinians, about one in five people in the state, depend on Medicaid for health care coverage, making the program the de facto largest insurer in the state.

With the state’s current fee-for-service structure, where North Carolina essentially cuts a check for every Medicaid enrollee’s doctor visits and hospital stays, the annual fluctuating costs prompted the legislature in 2015 to move to a capitated managed care program. Under managed care, North Carolina will use its federal and state Medicaid dollars to pay a set rate to private health care companies and groups to handle people’s care.

The passage of the Affordable Care Act opened up avenues in many states to move  low-income adults, who struggle to afford health care coverage on their own, onto the Medicaid rolls. The expansion, intended initially to be mandatory, was curtailed by the U.S. Supreme Court in a case filed from largely Republican-led states. The court ruling made expansion optional, so far, all but 14 states have expanded their Medicaid programs. The hold-outs, which include North Carolina, have largely been more conservative or purple states in the Southeast.

Here in North Carolina, the fight over expansion has led to a stalemate last year over the state budget between Gov. Roy Cooper and his fellow legislative Democrats and Republican leaders in the legislature. Cooper and Democrats are pushing for expansion, demanding it be a part of any final budget discussions, while Republican leaders have thus far resisted their calls to expand coverage in the state. Caught up in the stalemate is the planned switch to managed care, which was indefinitely delayed this fall by N.C. DHHS Secretary Mandy Cohen because of the budget issues.

But it’s not yet clear what any of the states that didn’t expand Medicaid, including North Carolina, will do with the block grant proposal, said Matt Salo, executive director of the National Association of Medicaid Directors.

“There are certain issues in the Medicaid world that are inherently very divisive — abortion and religion and immigration and block grants,” Salo said. “And they’re going to generate very, very different feelings across the different states.”

And change, if it comes, likely won’t happen right away. The process of applying for changes, through a waiver process, is anything but speedy, and decision-makers in North Carolina would first have to get on the same page of what to do. And then there are the inevitable legal challenges the block grant program will see in the federal courts.

“Feds work slow, states work slow and it’s probably (the stage) of discussing things and thinking out loud,” Lambeth said.

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Sarah Ovaska is a freelance writer based in Orange County, who has called North Carolina home for well over a decade. She’s reported on criminal justice, education, health and government issues at publications...

One reply on “Federal proposal could change the face of Medicaid in North Carolina”

  1. Comment in the Winston-Salem Journal article by Laurie Coker: “We are already undertaking a major effort to improve on our Medicaid service system in North Carolina, which would seemingly be completely upturned. North Carolina does not need any more chaos and needs public dollars to be focused on high-quality, outcome-proven public services.

    “In spite of frustrations there may be with how our states use Medicaid, more flexibility in how dollars are used does not equate to progress if funding allocations continue to decrease.

    “Rather than purchasing innovation with high-quality service outcomes, block granting gives incentive for politically driven commercial productivity with little regard for purchasing actual health improving results.”

    Especially in our state’s current political climate, this change would be disruptive and would call for further funding decreases, and not really get at increasing accessibility or improving quality of care.

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