Biden’s director of Medicaid expresses concern for the program’s future amid talk of block grants

In what amounted to a valedictory for CMS leadership as it has been constituted during the Biden administration, the head of Medicaid expressed concern about the potential for big changes to the program.

Daniel Tsai, director of the Center for Medicaid and CHIP services, said the possible transformation to a block-grant program under the incoming administration and Congress would have adverse consequences.

“We’re at an unprecedented crossroads for Medicaid,” Tsai said during a Nov. 20 stakeholder call.

“We are leaving the program so much stronger today than when we started four years ago, but that progress is at risk,” Tsai added. “Things like adding work requirements for Medicaid or block grants to the program will not only add onerous red tape that none of us would accept for ourselves [in] how we would expect to navigate not only healthcare, but any sort of good or service provided by the public or private sector.”

He also said the concepts are “just plain bad policy, not backed up by the facts and evidence, and the cost would be people’s lives and health across the country.”

Tsai made his comments during a conference call with CMS Administrator Chiquita Brooks-LaSure and the heads of Medicare and other CMS sub-agencies. Most or all of the directors are preparing to depart their posts as the Biden administration gives way to a second Trump administration, including Dr. Mehmet Oz, the nominee to be the next CMS administrator.

Backing block grants

The incoming Trump administration and Republican majorities in Congress are expected to consider moving Medicaid to a block-grant program or instituting work requirements — or possibly both — as they look for ways to rein in federal spending.

The Paragon Health Institute, a think tank that is said to have influence with key policymakers on the right, issued a 2024 paper that described benefits of block grants (i.e., a capped amount of federal funding per state).

“The result would be a much more efficient program with state incentives focused on maximizing value from program expenditures rather than maximizing the receipt of federal dollars,” the report states.

But a system of per capita caps may not be desirable, the report suggests, because it would inherently bring incentives for states to enroll people in Medicaid and thus could induce improper enrollment and eligibility errors.

At a time when Republicans want to address the federal deficit and national debt without affecting Social Security or Medicare benefits, big changes to Medicaid are bound to attract interest.

“We ought to look at whether we’re doing [Medicaid] the right way,” Sen. John Cornyn (R-Texas) said in a Politico report (login required).  “Block grants make a lot of sense.”

Possible repercussions previously flagged by liberal-leaning think tanks include widespread loss of coverage, although precise estimates appear to be elusive on how many beneficiaries would be affected, along with increased cost sharing and a shift to more restrictive coverage.

Such concerns indicate why most Republicans are not committing to substantial Medicaid changes, saying discussions need to wait until next year as part of larger budget talks.

“It’s way too early to start talking about Medicaid cuts,” Sen. Bill Cassidy (R-La.), a physician and leading healthcare policymaker, told reporters.

Work requirements as another option

Medicaid policy also could undergo a big shift via the imposition of stricter work requirements.

CMS promoted such requirements during President-elect Donald Trump’s first administration via approval of roughly a dozen state-based Section 1115 demonstration waivers. The Biden administration rescinded those waivers, saying they would reduce coverage while having a negligible impact on employment, and courts generally have not pushed back on the cancellations.

Most states did not have a chance to implement their 1115 work mandate before litigation or administrative action negated the demonstration. Arkansas had a waiver in place for nine months in 2018 and 2019 before litigation forced the state to halt the requirement. Roughly 18,000 state residents — about a quarter of those who were subject to work requirements — lost coverage over a seven-month stretch, according to a 2020 report by the Medicaid and CHIP Payment and Access Commission (MACPAC).

“Coverage losses [nationally] could be particularly pronounced among individuals who have substantial barriers to work (e.g., behavioral health problems or issues with arranging childcare), as they may be ineligible for exemptions but unable to satisfy the work requirement,” the MACPAC report states.

A 2018 analysis by KFF found that between 1.4 million and 4 million beneficiaries would lose coverage due to work requirements, in large part because of obstacles faced by employed beneficiaries in reporting as required.

Recent enrollment trends

KFF’s projected numbers could be higher today because Medicaid enrollment has risen from 74 million in 2018 to more than 79 million. That’s down from more than 92 million in late 2022 amid the continuous-enrollment period authorized during the COVID-19 public health emergency.

The uninsured rate was 7.9% in 2022 and had ticked down to 7.6% by Q2 2024, the most recent period for which federal statistics have been reported. That defied widespread predictions of a substantial rise amid the unwinding of continuous eligibility even though more than 25 million people had been disenrolled from Medicaid through September.

One way Medicaid sought to limit an anticipated spike in the uninsured rate was by coordinating with the Affordable Care Act (ACA) marketplace program to help beneficiaries move to private insurance. Nationwide, more than 2.4 million Medicaid enrollees transferred to a marketplace plan during the unwinding, said Ellen Montz, director of CMS’s Center for Consumer Information and Insurance Oversight.

CMS leaders on this week’s call touted the collaboration between Medicaid and the marketplaces, including a special enrollment period, navigator outreach to disenrolled beneficiaries and an enhanced account-transfer process.

The approaches likewise may offer a template for mitigating Medicaid coverage loss from a switch to block grants. However, marketplace plans likely would be less viable for some individuals and families if enhanced subsidies for buying the plans are allowed to expire at the end of 2025.

Efforts to boost access

Tsai noted the recent expansion of Medicaid postpartum coverage from 60 days to 12 months, along with a continuing increase in the number of Medicaid expansion states as authorized by the ACA (from 36 states plus Washington, D.C., four years ago to 40 today).

“Once folks have coverage, we’ve spent tremendous amounts of time working with the community on making it easier for people to access care,” Tsai said.

Examples he gave included shoring up reimbursement for behavioral health providers and home- and community-based providers, along with wait-time standards for Medicaid managed care.

Elizabeth Fowler, director of the Center for Medicare & Medicaid Innovation, said a key project implemented by her team over the last few years was the December 2023 launch of the Transforming Maternal Health Model, which seeks to support up to 15 state Medicaid programs in filling gaps in maternal healthcare.

As with Medicaid, however, the future of Innovation Center programming bears watching after the upcoming transition of power in Washington. Republicans have criticized the center, including during a House subcommittee hearing in June, for failing to consistently deliver Medicare savings.

Fowler has a different take from critics regarding what constitutes success.

In determining whether an Innovation Center model should be expanded and made permanent, “For so long, the cost has been the primary focus,” Fowler said during this week’s call. “When looking at the impact, we know cost is a key dimension and an important factor of high-value care, but so is quality.

“We’re laying the groundwork for considering a model’s impact on quality of care, including for outcomes that are reported directly from patients and their caregivers, as a pathway for model expansion.”