Overview: How the President’s Proposed FFY 2019 Budget Impacts Critical State Health Programs

On Monday, the Office of Management and Budget released the president’s FFY 2019 budget request that proposes $68.4 billion for health programs administered by the U.S. Department of Health and Human Services (HHS) – which is $17.9 billion less than 2017 funding levels. The budget proposal included an addendum designed to align the proposed White House budget with the recently passed Bipartisan Budget Act.

The following highlights some of the key components of the president’s budget proposal that could impact state health programs.

Affordable Care Act (ACA) and Insurance Markets
The proposed budget recommends the following changes to the ACA and insurance markets:

  • Replace the ACA with the Market-Based Health Care Grant Program: This would be a block grant structure that state could use to implement their own insurance reforms, which was originally proposed by Sens. Graham, Cassidy, Heller, and Johnson. Under the Graham-Cassidy-Heller-Johnson bill, $1.176 trillion would be appropriated from FFY 2020 to FFY 2026 for states to explore experimenting with a variety of insurance reforms or affordability programs. The bill would allow greater flexibility over enrollment in copper (catastrophic health) plans in 2019 and provide greater flexibility over health savings accounts. (For more details see, NASHP’s summary).
  • Phase out the federally-facilitated marketplace (FFM): Related to its proposed ACA repeal, the budget includes funding for “critical functions” and “wind down” of the FFM.
  • Increase funding to support Association Health Plans (AHPs): Funding would be directed to the Employee Benefits Security Administration to develop policy and enforcement capacity to expand access to AHPs, which would not have the consumer protections that ACA plans currently have and may be exempt from state regulation. This reflects recently-proposed regulations designed to increase flexibility over the formation of AHPs.
  • Fund the cost-sharing reduction (CSR) program: Funding would be available to cover CSR expenses from October 2017 through December 2019. The Administration discontinued payments to the CSR program in October 2017.
  • Reduce the grace period for payment of health insurance marketplace premiums: This suggests that the 90-day grace period consumers are given to enact marketplace coverage be reduced to 30 days.
  • Allow for state certification of qualified health plans (QHPs): The change is consistent with recent actions taken by the Administration to defer oversight and certification of QHPs sold through Healthcare.gov to states.
  • Include mandatory funding for the Risk Corridor program: Funding would reconcile outstanding balances owed to insurers under the temporary Risk Corridor program established under the ACA.

The president’s FFY 2019 budget proposes:

  • Overall program funding cuts: Proposes to cut federal Medicaid funding by $250 billion over 10 years.
  • Repeal of ACA’s Medicaid expansion and targets Medicaid funding: Advocates repealing the ACA’s Medicaid expansion and supports state efforts to prioritize Medicaid dollars for the “most vulnerable” individuals.
  • Medicaid financing changes: Indicates support for proposals to change the structure of Medicaid financing, similar to what the Graham-Cassidy bill proposed, such as implementing per capita cap or block grant funding models, which would be trended over time by the Consumer Price Index.
  • Work and community engagement initiatives: Encourages state initiatives to implement community engagement initiatives for able-bodied adults enrolled in Medicaid.
  • Prohibit Medicaid payments to public providers: Proposes to limit Medicaid reimbursement for health care providers operated by a unit of government to no more than the cost of providing services to Medicaid beneficiaries.
  • Giving states the ability to change certain program elements and eligibility determination processes: Plans to provide states with additional flexibility over Medicaid benefits and cost sharing, including allowing states to use state plan authority to increase copayments for non-emergency use of emergency departments. Proposes to also allow states to make changes to Medicaid eligibility determination, such as counting savings, lottery winnings, and other assets.
  • Mandated coverage of medication-assisted treatment: Requires state Medicaid programs to cover approved medication-assisted treatments for opioid use disorder. These investments are expected to reduce Medicaid expenditures over time.
  • Resources for program integrity and data collection: Includes measures designed to address waste, fraud, and abuse, as well as forthcoming guidance from the Centers for Medicare & Medicaid Services (CMS) about improving data collection of Medicaid supplemental payments.
  • Medicaid Disproportionate Share Hospital (DSH) payments: Continues DSH reductions by $8 billion per year from FFY 2026 to FFY 2028 (the Bipartisan Budget Act delayed DSH cuts until FFY 2020, and then increased scheduled payment reductions for FFY 2021 to FFY 2025 to $8 billion for each fiscal year).

