Skirting the Law: Medicaid Block Grants and Per-Capita Caps in a Pandemic

St. Louis University Journal of Health Law and Policy, Forthcoming

34 Pages Posted: 27 Sep 2021 Last revised: 1 May 2024

Date Written: September 25, 2021


To what extent can an administration abridge Medicaid’s entitlement status by administrative fiat? In the final year of the Trump administration, just before the COVID-19 pandemic, the Centers for Medicare and Medicaid Services (CMS) sought to push the outer bounds of this question by announcing the Healthy Adult Opportunity (HAO) initiative. It invited states to submit § 1115 demonstration applications to cover individuals not eligible for Medicaid benefits under the state’ s Medicaid plan—meaning, in many cases, the Affordable Care Act’s (ACA’s) Medicaid expansion population. Spending on those populations would be capped, not by purporting to waive federal law regarding matching payments under Medicaid—which would clearly exceed the government’s authority under § 1115(a)(1)—but rather through application of the demonstration’s budget neutrality limit. “Savings”—or the difference between the cap and actual state expenditures under the demonstration—could be used on a variety of otherwise non-matchable state projects.

This Article traces some of the history of this maneuver, showing that the HAO misguidedly seeks to “return” Medicaid to a program it has not been for decades. It furthermore argues that the Trump administration’s attempt to cap federal expenditures for certain Medicaid populations in exchange for certain state flexibilities is beyond the administration’s legal authority to grant. As this Article shows, the issue turns on how “individuals not eligible for benefits under the state plan” are defined: Are they expansion populations considered to be “receiving medical assistance under a state plan approved under Title XIX,” at least for the duration of the demonstration, and hence entitled to all the protections given to categorical and optional Medicaid populations covered under a state plan, or are they simply “regarded” as such for the purpose of expenditures only, and not protections and privileges under the Medicaid statute? A careful reading of the statute, relevant regulations, and recent caselaw show that, at least in the case of the ACA’s Medicaid expansion population, the HAO initiative’s structure and suggested flexibilities do not comply with the law.

Keywords: Medicaid, health law, medical law, poverty, block grant, Healthy Adult Opportunity

JEL Classification: K32, I13, I14, I18

Suggested Citation

Hermer, Laura D., Skirting the Law: Medicaid Block Grants and Per-Capita Caps in a Pandemic (September 25, 2021). St. Louis University Journal of Health Law and Policy, Forthcoming , Available at SSRN: or

Laura D. Hermer (Contact Author)

Mitchell Hamline School of Law ( email )

Mitchell Hamline School of Law
875 Summit Ave.
St. Paul, MN 55105-3076
United States
6512906357 (Phone)

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