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The Limits to Trump's Medicaid Freedom for States

The president promised to give states more flexibility on health care. His administration has -- but with some restrictions.

CMS Administrator Seema Verma, right, listens as President Donald Trump speaks.
(AP/Evan Vucci)
Ever since being elected, President Donald Trump has vowed to give states more flexibility to enact their own health care policies.

Under him, the Centers for Medicare and Medicaid Services (CMS) has approved state waivers that the Obama administration continually denied. Several states, for instance, have received permission to make employment a requirement for Medicaid, the government-sponsored health care plan. (In at least one of those states, however, the new rule has already gone to court.)

The administration is also letting some states require beneficiaries to report income changes (Kentucky) and locking people out for the rest of the calendar year if they don't comply with the work requirement (Arkansas).

But it turns out that there are limits to what the Trump administration will let states do.

Here’s what CMS has already declined, and what's still up in the air:



Lifetime limits

Last month, CMS rejected a waiver from Kansas that would have set a three-year time limit for people to use Medicaid.

“I was pleasantly surprised by that,” says Joan Alker, executive director of the Center for Children and Families at Georgetown University.

Arizona, Utah and Wisconsin have also submitted waivers that include lifetime limits, which Alker expects will also get denied. 

Advocates of lifetime limits believe they are necessary to curb health care spending. But critics say they are too harsh.

“We seek to create a pathway out of poverty, but we also understand that people’s circumstances change, and we must ensure that our programs are sustainable and available to them when they need and qualify for them,” said Seema Verma, CMS administrator, in a statement following the rejection of Kansas' waiver. 


Partial expansion

In March, CMS rejected Arkansas’ attempt to reduce the number of people who qualify for Medicaid. The state wanted to drop the eligibility from 138 of the federal poverty to just 100 percent of the federal poverty line, which is about $12,000 per year for a single person.

However, it wasn’t a firm ‘no.’ CMS instead said it couldn’t approve it "at this time." 

When a state opts to expand Medicaid, like Arkansas did, the federal government pays 90 to 100 percent of the bill. If Arkansas were allowed to only cover people up to just 100 percent of the poverty line, the people who lose their Medicaid would likely qualify for federal health insurance subsidies, getting them "off the state’s dime and onto the federal dime,” says Alker. That probably isn’t appealing to the Trump administration. 



Work requirements for non-expansion states 

Other parts of Kansas’ waiver are still pending -- like a work requirement for Medicaid beneficiaries. But unlike in Arkansas, Indiana and Kentucky, Kansas didn’t expand Medicaid, so requiring people to maintain an 80-hour-per-month job would likely disqualify them for Medicaid because they’d be earning too much money.

Alabama, Mississippi, Oklahoma and South Dakota are other non-expansion states exploring a work requirement. The Center on Budget and Policy Priorities released a report on Wednesday looking at the catch-22 of those proposals.

For example, in Mississippi, a single parent can’t make more than $370 a month to qualify for Medicaid. But if they got a 20-hour-a-week job making minimum wage, they’d be earning $580 a month, which is too much to qualify for Medicaid. 

“They will be complying with the work requirement but still lose coverage. You’re in this situation that can’t be fixed,” says Jessica Schubel, a senior policy analyst for the Center on Budget and Policy Priorities.

CMS’ Verma has signaled that she is worried about this “subsidy cliff” and wants to find a “pragmatic and empathetic” approach to work requirements and other new Medicaid initiatives. 


Drug testing 

Last year, Wisconsin became the first state to ask for permission to drug test Medicaid applicants and deny them health care if they test positive. Experts say there is no telling where the federal government will fall on this issue.

This month, CMS signaled support for using Medicaid funds to cover neonatal abstinence syndrome,  the withdrawal condition when an infant is born with an opioid addiction from their mother. Medicaid experts say it would make no sense if the federal government covered babies with drug-related problems but not their parents.

“With the opioid epidemic raging in states, it seems counterintuitive that they would consider [drug test requirements],” says CBPP's Schubel.

Mattie covers all things health for Governing.

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