Trump Medicaid Overhaul Will Spark Furious Election-Year Fight

Trump Medicaid Overhaul Will Spark Furious Election-Year Fight

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Plus: Scoring Sanders’ Medicare-for-All plan
Friday, January 31, 2020

Trump's Medicaid Overhaul Will Spark Furious Election-Year Fight

The Trump administration on Thursday set off a fight over Medicaid by officially opening the door for states to apply to convert part of the program into block grants — a controversial structure that, instead of providing open-ended federal funding, would have the U.S. government send states a lump sum of money or a specific amount per enrollee. In exchange, states would get unprecedented flexibility in how they implement the safety-net program, including the ability to limit who is eligible and restrict the prescription drugs covered.

Axios’s Sam Baker spells out why it matters: “Medicaid covers about 70 million people — more than Medicare. It’s the biggest item in many states’ budgets. It is a huge part of the health care system, and the Trump administration has been fully committed, since day one, to shrinking it.”

Medicaid spending totaled $593 billion in fiscal year 2018, with 62.5% paid by the federal government and 37.5% financed by states, according to the Kaiser Family Foundation.

Here’s what else you need to know.

This is a big change: Kaiser Health News’s Rachana Pradhan and Phil Galewitz explain why the administration’s initiative is so momentous:

“Medicaid, a federal-state health program that covers 1 in 5 Americans, has been an open-ended entitlement since its beginning in 1965. That means the amount of money provided by the federal government grows with a rise in enrollment and health costs.

“The administration said the new program would allow states to offer patients more benefits while controlling government spending. But the plan was assailed by Democrats, consumer advocates and health providers as undermining efforts to serve the poor.”

And a long-time conservative goal: Though the Trump administration isn’t using the term block grants, instead calling its plan “Healthy Adult Opportunity,” the basic idea has been embraced by conservatives dating back to the Reagan administration. “Conservatives complain that the [current] financing formula encourages states to spend more so they can secure more federal money, while a block grant would prompt them to better control costs,” CNN’s Tami Luhby explains. Supporters tout the idea of block grants as a way to both rein in Medicaid spending and give more control to states, which they argue are best positioned to determine the needs of their populations and structure health programs.

Critics charge it will harm patients: Opponents, including a coalition of 27 patient and consumer groups, argue that fixed block grant payments and the broad authority they come with would likely lead states to limit enrollment, cut benefits, lower provider payments or raise patient costs.

Under the new guidance, states could seek to limit the number of drugs they cover, introduce additional or higher out-of-pocket costs or eliminate some current Medicaid benefits. The proposal would also pare back federal oversight of the private health insurers that states pay to manage their Medicaid programs.

“Per capita caps and block grants are designed to reduce federal funding for Medicaid, forcing states to either make up the difference with their own funds or make cuts to their programs that would reduce access to care for the patients we represent,” the coalition said. “Simply put, block grants and per capita caps will reduce access to quality and affordable health care for patients with serious and chronic health conditions.”

The administration’s plan is optional, and it wouldn’t apply to all current Medicaid enrollees: States aren’t required to switch to the block grants, and those that want to will have to get approval from the federal government. “It remains unclear how many of the 14 states that have not expanded Medicaid — typically with Republican leaders — will be drawn to do so now with the block-grant option,” The Washington Post’s Amy Goldstein says.

For states that seek to switch, the block grants would apply “only to financing health insurance for able-bodied adults — primarily for people slightly less poor than traditional Medicaid recipients and who have joined through expansions of the program under the Affordable Care Act,” Goldstein explains. Kaiser’s Pradhan and Galewitz add that states could also decide to include certain pregnant women and low-income parents, because their coverage is not mandated by federal law.

The political impact will be felt before any on health. It’s reportedly unlikely that any state would get a waiver under the program this year — but the plan is certain to be used by Democrats running for president as an example of how the Trump administration is undermining the health-care system and social safety net. As that political battle plays out, legal challenges are likely as well.

Read more at Kaiser Health News.

Sanders’ Medicare-for-All Plan Would Boost Life Expectancy, but Its Cost Is Highly Uncertain: Report

Sen. Bernie Sanders’ Medicare for All plan would provide considerable health benefits for Americans, according to a new report from the Penn Wharton Budget Model, but its economic and budgetary impact is far less certain, with much depending on how it is financed.

The Penn Wharton analysis finds that by 2060, Sanders’ universal health plan would add nearly two years to average life expectancy in the U.S., grow the population by 3%, boost worker productivity through better health and reduce the share of the population that is seriously ill by two percentage points.

The estimated economic cost of the plan varies widely, though, depending on how it is paid for. Penn Wharton modeled three financing options: premiums, payroll taxes and deficit spending.

  • If Medicare for All is paid for by issuing more debt, Penn Wharton projects a roughly 24% reduction in GDP by 2060, relative to the baseline, due largely to the crowding out of private investment and a smaller capital stock.
  • Payroll financing would have more modest negative effect, producing a 15% smaller economy.
  • Using premiums, however, would have no negative effect on GDP growth, producing a 0.2% larger economy in 2060.

Similarly, the plan’s effect on the national debt depends on its financing. Deficit financing would nearly double the national debt by 2060. Using payroll taxes would increase the debt by 4.3%, while a premium model would shrink the debt by about 12.7%.

A bottom line that’s a moving target: The Penn Wharton analysts have good reason to be uncertain about the plan’s ultimate cost, since Sanders has refused to provide details, citing the inherent complexity of health care spending and the politic surrounding it. In response to a question from "CBS Evening News" anchor Norah O'Donnell last week about how much Medicare for All would cost, Sanders said, "You don't know. Nobody knows. This is impossible to predict."

Quote of the Day

“Deficits are not always problematic, by a long shot. It’s just that our current ones have been induced by wasteful, regressive, inequality-promoting tax cuts.”

– Jared Bernstein, chief economist to former Vice President Joe Biden, in a Washington Post column arguing that the United States is “borrowing money for all the wrong things.”

Your Prize for Making It Through the Week

Before you watch Super Bowl LIV — and a whole bunch of high-priced ads, political and otherwise — on Sunday evening, check out some of the wild prop bets surrounding the game. Will Demi Lovato complete the national anthem in less than two minutes? Will the opening coin toss be heads or tails? Which player will be named MVP?

The Washington Post has a handy printable prop bet contest sheet that could help add some fun to your Super Bowl party.

Have a great weekend! Next week looks like a busy one. Send your tips and feedback to And please tell your friends they can sign up here for their own copy of this newsletter.


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