Medicaid Block Grant Option Could Hurt Behavioral Health Providers — But Not Anytime Soon

The Centers for Medicare and Medicaid Services (CMS) has unveiled a new option for states to receive their federal Medicaid expansion funding as a capped lump sum.

Behavioral health stakeholders worry the proposed waiver program could hurt safety net providers and the patients they serve, but operators won’t see changes anytime soon — if at all.

“The troublesome proposal unveiled today is tragically flawed because it will undermine the health and welfare of vulnerable populations, including individuals with behavioral health and substance use disorders, who depend on Medicaid,” National Council for Behavioral Health CEO Chuck Ingoglia told Behavioral Health Business in a statement.


The National Council is a behavioral health trade association representing more 3,300 provider members nationwide, most of whom are safety net organizations serving large Medicaid populations.

Ingoglia noted that the proposed block grant program would essentially “shred” the Medicaid safety net, leading to higher copays and premiums for beneficiaries and making it harder to access care.

Essentially, the new demonstration, which has been dubbed the “Healthy Adult Opportunity,” is a block grant program. It would give states the option to receive a set amount of Medicaid expansion funding from the federal government for nondisabled adults under 65.


Medicaid expansion, which is a product of the Affordable Care Act, is also optional for states and has been since 2014. It expands who is eligible for Medicaid.

It allows uninsured people with incomes of up to 138% of the federal poverty level to be covered under the program, while also guaranteeing a certain level of mental health and substance abuse coverage to those individuals.

As a result of states’ expansion efforts, Medicaid has added 15 million new working-age adults who would not otherwise be eligible for the program, CMS administrator Seema Verma pointed out while explaining the motivation for the new Healthy Adult Opportunity.

“The program was not originally designed for this group. Spending growth rates in this population are forecast to be higher than in others, and our most recent round of audits demonstrated that many states’ practices for verifying eligibility are far too lax,” Verma said. “We shouldn’t have to tell someone with a disability to get on a waitlist for services because we’re diverting precious resources to cover someone who potentially doesn’t qualify.”

As such, Verma couched the new option as a way to ensure financial stability for the Medicaid program in the future, while also giving states who pursue the block grant the flexibility to design innovative Medicaid plans.

However, opponents see the block grant as a threat to Medicaid, as it gives states the ability to cut back on expansion benefits and spending.

Currently, federal Medicaid funding is not capped. Instead, the federal government matches a set portion of state Medicaid funding to help finance the program, with funding dependent on how many people need coverage.

And that’s how things will continue unless and until Verma’s block grant proposal is passed.

“Although we are deeply concerned about the onerous CMS guidance outlined today, it’s important to remember the proposal won’t result in immediate changes to the program,” Ingoglia said. “Medicaid continues to operate as usual. It’s also important to remember that the proposed block grant program, if approved, would be optional – no state would be obligated to implement the program.”

Additionally, he highlighted the fact the proposal faces “enormous hurdles” before it can be approved.

Meanwhile, another industry group, National Association for Behavioral Healthcare (NABH), is still exploring what the changes mean for its members.

“NABH is reviewing the behavioral healthcare-related proposals in the letter to state Medicaid directors and analyzing how this will affect our members,” Shawn Coughlin, NABH president and CEO told BHB in a statement.

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