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 States May Act on Medicaid Block Grants Via Section 1115 Waivers

​A new twist in the long-running attempt by Republicans to allow for the block granting of state Medicaid funds is happening after a letter was made public from Alaska Gov. Mike Dunleavy (R) to President Trump. The letter expressed the governor’s commitment to file for a Section 1115 waiver with the Centers for Medicare & Medicaid Services (CMS) to receive Medicaid funds in the form of a block grant, but the letter offered no details on how such a waiver would work.

Sources in the long term and post-acute care (LT/PAC) profession are aware of the Alaska letter, and discussion that other states, mainly in the South, could follow suit with waiver filings to block grant Medicaid funds once such a process started. The issue, however, is one that is expected to be drawn out considering the state-by-state nature of seeking Section 1115 waivers and the expected legal challenges in doing so, these sources say.

The Dunleavy letter to Trump said, in part, “Your Medicaid administrator, Seema Verma [actually the CMS administrator], has urged us to be the first state to receive Medicaid dollars as a block grant. We are eager to do this, but your support of her on this ‘first’ will keep the proper focus and speed on this application.”

At the same time there is discussion about what states may or may not file for under the Section 1115 waiver program, sources say CMS may release guidance on how states could go about seeking block grant permission.

The Section 1115 waiver process provides states the flexibility to test new approaches to their Medicaid programs that differ from what is required by federal statute through experimental or demonstration programs. Before states receive approval for these changes, the secretary of Health and Human Services (HHS) must determine each waiver still promotes the objectives of the Medicaid program.

For LT/PAC providers, the issue of block grants is highly important and one in which the profession fought hard against when Republicans in 2017 attempted to include Medicaid block grants in its failed bid to repeal and replace the Affordable Care Act. Many fiscal conservatives view block grants as a tool states should have to control Medicaid spending, while opponents see the practice as a potential disaster for Medicaid providers and recipients who could see dramatic reimbursement cutbacks and decreased access to care.

Still, the new discussion about block grants and the apparent push by CMS to have Alaska apply for a Section 1115 waiver have put the issue back on everyone’s radar, sources say.

There is also a major legal question looming over any attempt to do what Alaska’s governor wrote to Trump about, sources say, considering the recent court rulings in Kentucky and Arkansas that rejected Section 1115 waivers being used to impose work requirements on Medicaid recipients. The court rulings said the changes sought in those two states undercut the fundamental goal of the Medicaid program to aid low-income Americans in receiving health care and were disallowed.

CMS had no comment on the Section 1115 waiver discussion and block grants.

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