On January 30, 2020, CMS issued long-awaited guidance to states regarding the opportunity to access Medicaid funding through block grants or per-capita caps. In a letter to state Medicaid directors, CMS announced that states could submit applications for a Section 1115 waiver for approval of a Health Adult Opportunity (HAO) demonstration project to alter Medicaid coverage for limited populations.
HAOs would be limited to waiving coverage rules for expansion and waiver populations and would exclude traditional Medicaid populations. CMS would provide HAO funding within a defined budget target, either through a block grant model or through funding set on a per-enrollee basis, much like per-capita caps. Under an HAO, states would have flexibility in providing benefits to beneficiaries.
Allowing states to access Medicaid funding through a block grant or per-capita cap model has been a longstanding goal for many Republicans, with efforts dating back to the 1990s. Beneficiary advocates have expressed significant concern that such policies would make it more difficult for low-income individuals to enroll in Medicaid and would reduce access to benefits. Congressional Democrats have reacted to the new guidance with strong opposition, with the House passing a non-binding resolution on February 6, 2020, condemning the plan.
Many observers have questioned CMS's legal authority to alter Medicaid funding to states, and lawsuits challenging the HAO guidance are expected.
