How the President’s Proposed Budget Impacts Critical State Health Programs

The President’s 2020 budget request proposes a 12 percent reduction in the US Department of Health and Human Services (HHS) budget, compared to 2019 federal fiscal year (FFY) funding levels. The following highlights some of the key components of the President’s proposed $87.1 billion HHS 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:

  • Converts Medicaid and private market subsidies into state block grants: The changes are modeled after a 2017 bill originally proposed by Sens. Lindsay Graham (R-SC), Bill Cassidy (R-LA), Dean Heller (R-NV), and Ron Johnson (R-WI), which would convert Medicaid as well as private market subsidies (e.g., advance premium tax credits and cost-sharing reductions) into block grants for states. The program would require that states dedicate 10 percent of their grants toward funding that protects high-cost individuals, including those with pre-existing condition. The change is estimated to result in $777 billion in cuts to these programs over a 10-year period.
  • Establishes a minimum contribution standard for health insurance premiums. Amends premium tax credit calculations to require that individuals contribute a minimum percentage of their income toward insurance premiums. Currently, there is no such requirement, enabling some consumers to pay as little as zero for insurance once tax credits are calculated.
  • Funds the cost-sharing reduction (CSR) program: Proposed appropriation for CSR payments through calendar year 2020, with a request that CSR funding remain in place as long as the CSR requirement remains in place for health insurers. However, the budget only allocates $479 million in funding for calendar year 2020, which falls significantly short of the Congressional Budget Office’s CSR cost estimate of $10 billion in FFY 2020. The President’s proposed FFY 2019 budget included a similar proposal that was not funded.
  • Reduces 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.
  • Expands availability of health savings accounts (HSAs): Allows HSAs to be combined with any plans that are below a certain value threshold based on their benefits and cost-sharing structure (actuarial value of up to 70 percent). Current law only allows for use of HSAs with high-deductible health plans.


The President’s FFY 2020 budget contains some significant changes to Medicaid financing that were in the FFY 2019 budget, as well as other proposals impacting its policies and program operations:

  • Cuts overall program funding: Proposes to cut $777 billion over 10 years from Medicaid and marketplace subsidies.
  • Repeals ACA’s Medicaid expansion and targets Medicaid funding: Advocates repealing the ACA’s Medicaid expansion and supports a refocusing of Medicaid on individuals the program was “originally intended to serve.”
  • Requires work and community engagement initiatives: Notes that work and community engagement demonstrations for able-bodied adults enrolled in Medicaid have been approved in eight states. Proposes that all able-bodied, working-age individuals meet work requirements to receive Medicaid benefits (and other federally funded public assistance programs), predicting this will save $130.4 billion over 10 years.
  • Gives states the ability to change certain program elements and eligibility determination processes: Proposes to give states additional flexibility over Medicaid benefits and cost sharing, including making non-emergency medical transportation optional and allowing states to use state plan authority to increase copayments for nonemergency use of emergency departments rather than requiring a waiver to do so. Proposes to allow states to apply asset tests for individuals who are financially eligible for the program through the Modified Adjusted Gross Income (MAGI) standard. States would also be permitted to conduct eligibility redeterminations for MAGI-eligible individuals more frequently.
  • Reduces the federal match rate for Medicaid eligibility staff: Reduces the federal match rate for Medicaid-eligibile workers from 75 percent to 50 percent by FFY 2024, predicting this will save $7.4 billion over 10 years.
  • Prohibits Medicaid payments to public providers in excess of costs: 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.
  • Allocates 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.
  • Continues Medicaid Disproportionate Share Hospital (DSH) reductions: Current law reduces Medicaid DSH allotments between FFY 2020 and FFY 2025. This budget proposes to continue DSH allotment reductions from FFY 2026 through FFY2029 and estimates this will save $25.9 billion over 10 years.
  • Allows states to provide postpartum coverage for pregnant women with substance use disorders (SUDs): Proposes to make it easier for states to offer pregnant women diagnosed with SUD full Medicaid benefits for one year postpartum, which would cost $245 million over 10 years.
  • Improves maternal mortality and morbidity interventions: Through the Center for Medicare and Medicaid Innovation, it proposes to explore a potential service delivery model to test ways to address maternal mortality and morbidity rates.
  • Extends postpartum Medicaid coverage: Proposes making it easier for states to extend full Medicaid coverage for up to one year after birth for postpartum women with SUD. Currently, postpartum Medicaid coverage ends 60 days after birth, which can be a barrier to SUD treatment for postpartum women.
  • Expands flexibility for enrolling out-of-state providers in Medicaid: Currently, when Medicaid beneficiaries receive care outside of their home state, their provider must enroll in the beneficiary’s home state Medicaid program to receive payment. To reduce paperwork and promote access to specialized out-of-state care, the budget proposes allowing out-of-state providers to be paid as long as they are enrolled in Medicare or any state Medicaid program. This proposal would cost $9 million over 10 years.
  • Extends Medicaid managed care waivers: Currently, to implement mandatory, risk based Medicaid managed care, states must request waivers from HHS every two to five years. This budget proposes permitting the HHS secretary to approve waivers for longer time periods, and even make the state’s managed care authority permanent if a waiver has been renewed once before.

