In this blog series, America’s Essential Hospitals will forecast the direction the administration might take on several aspects of Medicaid policy of importance to essential hospitals, including those related to expansion, social determinants of health, and program eligibility.

Since the passage of the Affordable Care Act (ACA) in 2010, Medicaid expansion has been a key policy in decreasing the uninsured rate and increasing access to care, particularly in vulnerable communities. Decisions made at the state and federal levels regarding expansion continue to evolve, even nearly a decade after the law’s passage.

The 2012 Supreme Court decision in National Federation of Independent Business v. Sebelius made Medicaid expansion optional for states. As of April, 36 states and the District of Columbia have opted to expand Medicaid, with 14 states choosing not to expand.

While many politically conservative states initially elected to forgo expansion, recent ballot initiatives and changing political dynamics have shifted the conversation on expansion in some areas. Virginia Gov. Ralph Northam (D) led his state to expand Medicaid following his election in 2017. In 2019, newly-elected Govs. Tony Evers (D-WI) and Laura Kelly (D-KS) vowed to do the same after winning their seats from Republican predecessors, despite opposition from their state legislatures. While Evers struck a deal to expand Medicaid in Wisconsin with work requirements, efforts in Kansas have stalled due to the legislature’s opposition.

Further, grassroots efforts in four non-expansion states have resulted in successful Medicaid expansion ballot initiatives, starting with Maine in 2017 and followed by Idaho, Nebraska, and Utah in 2018. Expansion from the three 2018 ballot initiatives could cover more than 300,000 previously ineligible individuals.

Meanwhile, at the federal level, states are seeking waivers from the Centers for Medicare & Medicaid Services (CMS) to create a more market-based approach to Medicaid expansion, partially expand the program, and even explore block grants and funding caps.

A Market-based Approach

From its earliest days, CMS under the Trump administration has put a strong emphasis on state flexibility in the Medicaid program. As a result, non-expansion states now see an opportunity to implement Medicaid expansion with politically attractive provisions for conservative governors and state legislatures that might have been denied under the previous administration. For example, CMS recently has encouraged and approved policies that build on market-based approaches approved under the Obama administration—including premiums and healthy behavior incentives. State policymakers have engaged with this new state flexibility in various ways, in many cases using it to create new eligibility criteria or restrictions on the expansion population, including work requirements and increased premiums.

To date, CMS has approved nine Section 1115 waivers that include work requirements. The waivers require the expansion population to work or participate in other community engagement activities for a set number of hours per month—and appropriately report their work to the state—to retain eligibility for the program. Exemption and penalty details vary by state. Several other states have pending work requirement waivers, including Nebraska, where state legislators added the policy to voter-approved expansion.

These waivers might entice governors in non-expansion states to expand their Medicaid programs if they are allowed to implement market-based approaches. However, the concept of work requirements faces an uncertain future as a federal judge recently struck down work requirements for a second time.

Partial Expansion

In addition to applying work requirements, non-expansion states are seeking ways to cover more individuals without implementing full Medicaid expansion. Several states have submitted waivers for “partial expansion,” a policy through which states expand Medicaid eligibility to individuals below the federal poverty level (FPL), rather than to those at or below 138 percent FPL as outlined in the ACA.

In Utah, state legislators passed a bill allowing the state to request partial expansion in an effort for the legislature to limit the scope of the voter-approved Medicaid expansion. Utah recently became the first state to receive CMS approval for a waiver with work requirements and partial expansion, which will be implemented in place of the full expansion approved by voters in 2018. It is important to note that Utah submitted a separate request to receive the enhanced federal matching funds granted to states to pay for their expansion populations. CMS is weighing whether to grant Utah these funds. Even before the ACA, states could elect to cover additional individuals through Medicaid, but Utah would be the first to receive enhanced federal funding for a partial expansion population. Utah’s waiver also included spending caps on its expansion population, cutting off enrollment once the cap is met.

Arkansas previously applied for a waiver that included scaling its expansion back to a partial expansion, but CMS did not make a decision on the change when the rest of the waiver was approved in March 2018.

Before Utah’s waiver approval, other non-expansion states expressed interest in a similar model. Recently passed legislation in Georgia authorizes the state to apply for a partial expansion waiver. In addition, Massachusetts in 2017 submitted a narrow amendment to their MassHealth waiver, which would cover only a partial expansion population. The state’s request is still pending with CMS.

The Wildcards: Block Grants and Per-Capita Caps

In 2017, Congressional Republicans floated the idea of Medicaid block grants as part of their efforts to repeal and replace the ACA. Block grants provide states a lump sum of funds to use for Medicaid, rather than matching state spending at a predetermined rate. Per-capita caps would similarly limit federal spending on Medicaid, leading to cuts in services for beneficiaries and payments to providers. To date, these proposals have not been passed by Congress. However, the president’s fiscal year 2020 budget request proposes that Congress repeal Medicaid expansion and give states the option to implement block grants or per-capita caps on the program.

While proposals to implement such measures have yet to be passed by Congress or approved by CMS, rumors have circulated around Washington that the administration will issue guidance to states on a new demonstration waiver that would incorporate block grants. In anticipation of this, Tennessee recently passed a bill requiring the state to submit a waiver request to CMS that would establish a block grant. Alaska Gov. Mike Dunleavy (R) also confirmed in a recent letter to President Trump that he is in negotiations with CMS to apply for a block grant waiver.

More Changes Expected

As the Trump administration continues to explore increased flexibility in the Medicaid program, we expect to see additional policies that push the boundaries of the agency’s authority. At the same time, the fate of Medicaid expansion in some early-adopting states is uncertain, as initiatives in their Section 1115 waivers begin to sunset with no clear next phase. Finally, pending litigation will determine how policies such as work requirements are implemented, as well as the fate of the ACA as a whole.

As the Medicaid program—including its expansion—continues to evolve at a rapid pace, it seems the only constant is change.