HHS Secretary or Not, Seema Verma Could Redefine Medicaid

She helped craft Mike Pence’s conservative approach to expanding Medicaid in Indiana. Now, the CMS administrator is one of President Trump's top contenders to replace Tom Price.
by | October 24, 2017
Seema Verma
(Getty Images)

Earlier this fall, the most recent congressional attempt to repeal and replace the Affordable Care Act was eclipsed when a seemingly small story broken by Politico started getting more and more headlines. Health and Human Services Secretary Tom Price -- considered a fiscal hawk during his tenure in Congress -- had been flying private planes to events, costing taxpayers hundreds of thousands of dollars. The drumbeat of bad press grew louder, and Price eventually resigned just before 5 p.m. on the last Friday in September.

One name immediately emerged as a top contender to replace him: Seema Verma, the administrator of the Centers for Medicare and Medicaid Services (CMS). For now, Eric Hargan, who held leadership positions at HHS under President George W. Bush, has been installed as the interim secretary, and by mid-October President Trump had not yet nominated a full replacement. But much of the initial inside-the-Beltway chatter about a permanent replacement centered squarely on Verma.

There’s good reason for that. A former health policy consultant based in Indiana, and the chief architect of that state’s conservative health-care plan under Gov. Mike Pence, Verma now oversees the nation’s $1 trillion Medicaid system, the federal- and state-funded health-care program for the poor and nearly poor. She was a key player in repeal and replace efforts earlier this year, reportedly sitting in on meetings with Senate Majority Leader Mitch McConnell and on-the-fence Republicans. In fact, when Price was embroiled in the scandal that led to his resignation, Verma was also reportedly taking meetings on Capitol Hill without him.

 All of this means that Verma has found herself in an interesting position this year, tapped by a Republican president to help uphold a law, passed by a Democratic president, that both she and her boss have actively been trying to dismantle. When the Congressional Budget Office released estimates in July that Republicans’ proposed health-care changes would result in 22 million people losing health coverage, Verma publicly spoke out against the CBO’s numbers, saying they overstated the impact that repeal would have. She maintains that she is going to uphold Medicaid as it stands. But she is nonetheless implementing changes that could radically remake the way America cares for its poorest citizens for decades to come.

One sunny September afternoon, before the Price scandal broke, Verma sat in a conference room in the drab Hubert Humphrey federal building, just south of the National Mall, and laid out her vision for Medicaid as a temporary backstop for people in need. Other than a few jokes about the office’s dated 1980s decor, Verma stayed relentlessly on-message. “The goal of the program should be to help people rise out of poverty,” Verma said. For able-bodied adults, the program should be “a stepping stone, not a long-term plan. We should be aiming higher.”

Trump signed executive orders earlier this month that made sweeping changes to private insurance markets and subsidies under the Affordable Care Act (ACA). But Medicaid remains untouched for now and can’t be changed without congressional action. Throughout the repeal and replace efforts in the past year, one of the core disagreements has been over what to do about Medicaid. A complete repeal of the ACA would mean pulling the plug on Medicaid expansion, under which 32 states took federal money to allow people with incomes up to 138 percent of the federal poverty level to get coverage. Congressional Republicans might not like to admit it, but the expansion has been popular in the states that have participated. Both Democratic and Republican governors warned their congressional representatives that there will be consequences if it gets dissolved.

At the heart of Verma’s goals for Medicaid is the desire to loosen bureaucratic restrictions while emphasizing that recipients “take personal responsibility” for their own health care. The idea of personal responsibility in health care has become a core Republican party value, and it reflects a growing divide that emerged from the ashes of repeal and replace efforts. While there’s mounting consensus that universal coverage is good, there’s a fundamental disagreement on how to get there. Democrats think health care is a right that should be guaranteed by the government. Republicans -- and Verma -- argue that health-care recipients must have “skin in the game” for the system to work properly.

That’s not how the Obama administration saw things. The ACA allowed states to submit waivers to tweak the law for their unique populations, but the government was quick to deny any plans that included things like work requirements, drug testing and caps on how long a person could be covered under Medicaid.

Verma wants to allow states to experiment with those and other ideas in an effort to help encourage Medicaid recipients to find private insurance coverage. Just after her confirmation in March as CMS administrator, Verma and Price sent a letter to all 50 of the nation’s governors urging them to rethink their existing Medicaid programs. “The best way to improve the long-term health of low-income Americans is to empower them with skills and employment,” they wrote. “It is our intent to ... review and approve meritorious innovations that build on the human dignity that comes with training, employment and independence.”

Unsurprisingly, many Democrats and progressives take issue with that approach. They fear that Verma and her team will transition Medicaid away from an open-ended entitlement into more of a welfare program, like the Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families, where recipients must continually prove they deserve the benefits. “I would imagine in some states it will start to look like a welfare program,” says Laura Hermer, a health-care law professor at the Mitchell Hamline School of Law. “In 2013 when she was grousing about the Obama administration to Congress, she mentioned that Indiana requires contributions. She’s trying to change this [approach of] guaranteed assistance if you’re eligible.”

