Skirmish Between Biden and Red States Over Medicaid Leaves Enrollees in the Balance

By Phil Galewitz and Andy Miller / February 10,2022

When Republican-led states balked at expanding Medicaid under the Affordable Care Act, President Barack Obama’s administration tossed them a carrot — allowing several to charge monthly premiums to newly eligible enrollees.

Republicans pushed for the fees to give Medicaid recipients “skin in the game” — the idea they would value their coverage more — and to make the government program resemble employer-based insurance.

But with studies showing that the fees led to fewer low-income adults signing up for coverage and fewer reenrolling, the Biden administration is moving to eliminate them.

It will force Arkansas and Montana to phase out premiums by the end of 2022. Federal health officials have indicated they may do the same in six other states allowed to charge premiums — Arizona, Georgia, Indiana, Iowa, Michigan, and Wisconsin.

The policy flip is one of several moves the administration has made to change how states run their Medicaid programs, and it provides a stark example of how Medicaid changes depending on who has control of the White House and state capitols.

Medicaid, which has about 83 million enrollees, is a state-federal partnership that provides health coverage to people with low incomes. Washington is responsible for most of the funding and states handle operations. For decades, states have complained that the federal government sets too many rules and doesn’t respond quickly enough when states want to make changes through a wide variety of waivers to improve care or control costs.

But in recent months, the power struggle has intensified around the waivers that states seek from those federal rules so they can test new approaches for delivering health services. Waivers have become an integral part of the Medicaid program, and some states have renewed theirs to last for decades.

With spending on Medicaid waivers now making up about a third of federal spending on the program, they’ve become a lightning rod for disputes between states and the federal government.

Such conflicts are not new, said Matthew Lawrence, an associate professor at Emory University’s law school. But lately “the level of conflict is unprecedented.”

“The conflicts are more consequential because there is so much more money on the table,” said Josh Archambault, a senior fellow with the conservative Cicero Institute, a Texas-based think tank.

At stake for states is not merely retaining authority on how to run their Medicaid program, but often billions of dollars in federal funding. Because securing a waiver can often take years, states are dismayed the Biden administration is trying to withdraw previously approved ones before they are up for renewal, Archambault said.

Both Georgia and Texas have sued the Biden administration for revoking part of their waivers approved in the waning days of President Donald Trump’s administration. The changes sought be each state varied widely.

Neither of these Republican-led states has expanded Medicaid to cover all adults with annual incomes under 138% of the federal poverty level, about $18,800, as 38 other states have done.

Georgia sued the Biden administration in January after the Centers for Medicare & Medicaid Services rejected key parts of its waiver — approved in October 2020 but never implemented by the state as it awaited a review by the Biden administration.

These provisions would have required newly eligible enrollees to pay a monthly premium and work or volunteer as part of a plan to modestly increase enrollment.

The lawsuit says the decision by CMS was an illegal and arbitrary “bait and switch of unprecedented magnitude.”

The Texas lawsuit filed in May stems from the Biden administration’s reversal of a 10-year waiver extension approved five days before Joe Biden was sworn in as president. That waiver allowed the Texas Medicaid program to reimburse hospitals for treating uninsured patients and included $30 billion in federal aid. The Biden administration said Texas did not appropriately seek public comments and the move was seen as a way to nudge Texas toward expanding Medicaid. A federal district judge in August sided with Texas and issued a temporary injunction.

In another example of reversing Trump’s policies, CMS last year told Michigan, Wisconsin, Arkansas, and New Hampshire, which had previously received approval for work requirements for newly eligible adults, that the federal government was withdrawing that green light. The change, however, had little practical effect since the work requirements had been put on hold by federal courts.

Advocacy groups say Medicaid enrollees are caught in the middle of these political battles.

Laura Colbert, executive director of the consumer advocacy group Georgians for a Healthy Future, said the lawsuit brought by the governor and state attorney general is a waste of time and taxpayer dollars. “Federal courts have repeatedly struck down work requirements for Medicaid-eligible adults because work requirements ultimately act as a barrier to health coverage and care,” she said.

Typically, CMS reserves the right to terminate or rescind a waiver as long as its decision is not considered “arbitrary or unreasonable,” said MaryBeth Musumeci, associate director of KFF’s Program on Medicaid and the Uninsured.

In the Texas case, in fact, the federal court said CMS was arbitrary and unreasonable in revoking the state’s Medicaid waiver.

Brian Blase, a former Trump health adviser and president of Paragon Health Institute, a research firm, said having so much of the Medicaid program run through waivers is problematic because states are seldom held accountable for how the waivers work and that the program changes depending on which party is in power in Washington.

“States get whipsawed back and forth under the current structure of Medicaid,” he said.

Blase and other conservatives want Congress to give states a defined amount of money — a block grant — for Medicaid each year and let states manage it as they see fit. Democrats have fought such proposals, saying they would limit how much money states have to help the poor, especially during difficult economic times.

The proposal to fund Medicaid through block grants is at the center of another simmering waiver feud. The Trump administration in its final days approved a new financing plan for Tennessee that would convert the state’s federal Medicaid funding into a type of block grant. The Biden administration reopened the public comment period last summer. Nearly all of the 3,000 letters submitted opposed the plan.

Blase said that some Republican states expanded Medicaid only because they were allowed to implement it with work requirements and premiums. Taking away those provisions, he said, “is an affront to those states and will discourage other states from adopting the expansion.”

But it’s unlikely Republican-led states would turn away from the expansions they’ve implemented because it’s politically difficult to kick people off the program.

Democrats have long opposed Medicaid premiums, so it’s no surprise the Biden administration is moving away from them now that it has data to show their negative impact.

A 2021 study in Michigan found that the number of adults dropping out of Medicaid increased by nearly 12% after the state began charging them a monthly premium, which now averages about $18 a month. Disenrollment rose by nearly 1 percentage point for every dollar charged monthly, the study found.

States needed waivers because federal law prohibits charging premiums to most Medicaid enrollees.

Katharine Bradley, a senior researcher at Mathematica who recently helped evaluate premium policies in several Medicaid programs for CMS, said premiums as low as $1 a month act as a deterrent to signing up, she said.

“All the evidence points in the same direction — that premiums inhibit overall enrollment,” Bradley said.

Michigan — like other states with premiums — stopped enforcing the provision during the pandemic. But even before the national health emergency, Michigan enrollees faced few consequences for not paying. If people did not pay, the state would deduct the amount from their state tax refund or any lottery winnings.

By contrast, before the pandemic, states such as Indiana, Iowa, and Montana disenrolled thousands of Medicaid enrollees who did not pay.

When asked late last year if CMS would eliminate premiums in all Medicaid waivers, CMS Administrator Chiquita Brooks-LaSure said: “We want our programs to be consistent.”