Trump admin shrinks federal Medicaid funding available to states
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The Trump administration is cutting off a key Medicaid financing tool used to help states pay for health care programs it says diverge from the program's core mission, including high-speed internet for rural health providers.
Why it matters: The change essentially reverts back to a policy from the first Trump administration and begins to flesh out the current administration's messaging about wanting to cut Medicaid expenses without touching benefits.
State of play: The Centers for Medicare and Medicaid Services told states last week that it doesn't plan to renew or approve new requests for federal matching funds for so-called designated state health programs.
- The arrangements aren't prudent investments because they raise federal spending without necessarily advancing Medicaid goals, CMS said.
- "To ensure this vital safety net continues to be available in the future, CMS is taking this action to safeguard the financial health of the Medicaid program," says a news release about the change.
Catch up quick: The policy change takes aim at CMS' practice of approving extra federal Medicaid dollars for states that are independently funding programs that wouldn't otherwise be eligible for federal Medicaid funds.
- These programs include high-speed internet for rural health providers in North Carolina, student loan repayments in California and in-home services, such as housekeeping, in New York.
- The arrangement doesn't directly fund these programs, but frees up state dollars so that states can continue funding these programs while also investing in Medicaid innovations and initiatives.
CMS first approved the arrangements in 2005. After a federal watchdog raised concerns with a lack of guardrails around the financing, the Trump administration in 2017 said it would no longer authorize or renew the programs.
- The Biden administration in 2020 reversed that policy and added new guardrails, before approving several funding arrangements.
- Arizona, California, Hawaii, Massachusetts, New York, North Carolina, Oregon and Washington currently receive the extra funding, per CMS. Tennessee has a similar but slightly different arrangement.
- CMS has authorized nearly $4 billion for New York through the designated state health program authority.
The announcement doesn't stop states from continuing to fund high-speed internet programs and other initiatives that get at social determinants of health and other public health goals, said Morgan Craven, a director of state programs and policy at ATI Advisory.
- But states with approved funding now need to think about how they'll sustainably replace these dollars once their current authorizations expire, she said.