Hermer is referring to congressional testimony in which Verma said that states should require Medicaid recipients to be active partners in their own health, rather than simply receiving benefits from the government. That approach helped Indiana improve its health-care system, she told Congress. “Indiana’s Healthy Indiana Plan ... applied principles of consumerism with remarkable results, lowering inappropriate ER use and increasing prevention.”

But research suggests that a Medicaid program requiring personal responsibility of its recipients has mixed results. While expanding coverage is positive, a report from the health policy firm the Lewin Group found that Indiana’s version of Medicaid expansion wasn’t meeting its enrollment goals, and requiring recipients to pay premiums was often a confusing administrative barrier. 

Many critics simply don’t agree that work requirements and other mandates have any place in a health-care plan. “Medicaid’s purpose is not to encourage employment or train people. That’s the Department of Labor’s job,” says Jessica Schubel, Medicaid policy expert with the left-leaning Center on Budget and Policy Priorities.

Others say that work requirements are a burdensome solution to a relatively minor problem. The Times of Northwest Indiana reported in September that fewer than 30 percent of Indiana’s Medicaid recipients would be required to comply with a work requirement mandate.

The real concern, says Schubel, isn’t just that the administration might now allow conservative states more leeway to add their own work requirements and other standards. It’s that CMS might actively start pushing those into other states as well. “There’s a tranche of about 10 states that have been considering these much more conservative elements,” Schubel says. “I don’t think we’ll see every state adopting them. What does concern me is a state coming to CMS with a straightforward waiver request, and CMS in turn pressures these states to implement these punitive measures.”

 

As governor of Indiana, Mike Pence, left, relied on Verma to help craft his conservative approach to expanding Medicaid. (AP)

 

Verma’s experience in Indiana is vital to understanding her approach to Medicaid. The daughter of immigrants from India, she was raised in a Democratic household and planned a career in medicine; she later shifted to health policy. Early on, she worked in Washington, D.C., on HIV/AIDS programs at the Association of State and Territorial Health Officials.

When she first came to work in Indiana in the mid-1990s for the Marion County Health and Hospital Corporation, she leaned more liberal, says Mitch Roob, then the CEO of that organization. “Over time in her health work,” Roob says, “she realized that a conservative ideology was the only one that’ll win the day.” (Verma says that prior to working for Marion County, she didn’t have much of a political ideology one way or another.)

Marion County encompasses Indianapolis, and Roob was used to high concentrations of uninsured patients. He says it was one of his key frustrations. “We wanted to empower people of the county so they could get continuity of care,” he says. But there was no way for these low-income patients to get care if they weren’t eligible for Medicaid, let alone take responsibility for their own care. To develop a solution, Roob and Verma spent months looking at community health-care models across the country, and logged “hundreds of hours in neighborhoods talking to people about their care needs, and talking to doctors too,” he says. In 1997, they launched the Wishard Advantage program. Financed through city and county property taxes, the program subsidized health care for 40,000 uninsured or underinsured residents of Marion County with incomes up to 200 percent of the federal poverty line. Residents who qualified paid for care on a tiered structure based on their income. Perhaps surprisingly, it lacked work requirements or time limits, but unemployed recipients were required to show proof they had a working adult helping them pay bills. The program was phased out in 2014 after the Affordable Care Act went into effect.

In 2001, Verma left county government and launched a private health policy consulting firm called SVC Inc. She gained national recognition for helping Republican-led states adopt more conservative elements to their Medicaid programs and, later, into their ACA implementation.

When Mitch Daniels became the governor of Indiana in 2005, he set his sights on addressing the state’s uninsured population -- and he wanted to do it in a market-driven way similar to Marion County’s. “I wanted health savings accounts for poor people,” Daniels says today. “I wanted to treat them with dignity, and introduce an element of the free market there.”

A year later, when a group of health officials, including Verma, presented a policy proposal to Daniels, he was unimpressed. “I threw them out the first time,” he says. “It was a plan that looked too much like traditional Medicaid.” As the team went back to the drawing board, Verma took the lead in crafting a new plan. She came back to Daniels with a proposal that included private health savings accounts and a requirement that benefit recipients must contribute at least some of their own money in order to stay covered.

Daniels liked the plan, and he relied on Verma to help shepherd it through the state legislature, which at the time included a Republican-controlled Senate and a Democratic-controlled House. “She worked with the Democratic majority in the House in drafting the language, so she knows how to work across the aisle,” says Republican former state Rep. Pat Miller, who at the time served as the chair of the House public health committee.

The first iteration of the Healthy Indiana Plan started enrolling residents on Jan. 1, 2008. Adults with incomes up to 200 percent of the federal poverty level could now be covered for preventive care visits. But they were expected to contribute up to 5 percent of their monthly income into so-called POWER accounts that helped cover a $1,100 deductible. If they missed a payment, they lost coverage and couldn’t enroll again within the next 12 months. Verma was at the heart of this rollout, says Daniels. “I try to avoid using this word, but she’s passionate about better care. She was easy to work with and had a sense of humor, which was important for our group.”

