April 6, 2011—U.S. House Republicans yesterday proposed converting the federal share of Medicaid spending into block grants to states, a move that could potentially imperil the 340B drug discount program.
The plan, one of the main elements in the fiscal 2012 budget resolution issued by the House Budget Committee on April 5, is expected to face stiff opposition from President Obama and the Democratic-controlled Senate. The House is likely to approve the budget, however, and the agenda it proposes is certain to be debated in the run-up to next year’s national elections.
Under congressional rules, after the President submits his or her budget request, the House and Senate are each supposed to pass a resolution of the type proposed yesterday and then later reconcile their differences. That document is not signed by the President and binds Congress only. It limits the amounts that can be appropriated and sets overall spending and revenue targets for the government for five years.
ACA, Medicare Targeted as Well
In addition to their plan to block-grant Medicaid, House Republicans again proposed repealing the Affordable Care Act (ACA), which is slated to add nearly 16 million Americans to Medicaid by 2019. The health care reform law also expanded the 340B program significantly and included provisions to strengthen the program’s oversight.
The House GOP also proposed to replace the federal Medicare entitlement in 2022 with payments to subsidize the purchase of private health insurance. The party says the new program would work similar to the way the Medicare Part D benefit does now. And although the proposed budget does not drill down to the point of listing specific program cuts, it says it would roll back federal discretionary spending to below 2008 levels and “lock in savings with enforceable spending caps and budget-process reforms.”
Funding for the Office of Pharmacy Affairs (OPA) falls into the discretionary category. OPA did not have a line item in the fiscal 2008 budget, the point to which spending would be rolled back. Its first line item, in fiscal 2009, was for just under $1.5 million. For the past two years its annual appropriation has remained stuck at $2.2 million in spite of 340B’s expansion during the past year. Due to uncertainty about its appropriation, the office recently scaled backed its technical assistance program and has refrained from filling four job vacancies out of a staff of 19. President Obama has proposed a 0.1 percent user fee on 340B drug purchases to help fund his proposed $10.2 million appropriation for OPA in fiscal 2012.
“Freedom and Flexibility”
The Republican spending blueprint would “secure the Medicaid benefit,” its authors wrote, “by converting the federal share of Medicaid spending into a block grant tailored to meet each state’s needs, indexed for inflation and population growth.”
“This reform ends the misguided one-size-fits-all approach that has tied the hands of so many state governments,” the document says. “States will no longer be shackled by federally determined program requirements and enrollment criteria. Instead, they will have the freedom and flexibility to tailor a Medicaid program that fits the needs of their unique populations.”
An End to 340B?
The House Energy and Commerce Committee, which has jurisdiction over Medicaid and the 340B program, would have to draft legislation to turn Medicaid into block grants and then pass it before the plan could reach the House floor.
Currently, the federal government requires drug manufacturers, as a condition for obtaining Medicaid coverage for their drugs, to sign 340B pharmaceutical pricing agreements with the Secretary of Health and Human Services.
That requirement might be one of the federal strings cut in the transition from a Medicaid entitlement to block grants. If that happened, a manufacturer’s participation in 340B presumably would become voluntary and it would suffer no penalty for opting-out.
President Reagan proposed block-granting Medicaid in 1981, as did House Speaker Newt Gingrich in 1995 and President Bush in 2003. Republicans controlled both houses of Congress in 1995 and passed the change to Medicaid as part of broader legislation to balance the federal budget. President Clinton vetoed the measure, setting off the last federal government shutdown.
The government could be forced to close again beginning this weekend if House Republicans and Senate Democrats fail to reach a long-term agreement on spending for the rest of the current fiscal year or on another short-term continuing resolution.