The 1995 Medicaid block grant provisions contained in the Balanced Budget Act of 1995 that was sent to (and vetoed by) President Clinton consumed 100 pages of dense legislative drafting. The block grant provisions of the American Health Care Act (AHCA)—which faces an imminent vote on the House floor—are much more efficient, taking up about eight pages in the House Manager’s Amendment (Policy Changes).

Read in some detail—although there is not much detail to read—the block grant option can be read as an astonishing expression of legislative policy, and even more so perhaps, a statement of child health policy. The lax nature of the amendment can be seen in the lack of federal integrity controls over hundreds of billions of dollars in federal spending. And the public health implications of the amendment can be seen in the degree to which the provision would—as a statement of general federal policy—move the role of government away from ensuring access to adequate health care for its very poorest residents, who, under the amendment’s terms, disproportionately are infants and children.

Titled “Flexible Block Grant Option for States,” the amendment adds a coda of sorts to the bill’s new Medicaid per capita cap payment system. Under the amendment, states would have an option to receive a certain portion of their federal Medicaid funding in the form of a block grant. A state would opt for the block grant model on a 10-year basis and would qualify for block grant funds simply by filing a state 10-year plan with the HHS Secretary; the state’s plan would be deemed approved if the agency fails to stop the clock within a 30-day window because the proposed plan is either “incomplete” or “actuarially unsound.”

Because there are virtually no requirements, it won’t be too difficult for states to write such a plan. A state’s plan must indicate which block grant eligibility categories the state wishes to include in its option. For the populations included in these categories, the plan must provide “block grant health care.” (More on what this might actually mean below.)

In terms of the categories of individuals to be incorporated into the block grant, states will have two choices. Under the first choice, beginning as early as October 1, 2017, a state could choose a block grant that includes all poverty-level children for whom coverage is mandatory, newborns deemed automatically enrolled in the program, and working-age adults who are neither disabled nor part of the optional ACA adult expansion population. These adults would consist of pregnant women and very poor parents and caretakers who meet Medicaid’s traditional financial eligibility rules — that is, they make less than half the federal poverty level. States taking this “children and caretaker/parents” block grant option would have to cover only children and pregnant women and therefore could entirely cut out the very poorest parents and caretakers for whom coverage is now mandatory. Under the second choice, a state could simply block grant its traditional working-age adults, leaving children out of the mix. States that choose the second option would be obligated to cover pregnant women, but the obligation would end there. As in the first option, all other adults apparently could be eliminated, and since the funding is block granted, either option would allow states to keep the surplus.

Disappearing Coverage Standards

What kind of health care would states operating block grants need to finance for block-granted eligibility groups? The amendment virtually eliminates any coverage obligations. (Block grant states would have to undergo audits to ensure that they were spending their block grants on block grant health care. The audit would be conducted by the state and “made available” to the Secretary. Children and adults whose care is financed through the block grant would receive “block grant health care assistance.”

In what can only be described as a feat of drafting circularity, this term is defined as “assistance for health care-related items and medical services for block grant individuals within the applicable block grant category for the state” under a state’s 10-year plan. Certain minimum benefit classes are listed: hospital care; surgical care and treatment; medical care and treatment; obstetrical and prenatal care and treatment; prescribed drugs, medicines, and prosthetic devices; other medical supplies and services; and “health care” for children under 18 years of age. Beyond this, the amendment does away with Medicaid’s current coverage standards, virtually all of which date to 1965: its requirement that coverage levels be reasonable; its detailed definition of what constitutes medical assistance; and its cost-sharing rules.

Presumably the amendment’s “health care for children” coverage requirement is meant to suggest that the bill would retain some type of pediatric focus on the very poorest children. Obviously this language eviscerates Medicaid’s special early and periodic screening diagnosis and treatment (EPSDT) coverage standard for children — an unprecedented definition of what coverage means for low-income children that has been part of Medicaid since 1967. But perhaps even more amazingly, the amendment’s pediatric coverage language does not even rise to the less generous, but still robust, coverage standard that applies to children who receive services under the Children’s Health Insurance Plan (CHIP) block grant. Apparently, the nation’s very poorest children do not rate even at the CHIP coverage standard.

Block grant funding would be frozen at a state’s 2019 enrollee figure updated each year by the annual consumer price index for urban consumers — not even the Consumer Price Index adjusted for medical care. There apparently would be no adjustments possible for population growth, unforeseen changes in service intensity or technology, or major spending surges resulting from natural disasters. States could hold onto any funding they don’t spend to use in future years, obviously encouraging systematic underspending in terms of both who qualifies for block grant health care and what that health care consists of. Federal payments would be at the enhanced federal funding levels used under CHIP (Note 1); states would be responsible for the remainder.

Other than the audit requirement, the amendment appears to eliminate all federal Medicaid administration requirements: a state’s obligation to allow anyone to apply for assistance; a state’s obligation to provide medical assistance with reasonable promptness to people found eligible; a state’s obligation to set qualification standards for providers and to adhere to minimum qualification standards for managed care entities; a state’s obligation to maintain an anti-fraud oversight system; a state’s obligation to maintain the efficiency and quality of care.

The amendment is silent on the question of whether states accepting a block grant would continue to qualify for various supplemental payments outside the aggregate cap that are available under the per capita cap financing system (e.g., administration costs, disproportionate share payments).

Note 1

The bill is not clear whether the CHIP level would be at the normal CHIP enhancement rate (which is about 15 percentage points higher than a state’s federal medical assistance percentage) or instead, at the super-enhanced rate set under the Affordable Care Act beginning in 2016 and ending September 30, 2019. This super-enhanced rate boosts states’ enhanced CHIP funding by 23 percentage points, up to a cap of 100 percent federal funding. Both degrees of federal funding are found in the section of the CHIP statute to which the House bill refers; presumably states would enjoy super-enhancement for the first two years of the new block grant option.