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Red states' Medicaid gamble: Paying more to cover fewer people

Illustration of a price tag hanging from an IV stand
Illustration: Sarah Grillo/Axios

Red states are getting creative as they look for new ways to limit the growth of Medicaid. But in the process those states are taking legal, political and practical risks that could ultimately leave them paying far more, to cover far fewer people.

Why it matters: Medicaid and the Children's Health Insurance Program cover more than 72 million Americans, thanks in part to the Affordable Care Act's Medicaid expansion. Rolling back the program is a high priority for the Trump administration, and it needs states' help to get there.

The big picture: The Centers for Medicare & Medicaid Services, under the leadership of Administrator Seema Verma, has made clear that it wants to say "yes" to new limits on Medicaid eligibility, and has invited states to ask for those limits.

  • But CMS hasn't actually said "yes" yet to some of the most significant limits states have asked for.
  • In the meantime, states are left either with vague ambitions they’re not sure how to implement, or with risky plans that put their own budgets on the line.

What we're watching: State-level Republicans are waiting for CMS to resolve two related issues: how much federal funding their versions of Medicaid can receive, and the extent to which they’re able to cap enrollment in the program.

  • “These issues are going to continue to be intertwined,” said Joan Alker, the executive director of Georgetown University’s Center for Children and Families.

Verma has reportedly told state officials that she wants to use her regulatory power to convert Medicaid funding into a system of block grants — which would be an enormous rightward shift and probably a big cut in total funding.

  • CMS probably cannot do that on its own, experts said, but it could achieve something similar by approving caps on either enrollment or spending.

Where it stands: GOP lawmakers in a handful of states are looking to Utah, which has bet big on Verma's authority, for signals about what's possible.

  • Utah voters approved the full ACA expansion last year, but the state legislature overruled them to pass a more limited version.
  • By foregoing the full expansion, Utah passed up enhanced federal funding. It's still asking for that extra money — a request CMS has never previously approved.
  • Utah will also ask CMS to impose a per-person cap on Medicaid spending — a steep cut that was part of congressional Republicans’ failed repeal-and-replace bill, and which may strain CMS' legal authority.
  • If Utah doesn't get those two requests, its backup plan is simply to adopt the full expansion.

What's next: Utah is not the only red state leaning into Verma's agenda, but it's further out on a limb than any other.

  • Idaho, like Utah, overruled its voters to pass a narrower Medicaid bill. But it preserved an option for people to buy into the ACA's expansion.
  • Alaska Gov. Mike Dunleavy has said he wants to take Verma up on her offer of block grants; so have legislators in Tennessee and Georgia. But in the absence of any detail about what that means, or what CMS will approve, that's all pretty vague right now.

If CMS does move forward on any of this, it could face the same threat of lawsuits that have stymied its first big Medicaid overhaul — work requirements.

  • Those rules are on ice in two states because a judge said they contravene Medicaid's statutory structure and goals. The same argument could await a partial expansion or tough spending caps.

“There’s a clear agenda here to get a handful of states to take up these waivers, which fundamentally undermine the central tenets of the Medicaid program — which [are] that it is a guarantee of coverage, and a guarantee of federal funding,” Alker said.

Go deeper: Medicaid is the ACA's workhorse