Children’s Health Insurance Program (CHIP)
Although the recent Bipartisan Budget Act along with the earlier Jan. 22, 2018, continuing resolution (CR) extended CHIP funding until FFY 2027, the president’s budget includes some suggestions for policy changes to CHIP.

  • Eliminates the 23-percentage point federal match rate increase earlier: Known as the 23 percent bump, the budget proposes to eliminate this entirely in FFY 2019. (This does not include the provisions that were in the Jan. 22, 2018, CR to continue the 23 percent bump in FFY 2018 and FFY 2019, phase it down to 11.5 percent in FFY 2020, and then return to the regular enhanced CHIP match rate in FFY 2021 and beyond).
  • Limits enhanced CHIP match rate: Proposes to cap the increased CHIP federal match rate for states by restricting this enhanced match rate only for children in families with income up to 250 percent of the federal poverty level (FPL).
  • Eliminates the maintenance of effort (MOE) in FFY 2019: Proposes to end the MOE that requires states to cover children with family incomes up to the same eligibility level that was in place in 2010. In contrast, the Bipartisan Budget Act continued the MOE requirements through FFY 2019 as in current law, and then through FFY 2027 for families with incomes up to 300 percent of FPL.
  • Transitioning children from Medicaid to CHIP: Allows states to transition children ages 6 through 18 with family income between 100 to 133 percent of FPL (known as the bright line or stair steps kids) from Medicaid to CHIP, thus eliminating the current 133 percent FPL Medicaid eligibility level floor for children.

Prevention and Public Health Issues
The HHS budget request prioritizes the opioid crisis, mental illness, and infectious diseases. This is a shift from the former HHS Secretary’s priorities of addressing opioid/substance abuse, mental illness, and childhood obesity. Some other things of note are:

  • Funding to address the opioid epidemic: Proposes $10 billion in funding in FFY 2019 to HHS to combat the opioid epidemic and serious mental illnesses.
  • Prevention and Public Health Fund (PPHF): Proposes to eliminate the PPHF but backfill PPHF-funded programs with discretionary budget authority.
  • Infectious diseases demonstration: Includes a $40 million request for a new demonstration program for five or more states or localities that focuses on eliminating multiple infectious diseases using screenings and referral to treatment. It would focus particularly on states/localities with infectious disease increases related to opioids.
  • National Strategic Stockpile: Proposes to move the National Strategic Stockpile program out of the Centers for Disease Control and Prevention and house it in the HHS Office of the Assistant Secretary for Preparedness and Response.

Health and Housing Issues/Other Programs Addressing Social Determinants of Health
Some components of the HHS budget, as well as several aspects of the U.S. Department of Housing and Urban Development (HUD) budget, could affect states’ abilities to address health through housing and other social determinants of health.

  • Decreases funding for HUD rental assistance programs: Proposes to reduce funding for HUD rental assistance programs by 11.2 percent over 2017. The administration maintains that this would be enough to support the currently-housed families, while shrinking the program over time. The addendum would provide $1.7 billion to maintain current levels of housing vouchers and exempt elderly and disabled households from “rent reform proposals.”
  • More state and local resources will be necessary to develop affordable housing: Expects states to pick up a greater share of the tab for affordable housing, and does not request funding for the Public Housing Capital Fund, indicating that the responsibility for providing affordable housing should be more fully shared with state and local governments.
  • Supplemental Nutrition Assistance Program (SNAP): Proposes cutting SNAP by $17 billion in FFY 2019 (and by $98 billion over the next five years), and proposes combining SNAP with a program that provides “100 percent American-grown foods” directly to households.
  • Social Services Block Grant: The budget proposes to eliminate the Social Services Block Grant with the justification that it funds services that are currently funded by other sources and lacks the ability to track the impact of spending.
  • Elimination of the Community Development Block Grant (CDBG) and Low-Income Home Energy Assistance Program (LIHEAP): Calls for the elimination of both programs.
  • Increases rent payment requirements for certain individuals in subsidized housing: Calls for able-bodied people in affordable housing to pay a greater share of their income (more than 30 percent) toward rent, in an effort to encourage them to work more.

