CMS to allow Medicaid funding caps: 5 things to know

An optional program is now available for states seeking greater flexibility over their Medicaid programs, CMS said Jan. 30. But with more flexibility would come an annual cap in federal funding.

Five things to know:

1. The program, called the Healthy Adult Opportunity, rebrands the government's block grant approach. Under the program, states can submit a waiver to use an annual budget neutrality limit for the Medicaid program, but only for able-bodied adult members under age 65. The budget can be calculated in aggregate or on a per-capita basis.

2. CMS said while federal funding would be capped under this approach, federal financial participation will continue, meaning states will still have to submit claims reflecting actual spending to get federal matching funds for Medicaid. Current policies match Medicaid funding based on spending.

3. The trade-off? States could share in savings if Medicaid spending is less than the annual budget, but only if they meet certain performance measures. States could also use copays to push Medicaid beneficiaries toward higher-value services and create their own prescription drug formulary, though it has to maintain coverage for HIV and mental health prescriptions. Additionally, states could waive retroactive coverage eligibility for members.

4. Legal experts have long argued that capping federal spending for Medicaid requires congressional approval, and any state opting for the waiver could face lawsuits. On a Jan. 30 call with the media, CMS Administrator Seema Verma said the government is not changing the financing structure of the program and feels it has a strong legal case.

5. CMS argues the changes are necessary to ensure Medicaid remains solvent and sustainable. By 2027, CMS expects to spend more than $1 trillion on Medicaid, representing 3.3 percent of gross domestic product. Still, Democrats and health advocacy groups oppose the measure. U.S. Sen. Patty Murray, D-Wash., a ranking member of the Senate Health, Education, Labor, and Pensions Committee, said the policy "will result in fewer doctors and lost benefits" for low-income Americans.

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