Some of the Healthy Indiana Plan provisions might sound punitive, but states in the pre-ACA era had few options for broadening health coverage to include people above the poverty line. “Our uninsured gap was much bigger than a lot of states. It was huge,” says Brian Tabor, president of the Indiana Hospital Association. “Hundreds of thousands had no options for coverage. Without that program, we wouldn’t have the momentum to expand Medicaid [years later].” However, there were limits to Healthy Indiana. Enrollment for childless adults was capped at 36,500 people, and the Kaiser Family Foundation estimated that in 2014 total enrollment was about 45,000 -- a fraction of the eligible population.

When the Affordable Care Act did become law, Daniels’ successor as governor, Mike Pence, determined that he wanted to expand Medicaid in his state while keeping the conservative elements of the Healthy Indiana Plan. It took two years of negotiations -- with Verma at the heart of them -- but the Obama administration finally approved the Healthy Indiana Plan 2.0 in January 2015. This plan expanded coverage to all who qualify under the federal law, but it also kept the POWER accounts that recipients are expected to pay into monthly. However, the lock-out period for not paying was reduced from one year to six months.

Verma’s experience negotiating and implementing health policy with Roob, and later for Daniels, was foundational to her current health policy beliefs, she says. “It showed me how important it is to empower all individuals to take ownership for their health and that those served by public assistance are capable and want choices about their health care.”

 

After Tom Price’s abrupt resignation, many Beltway insiders predicted Verma would be nominated to replace him. (AP)

 

Thanks to her work helping draft Medicaid waiver requests -- she consulted with half a dozen states in addition to Indiana -- Verma says she has a unique perspective now that she’s on the other side of the equation. “Part of my job as a consultant was to negotiate on behalf of states with CMS. It was a very difficult process,” she says. “I thought they’d be a partner, but instead they would often be the biggest barrier to getting creative solutions accomplished.”

That’s something Verma wants to change. There’s broad agreement that getting waivers approved is a burdensome process. The National Association of Medicaid Directors supports waiver reform, suggesting that the approval process should be more efficient, that states should be able to piggyback on common waivers and, eventually, that some waivers should become permanent. Right now, states must reapply every four years. Revamping the waiver process will take time, Verma acknowledges. In the meantime, she says, “we’re very supportive of states applying for waivers. We want to be as flexible as possible. We’re working on making it easier, doing them faster and quicker.”

Verma also wants greater transparency, including publishing more local-level health data, so people can have more information about the quality of care in their county and state. Just as the health-care industry is starting to hold doctors accountable on value, states should be held to similar standards. “We want to start publishing their outcomes on a variety of different metrics,” she says.

But state officials are starting to get antsy. As of early October, the waivers from states asking for more conservative elements in Medicaid still hadn’t been approved. Eighteen states have waivers pending with CMS. Six states want to impose work requirements. Wisconsin wants to implement drug testing. And most conservative of all, Maine wants to require upfront asset tests, which would screen applicants’ cash savings and property values in addition to their income, a practice that was specifically prohibited by the ACA.

Some critics have accused the Trump administration of purposefully dragging its heels on approving these and other waivers -- even denying waiver requests from conservative states -- in an effort to deliberately sabotage the ACA. Earlier this month, The Washington Post reported on a request from Republican-controlled Iowa to revamp its foundering health insurance marketplace and allow greater competition among providers. It was a decidedly conservative proposal. But when Trump caught wind of the request in late August, he personally called Verma and told her to deny the request, according to the Post

It was an unusual intervention by a president, and critics said Trump was attempting to undermine the law by opposing any efforts to make it more efficient. New Hampshire U.S. Sen. Maggie Hassan called on the administration to drop its “attempts to sabotage health-care markets and raise health-care costs for millions.” Oklahoma recently withdrew a pending waiver similar to Iowa’s, criticizing the administration’s sluggish approach to responding to the state’s request.   

Until more waivers are approved or rejected, it’s tough to say what Verma’s -- and Trump’s -- impact on Medicaid will really be. If she does become the next HHS secretary, it’s safe to assume that she’ll continue or even step up her efforts to work with Congress to repeal the ACA. But even if that law remains entirely or mostly intact, Verma could still make enormous changes to Medicaid programs that would reverberate for a generation.

She says she remains convinced that a conservative, “skin-in-the-game” approach to Medicaid is the best way forward. But she’s also adamant that she won’t push that vision out to the states. Governors, state lawmakers and Medicaid directors should be free to determine their own approaches, she says. “I think there are a lot of good ways to get good outcomes. I don’t presume to have all of the answers.”

*This story appears in the November 2017 print issue of Governing. This online version has been updated.

*CORRECTION: A previous version of this misstated where Laura Hermer is a professor.