Medicaid Prescription Drugs

  • Medicaid Drug Coverage Demonstration: Establishes a statutory demonstration authority to allow up to five states more flexibility in negotiating prices directly with drug manufacturers, rather than participate in the Medicaid Drug Rebate Program. Participating states will be required to include an appeals process so beneficiaries can access non-covered drugs based on medical need. The demonstration would exempt prices negotiated under the demonstration from best price reporting. (The budget estimates $85 million in savings over 10 years.)
  • Clarify definitions under Medicaid Drug Rebate program: Clarifies the Medicaid definition of brand and over-the-counter drugs, as well as drugs approved under a biologics license application, by codifying existing regulations to ensure appropriate Medicaid drug rebates. (Estimates $319 million in savings over 10 years.)

Federal Health Safety Net Programs

  • Health center funding: Provides $5.1 billion of discretionary funding for community health centers.
  • Consolidates Graduate Medical Education (GME) funding: Proposes to consolidate GME funding into a new mandatory GME capped grant program, no longer allowing categorical funding for certain medical specialties.
  • Reductions in nursing education funding: Proposes to reduce funding for nursing workforce development by $145 million from FFY 2018.

Proposals Affecting Individuals Dually Eligible for Medicare and Medicaid

  • Coordinated review of Dual Eligible Special Needs Plan marketing materials: Allows for joint state and CMS review of marketing materials for Dual Eligible Special Needs Plans.
  • Part D special enrollment period for dually eligible individuals: Clarifies the Special Enrollment Period (SEP) for Medicare Part D to allow CMS to apply the same annual election process for all eligible individuals, but maintain the ability for dually eligible beneficiaries to use an SEP to opt into integrated care programs or to change plans following auto-assignment. 

Center for Medicare and Medicaid Innovation (CMMI)

  • Additional funding for CMMI: Proposes an increase of $314 million in funding for CMMI for FFY 2019.

Other Programs

  • Temporary Assistance for Needy Families (TANF) funding reductions: Proposes a 10 percent decrease in funding for the TANF program, and require states to use at least 30 percent of federal TANF and state maintenance-of-effort funds on the following: work, education, and training activities and work supports, including child care.
  • Family to Family (F2F) Information Centers: Funds the F2F Health Information Centers, however not at the same rate as the recently passed CR, which included $6 million per year in FFY 2018 and FFY 2019, and an additional $1 million per year to establish centers in the territories and for Native American tribes. Under the president’s proposal, F2F centers would receive $1 million in FFY 2018 and $4 million each in FFY 2019 and FFY 2020.
  • Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program: Includes an addendum that would fund the MIECHV program for FFY 2019 at the same level included in the recently passed CR at $400 million per year.
  • Reforms for families with more than one child enrolled in the Supplemental Security Income (SSI) Disability Program: Creates a sliding scale for multi-recipient SSI families. For families with more than one child receiving SSI disability payments, they would still receive up to the current maximum benefit for the first child, but SSI payments for additional children would operate on a sliding scale that takes into the account the number of additional children.
  • Paid parental leave and child care funding: Allocates money to establish a paid parental leave program, which would require states to provide parents six weeks of paid leave to new mothers and fathers and give states wide latitude to design and implement their programs. It also enhances funding for child care programs, including increasing the Child Care and Development Block Grant by $169 million over FFY 2018 levels.
  • Individuals with Disabilities Education Act (IDEA): Proposes maintaining current level of funding ($12.8 billion) for IDEA formula grants to states to support special education and early intervention services.
  • Women, Infants, and Children (WIC): Proposes maintaining current level of funding ($5.8 billion) for the Special Supplemental Nutrition Program for WIC.