Utah is testing the Trump administration’s dreams of limiting Medicaid spending

(Francisco Kjolseth | The Salt Lake Tribune) Gov. Gary Herbert is surrounded by state representatives in the Gold Room of the Utah Capitol on Tuesday, March 27, 2018, as he sign H.B. 472 - Medicaid Expansion Revisions, which would expand Medicaid healthcare coverage to cover an additional 60,000 Utahns below the poverty line — pending approval from the federal government.

The Trump administration is contemplating some time-sensitive questions about how far states can go in shrinking Medicaid spending, as its top health officials seek to remold the low-income insurance program into a more conservative shape.

It all revolves around how the Department of Health and Human Services responds to a request from Utah, which is seeking to expand its Medicaid program less than three weeks from now. But despite pressing questions from Democrats, HHS Secretary Alex Azar provided few hints yesterday to the House Energy and Commerce Health subcommittee in a hearing on President Donald Trump’s budget request.

"I see the direction you're going with this, and I don't like this," Rep. G.K. Butterfield, D-N.C., told Azar. "But you answer to the president, and the president has the notion of taking Medicaid in the wrong direction."

By April 1, Utah needs federal approval for its new plan to only partially expand Medicaid. Under the plan, which the state legislature passed to override a November ballot resolution, Utah would expand Medicaid only to people earning up to 100 percent of the federal poverty level - not the 138 percent threshold envisioned under the Affordable Care Act.

To improve the plan’s chances for approval from the GOP-led administration, the state is also asking for its federal Medicaid contributions for the newly eligible patients to be limited to a fixed amount per enrollee - a so-called “per capita” structure congressional Republicans suggested in their 2017 health-care bills as a way to cut Medicaid spending overall. A spokesman for the state’s health department said the state “anticipates” opening enrollment on April 1 and is preparing for that date.

The administration has already gone out on a legal limb by approving Medicaid work requirements in several states, which are being challenged in court. If it goes along with Utah's request, it would set new precedents for how state and federal governments can seek to limit spending on Medicaid - which covers nearly 1 in 5 low-income Americans - and whether states may only partially expand the program under the ACA.

It's clear that lowering Medicaid spending is a fervent wish of the administration. Like its budget request last year, the White House's latest proposal suggests a cut of nearly $1.5 trillion in Medicaid over a decade and for $1.2 trillion to be added for the block grants or per-person caps that would start in 2021 (a block grant would also limit Medicaid spending by providing the federal portion in a single lump sum instead of as a percentage of states' total costs).

And earlier this year, a small group of people within the Centers for Medicare and Medicaid Services were working on a plan to allow states to ask for their Medicaid dollars to be provided via block grants. Butterfield sharply criticized that effort at the time, and yesterday drilled Azar on how it was going.

"Does the administration believe you have the authority to block grant Medicaid on your own without the participation of Congress?" Butterfield asked Azar.

Azar noted that states may request waivers for making changes to their Medicaid programs -- including for block grants (or, presumably, a per capita cap a la Utah). He said if HHS were to receive that kind of a proposal, "we would have to assess that with our legal counsel" and with the White House Office of Management and Budget.

Butterfield said such a move would create a "firestorm" because of the benefit cuts Medicaid programs may be forced to make under a block grant system. "It's deeply troubling to see this administration double down," he said. "It appears you're going to be aggressive with this."

The administration is juggling a lot of balls on Medicaid right now, as it seeks to open pathways for states to implement stricter rules. On Thursday, a federal judge in the District of Columbia is scheduled to hear oral arguments in a lawsuit challenging Kentucky and the administration for seeking to implement work requirements.

The work requirements have created their own firestorm of sorts, becoming a focal point for Democrats and progressives who accuse the administration of trying to undermine Medicaid's core goals of providing health insurance to low-income Americans.

In turn, Azar and CMS Administrator Seema Verma have stressed their goal is to enable people to ultimately leave the Medicaid program by obtaining coverage through a job. Azar repeated that argument yesterday.

“We believe it’s a fundamental aspect for able-bodied adults, if you are receiving free health care from the taxpayer, that it’s not too much to ask you would engage in some form of community activity,” Azar told the subcommittee.