Later this week, the Trump Administration will be rolling out their guidance to states on how to apply for Medicaid block grants:
— Dan Diamond (@ddiamond) January 25, 2020
The first guarantee is that any state that files for a block grant will be generating an amazing number of billable hours for lawyers. Nick Bagley explains:
Setting aside the dubious policy merits of block grants, however, I don’t think the proposal is legal. I don’t even think it’s close.
Under section 1903 of the Medicaid statute, the federal government must pay a fixed “match rate” (known in the statutory lingo as “the Federal medical assistance percentage”) to every state that participates in Medicaid. In Tennessee, the match rate is 65.21%. That means that, for every $1 that Tennessee spends on its Medicaid program, the federal government kicks in about $2….
As Tennessee recognizes, it’ll need a waiver from HHS to make these changes. And section 1115 of the Medicaid statute does allow HHS to waive lots of the law’s restrictions in connection with experimental projects that are likely to assist in promoting Medicaid’s objectives.
Now, I’ve written before that I’m not at all sure that block granting Medicaid counts as an experiment that serves Medicaid’s purposes. But there’s a more fundamental problem with Tennessee’s proposal. You can’t use section 1115 to waive section 1903. To the contrary, section 1903 is pointedly omitted from the list of statutory provisions that HHS is empowered to waive.
But let’s put aside the legal gymnastics of storming that castle for a moment. Let’s think about what happens to a state that chooses to block grant when faced with a shock?
- Major hurricane that destroys a lot of public health infrastructure and creates a lot of sudden, unanticipated morbidity and mortality?
- New virus that is readily transmittable with significant symptoms and care needs?
- New drugs/treatments that have high first year costs but are massive net present value savers under any reasonable discount rate after five or ten years?
- A family of clutzy triplets who all have inhibitor resistant hemophilia moving across the state line ?
All of these are shocks to the payment system. All of them could readily increase first year costs significantly. Under the current system, the cost of a shock is split between the federal government and the state government. The cost of the shock is split 3:1 in Mississippi and 1:1 in Massachusetts for legacy Medicaid and 9:1 federal/state for expansion. The ratios differ as the federal government,which has the best capacity to eat risk and bad luck in the world, bears a good chunk of the risk.
Under a pure block grant, the federal government bears no risk of a shock. Instead that risk is shifted entirely to a state government whose risk bearing capacity is orders of magnitude less than the federal risk bearing capacity.
That is what a block grant will do when a state is faced with a shock.