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Guidance on State Caps on Federal Medicaid Funding Withdrawn

Nov. 18, 2019, 7:10 PM

The Trump administration withdrew a controversial proposal that would have allowed states to cap federal funding for their Medicaid programs through a federal waiver.

The proposed guidance was under consideration by the White House Office of Management and Budget when it was withdrawn on Nov. 15.

That was just four days after Medicaid Administrator Seema Verma told the National Association of Medicaid Directors that the new regulations would soon be forthcoming after states expressed interest. On Nov. 18, the Centers for Medicare & Medicaid Services said Verma’s comments are still accurate. But the agency did not provide any details on why the proposal was withdrawn.

“We are encouraged by this interest,” Verma told the National Association of Medicaid Directors on Nov. 11. “You will soon see guidance from us that lays out initial opportunities to test new approaches to delivering and financing care for certain optional adult populations. The Medicaid Value and Accountability Demonstration won’t compromise important beneficiary protections, but it will inject rigorous accountability for outcomes, provide significant and unprecedented flexibilities for program operation, and offer opportunities for shared savings that can be reinvested back into Medicaid.”

The reversal comes as Tennessee is widely expected to seek federal approval this week to convert its Medicaid program, TennCare, to a block grant program under Section 1115 of the Social Security Act. The provision gives the Health and Human Services secretary authority to approve Medicaid experiments, or “waivers,” that help promote Medicaid’s purpose.

Currently, the federal government pays anywhere from 50 to 80 percent of a state’s Medicaid spending with no limit on total costs. The Trump administration wants to let states to get their federal Medicaid funding as a lump-sum, or “block grant,” for some Medicaid recipients.

Republicans have long touted block grants as a cost-saving solution that gives states more flexibility to redesign their Medicaid programs with limited federal interference.

But block grants would end Medicaid’s open-ended federal funding formula that allows it to extend coverage to all who are eligible. Opponents fear capped block grant funding would leave state Medicaid programs underfunded if the economy sours and unemployment rises.

To contact the reporter on this story: Tony Pugh in Washington at

To contact the editors responsible for this story: Fawn Johnson at; Andrew Childers at