Will Minnesota accept new Medicaid financing deal from feds?

The Trump administration is offering states more flexibility in how they run their Medicaid programs in exchange for capping federal payments. But will Minnesota take the deal?

Medicaid provides insurance for 1.1 million low-income Minnesotans. Under a funding formula that has been in place for more than 50 years, the federal government pays 50 cents of every dollar spent on most visits to hospitals, clinics and other health care settings. The other 50 cents comes out of state and local coffers.

That open-ended commitment has long been the target of fiscal conservatives who want to rewrite the formula by capping the amount of money going to the states in the form of a block grant. It was part of the unsuccessful effort by congressional Republicans to repeal and replace the Affordable Care Act (ACA) in 2017.

"It is just a terrible idea," said Gov. Tim Walz, who voted against the ACA replacement bill when he was in Congress. "This is nothing more than an attempt to shift costs and throw people off health care."

The proposal unveiled Thursday by Seema Verma, the administrator who oversees the Medicaid program, is slimmed down from three years ago. States would have to opt in, and the program would apply only to coverage for single adults under age 65 without children, leaving funding for families, the elderly and people with disabilities intact.

States could suspend some Medicaid rules so they could sustain the program under the block grant. They could limit prescription drug choices, set time limits for enrollment, charge premiums and co-payments and cut payments to providers and managed care organizations.

"States are trying to make routine changes or craft innovative programs," Verma said, "but are thwarted by the rigidity of a federal bureaucracy rooted in a 1960s program design."

Unlike traditional Medicaid, the federal government pays 90 cents of every dollar spent on care for the expansion population. But some states have turned down the sweetened deal for philosophical or political reasons, as well as fears that Congress could eliminate the enhanced federal match.

Converting to a block grant might not make sense financially for Minnesota, which only paid about $110 million for $1.8 billion in care for the 201,000 non-elderly single adults in the expansion population in 2019 when the federal match was about 93%.

Sen. Michelle Benson, R-Ham Lake, chairwoman of the Senate's health and human services finance and policy committee, said Verma's proposal merits further study — not as a replacement for the Medicaid expansion but as a complementary program.

"I think this is an opportunity to use this as a workforce tool," said Benson, adding that she has heard from employers who want to offer internships or training to people but they are not able to provide health insurance.

"If somebody is moving from not working to working ... maybe we can support them and help bridge them to fully gain employment," she said. "Maybe we can help by buying down the cost of their health care."

"I think for a state like Minnesota this would not be attractive," said Rep. Tina Liebling, DFL-Rochester, chairwoman of the House Health and Human Services finance and policy committee. During economic downturns, block grants don't adjust upward to handle the higher caseloads. "You aren't going to get the funding," Liebling said.

Like other administrative policy changes initiated since President Donald Trump took office, the block grant policy is likely to face legal challenges.

"This is just one more example of the Trump administration attempting to explode the Medicaid Act that Congress has written," said Jane Perkins, legal director for the National Health Law Program in Washington, D.C. "Our legal team is carefully investigating the enforcement and litigation options at this time."