Taxpayers should beware: the Biden administration has not been transparent or forthcoming about modifications to their policies on a lesser-known provision in the Medicaid program - budget neutrality for demonstration projects. National Taxpayers Union applauds the House Energy and Commerce Committee, led by Chair Cathy McMorris Rodgers (R-WA), Subcommittee on Health Chair Brett Guthrie (R-KY), and Subcommittee on Oversight and Investigations Chair Morgan Griffith (R-VA), for their important inquiry into these changes.
Medicaid is a government program that provides free or low-cost health insurance to certain families and individuals, generally either lower-income children and adults or the disabled. The federal government sets the guidelines, but each state operates its own program. In 2021, Medicaid covered 85 million Americans, accounting for 17 percent of total U.S. health care spending. In total, the cost to states and the federal government was estimated to be $748 billion in 2021. This entitlement program is jointly financed by states and uncapped federal taxpayer dollars, therefore modifications could be hugely impactful on federal spending.
The House Energy and Commerce Committee recently sent a letter to the Biden administration expressing concerns over transparency in changes to budget neutrality requirements for Medicaid demonstrations. The letter questions the rationale and secrecy for altering the budget neutrality framework that has been in place for many years, and requests further documentation from the Center for Medicare and Medicaid Services (CMS).
Budget neutrality is a key requirement for Medicaid demonstrations, which are authorized under Section 1115 of the Social Security Act. Section 1115 demonstrations allow states to test innovations in their Medicaid programs, such as expanding coverage, addressing social determinants of health, or implementing alternative payment models. However, these demonstrations must not increase federal spending beyond what it would have been without the waiver. This is known as the ‘without-waiver baseline.’
The letter cites recent waiver approvals for Arizona, Arkansas, Massachusetts, and Oregon, which establish a new and unannounced policy framework for calculating the without-waiver baseline and determining the amount of federal funds available for state demonstrations. Some of the most critical changes include: allowing policy changes without a formal amendment, reducing guardrails on Health-Related Social Need programs, and doubling the savings roll-over period from five years to ten.
The House Energy and Commerce Committee letter raises several issues with this new framework, such as:
The lack of transparency and public input on the changes, which were not announced or explained in any official guidance or notice;
The potential for increased federal spending and reduced state accountability, as the new framework allows states to use more generous assumptions and methodologies to project their without-waiver costs and savings;
The inconsistency with precedent as the new framework deviates from the longstanding principles and standards for budget neutrality that have been established by CMS.
The letter requests the administration to provide detailed information and justification for the changes to the budget neutrality framework, as well as the impact of these changes on federal and state spending and program integrity.
We commend the House Energy and Commerce Committee and its leaders for their oversight and inquiry into this important issue. Medicaid demonstrations are a valuable tool for state innovation and improvement, but they must also be fiscally responsible and sustainable. The changes to the budget neutrality framework could have significant implications for the future of Medicaid and the federal budget, and they deserve careful scrutiny and public debate. We hope that the Biden administration and Congress will work together to ensure that Medicaid demonstrations are conducted in a manner that is consistent with the objectives and principles of the Medicaid program, and that protects the interests of taxpayers and beneficiaries.