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Utah’s Proposed Medicaid Waiver Would Deny Medicaid to Tens of Thousands of Low-Income Utahns, Drive More Cuts in the Future

Utah proposed a waiver of federal Medicaid rules on May 31 that would add harmful features to an earlier waiver that the federal government approved for the state. The new waiver would deny Medicaid to tens of thousands of low-income adults who would be eligible if the state fully expanded Medicaid under the Affordable Care Act (ACA), and it would make it likelier that Utah will further limit Medicaid access over time by turning eligible people away, leaving them uninsured.

Utah voters passed a ballot initiative in November that fully expanded Medicaid to low-income adults with incomes up to 138 percent of the poverty line. Instead of implementing the initiative, Utah’s legislature directed the state to seek a series of Medicaid waivers. Under the first waiver, which the federal Centers for Medicare & Medicaid Services (CMS) approved in March, Utah expanded Medicaid only to adults with incomes under the poverty line — leaving out about 50,000 Utahns with incomes between 100 percent and 138 percent of the poverty line — and obtained authority to take coverage away from people who don’t meet a work requirement. Of particular note, as part of that waiver, CMS also gave Utah unprecedented authority that threatens the core of the Medicaid program — authority to close enrollment and deny coverage to eligible people if Medicaid costs exceed the state’s budget target.

Under the waiver approved in March, Utah is receiving its regular federal matching rate of 68 percent rather than the enhanced matching rate available for adults who are newly covered under the ACA’s Medicaid expansion. The new waiver seeks to maintain both Utah’s “partial” expansion (i.e., up to 100 percent of poverty rather than 138 percent) and its unprecedented authority to close enrollment, while having the federal government provide Utah with the ACA’s enhanced matching rate — 93 percent this year and 90 percent starting in 2020 — that is reserved for full expansion. (Even the Trump Administration declined earlier requests from other states — Arkansas and Massachusetts — that sought 90 percent federal funding for partial Medicaid expansions.)

Utah’s new waiver proposal also has attracted increased attention because it seeks another unprecedented change — to impose a per capita cap on the federal funding that Utah’s Medicaid program receives. (The Utah legislature required the state Medicaid agency to seek such a cap, as part of the legislation it passed overriding the ballot initiative.) This provision would limit the federal Medicaid funding the state would receive for low-income adults enrolled under the partial Medicaid expansion to a fixed amount per beneficiary, irrespective of what beneficiaries’ health care costs turn out to be.

In 2017, Congress rejected proposals to apply a per capita cap to all states, which would have cut federal Medicaid funding significantly over time. Under those proposals, the federal government would no longer pay a fixed percentage of states’ overall Medicaid costs as it does now. Instead, it would pay a state only the federal matching share of a fixed amount per beneficiary — the state’s “per capita cap” amount — with the “cap” amounts set to rise from year to year at a slower rate than the projected growth rate in Medicaid costs. As a result, states would receive less federal Medicaid funding than under current law, with the shortfall growing each year. To accommodate the loss of federal funds, states would have to lower eligibility, restrict benefits, cut provider payments, or contribute more of their own funds.

Utah’s proposal departs in important respects, however, from the per capita cap proposals that Congress debated. Utah officials reportedly feared the additional financial risk for the state under such a cap, so they proposed a growth rate in the cap amounts that would equal projections of growth in health care costs. They also included “protections” to limit the cap’s risks to Utah’s budget, including safety valves that would adjust the caps if unanticipated events occur such as a public health emergency or natural disaster. Utah officials also proposed applying the caps to combined federal funding over a five-year period rather than on an annual basis, letting the state spend over the cap in one year if offset by lower spending in another. In addition, in the event that Utah’s Medicaid expenditures exceeded the caps, Utah would still receive federal matching funds to help defray the costs above the cap, but at the state’s regular federal matching rate of 68 percent instead of the ACA’s enhanced matching rate.

Despite these “protections” however, Utah would still face greater financial risk from the waiver proposal than from a straightforward Medicaid expansion, under which the federal government would pay 90 percent of the costs incurred for low-income adults, with no cap.

Moreover, as noted above, CMS has already granted Utah unprecedented authority to cap enrollment — and to deny coverage to eligible adults — if Utah’s Medicaid expenditures exceed state budget targets. That presents a very serious threat to low-income Utahns, especially in a recession, when need rises but state budget resources fall. The new waiver request, with its per capita cap, would compound the threat by tightening Utah’s federal Medicaid funding, making it likelier that the state’s own Medicaid spending would breach the state’s target for that spending.

Nor would the risks be limited to Utahns. If the federal government both lets Utah stop enrolling people eligible under the Medicaid expansion when expansion costs exceed a state budget target and gives Utah an enhanced federal matching rate, an enrollment cap will likely become attractive to other states. That could endanger coverage for large numbers of people nationwide.

In a recent interview, CMS Administrator Seema Verma expressed interest in negotiating block grants or other funding caps with states and said that waivers for such caps “would include reduced federal standards and oversight.” Utah’s waiver proposal shows one way that CMS could radically overhaul and restrict Medicaid through waivers.

The combination of the enrollment cap authority that Utah has already received and a per capita cap would amount to replacing Medicaid’s guarantee of coverage with an option for states to provide coverage to as few low-income adults as they choose in order to shift state resources that would otherwise go to health coverage for low-income people to other parts of the state budget or to tax cuts.