Three reversals point to major changes in federal Medicaid policy

The Biden administration’s reversals of three Trump-era Medicaid decisions signal a wholesale change in direction is now underway. While some legal wrangling is likely (and may be protracted), the previous administration’s imprint on the program is certain to fade with time.

The new president signed an executive order on January 28th jump-starting an aggressive review of recent Medicaid decisions. The order stated that the new administration’s overarching policy is to make enrollment into Medicaid easier rather than harder, and thus agency officials should examine recently-issued regulations, waiver approvals, and other matters to ensure they are consistent with this guiding principle. The result has been quick action on three fronts:

 

 

  • Work Requirements. The most high-profile Medicaid initiative of the Trump era was promotion of state-enforced work requirements (or “community engagement” rules). The Biden administration has all but told the states that imposing these obligations on program participants runs counter to its views of Medicaid as a safety net insurance program. In a February 12 letter, the Centers for Medicare and Medicaid Services (CMS) indicated that it was reviewing the Trump-era policy and giving notice that its reversal was likely and imminent. Further, a CMS webpage created during the Trump years that provided information on how states could proceed with such requirements is no longer accessible.The practical effect of this rollback is minimal at this stage as the Trump initiative had run out of steam anyway. Courts already had blocked implementation of work requirements in Arkansas and Kentucky, and other states have shown little interest in taking up the contentious idea.

 

  • Block Grants. National and state Republican officials have long touted block grants as a reform option for Medicaid, and the Trump administration moved to create a pathway for states to experiment with the idea. The Biden administration has yet to close off this option entirely, but there are signs it will do so in time.The first step is likely to be a revocation of federal approval for the block grant plan now being implemented in Tennessee. CMS appears to have taken the first necessary step to allow that reversal to occur.Trump officials approved Tennessee’s plan on January 8th, just twelve days before the president’s term ended. Four days earlier, on January 4th, CMS had sent a letter to all state Medicaid directors outlining new procedures for modifying or withdrawing federal support of previously-approved waivers. The effect of these new procedural rules is to make it harder for the federal government to change course and pull back on previously-approved waivers. The January 4th procedural letter is seen as an attempt to make it more difficult for an incoming administration to reverse waiver approvals granted prior to its arrival, such as would be the case if the Biden team pulls back the Tennessee block grant.

    The Biden administration has now indicated that it will not allow the previous administration’s procedural roadblocks to preclude a reversal of the Tennessee waiver approval. A February 12 communication from CMS to all states indicated that the January 4th rules were now under review, and likely to be reversed. When the January 4th rules are pulled back, CMS can move forward with either a full reversal or major modification to the Tennessee waiver.

    For now, Tennessee is proceeding with implementation but bracing for a fight. If and when CMS pulls back approval of its block grant, the state is likely to take its case to federal court.

    The CMS guidance encouraging states to consider one version of a block grant (for an expansion of coverage to adults), while still available publicly, is likely to be taken off its website soon.

 

  • The Texas Waiver. On January 15, 2021, just five days before the end of the Trump administration’s term, CMS approved an extension of Texas’ existing 1115 waiver program, which had been submitted by the state on November 30, 2020 (less than a month after President Trump lost his reelection bid).Texas’ 1115 waiver is complex and covers numerous state initiatives. Among the most important is the funding provided for an uncompensated care pool out of estimated savings the state achieves through various reforms. This pool allows Texas to pay hospitals for services rendered to uninsured patients, and is seen as easing the financial burden from the state’s large uninsured population, and thus also lessening the pressure to adopt the Medicaid expansion authorized in the Affordable Care Act (ACA). The waiver extension would have allowed the state to operate its uncompensated care pool through 2030.The Biden administration revoked the waiver extension in a communication to the state on April 16th.

    Texas has filed a lawsuit challenging the validity of CMS’s reversal. A lengthy legal struggle seems likely, given the high political and budgetary stakes.

 

Additional rollbacks are probable in the coming months as more Biden appointees take up their official roles, and could affect a wide range of matters within Medicaid, such as quality standards for managed care plans and the degree to which states are free to manage program expenses.

 James C. Capretta is a columnist for State of Reform and is a resident fellow at the American Enterprise Institute.