Proposals Affecting Individuals Dually Eligible for Medicare and Medicaid

  • Coordinates review of Dual Eligible Special Needs Plans marketing materials: Allows for joint state and CMS review of marketing materials for Dual Eligible Special Needs Plans.
  • Revisits 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 maintains the ability for dually eligible beneficiaries to use an SEP to opt into integrated care programs or to change plans following auto-assignment.

Prescription Drugs

  • Expands Medicaid drug coverage demonstration: Would allow up to five state Medicaid programs to test a closed formulary under which they negotiate prices directly with drug manufacturers. However, states in this demonstration cannot participate in best-price reporting or the Medicaid Drug Rebate Program. Closed formularies would permit states to pursue a selective and more cost-effective specialty pharmacy network, but leaving the rebate program is a risk states need to weigh. Predicted savings is $410 million over 10 years.
  • Eliminates the Medicaid rebate cap: There is currently a statutory cap on manufacturer drug rebates at 100 percent of a drug’s average manufacturer price. Once the cap is reached, manufacturers can increase a drug’s price without increasing associated Medicaid rebate. Lifting the cap will ensure manufacturers pay rebates covering all prices of a drug. It will also protect state Medicaid programs from the cost of excessive price spikes and incentivize lower list prices.
  • Authorizes the Health Resources and Services Administration (HRSA) to collect a user fee from participating 340B hospitals. Covered entities would pay 0.1 percent of total 340B drug purchases to create a sustainable source of funding to manage the 340B Drug Pricing Program.
  • Requires 340B transparency. All 340B-covered entities would need to report savings achieved from the 340B program and their uses to HRSA.
  • Improves integrity of rebate program: Enables HHS to impose fines on manufacturers when they misclassify drugs for Medicaid drug rebate purposes. Predicted savings are $347 million over 10 years.

Children’s Health Insurance Program (CHIP)

The President’s proposed budget only includes one suggested policy change that does not offer much detail.

  • Eliminates an existing fund and establishes a new one to provide states with additional federal CHIP funds in case of a shortfall. The proposed budget eliminates the Child Enrollment Contingency Fund, which provides additional funding to states that anticipate a shortfall of federal funds due to higher-than-expected CHIP enrollment. However, it also creates the Shortfall Fund and tasks CMS to transfer unused annual appropriations to this fund for states that need additional federal CHIP dollars.

Prevention and Public Health

The HHS budget request prioritizes public health through its investments in the opioid crisis and by targeting funds to support the launch of an initiative designed to end HIV/AIDS across the country. The high-level budget breakdown:

  • Continues support to prevent, treat, and support recovery from opioids, including:
    • $1.5 billion for State Opioid Response grants in support of all states and territories;
    • $221 million to expand the behavioral health workforce, including an additional $4 million for a new effort authorized in the SUPPORT for Patients and Communities Act to increase the number of providers that are able to prescribe medication-assisted treatment;
    • $120 million to support SUD treatment and prevention, including opioid abuse, in rural communities at the highest risk;
    • $476 million for the US Centers for Disease Control and Prevention to continue current activities in support of all 50 states and territories, as well as local jurisdictions, to track and prevent overdose deaths;
    • Align SUD treatment privacy protections with other confidentiality protections;
    • Prevent abusive prescribing by establishing HHS reciprocity with the Drug Enforcement Administration (DEA) to terminate provider prescribing authority;
    • $330 million in Department of Justice funding for opioid-related state and local assistance, including: $145 million for the Comprehensive Opioid Abuse Program to support, treatment and recovery, diversion, and alternatives to incarceration programs; $125 million for drug courts, mental health courts, and veterans treatment courts; $30 million for residential substance abuse treatment; and $30 million for prescription drug monitoring programs, as well as funding for the DEA to combat illicit drug use and trafficking; and
    • Funding for US Department of Agrilculture: $44 million in distance learning and telemedicine grants, of which $20 million would be dedicated to projects that combat the opioid crisis. In addition, the budget proposes $60 million in community facilities grants, which can be used to support treatment centers and other community needs.
  • Aims  to end the HIV epidemic: The HHS budget invests $291 million in FFY 2020 for the first phase of the administration’s proposed initiative, which will target areas with the highest infection rates with the goal of reducing new diagnoses by 75 percent in five years and 90 percent in ten years. The initiative includes:
    • $140 million investment in CDC to test and diagnose new cases, link newly infected individuals to treatment, connect at-risk individuals to pre-exposure prophylaxis (PrEP), expand HIV surveillance, and directly support states and localities;
    • $70 million in new funds for the Ryan White HIV/AIDS Program within HRSA to increase direct health care and support services, in an effort to increase viral suppression among patients in targeted, high-incidence areas. Also includes $50 million to HRSA for expanded PrEP services, outreach, and care coordination in community health centers;
    • Prioritizes the reauthorization of the Ryan White program; and
    • $25 million in new funds for the Indian Health Service to screen for HIV and prevent and treat hepatitis C in those living with HIV/AIDS.
  • Expands activities to address HIV/AIDS: Allocates $54 million for the Minority AIDS Initiative within the Office of the Secretary and $116 million for the Minority AIDS program in the Substance Abuse and Mental Health Services Administration in an effort to increase services to disproportionately affected communities of color.
  • Prioritizes funding for programs that address the needs of older Americans, many of whom require some level of assistance to continue living independently within their communities. This funding provides critical help and support to seniors, providing direct services such as respite care, transportation assistance, and personal care services. These services also include $907 million for senior nutrition programs. This funding is estimated to provide 221 million meals to more than 2.3 million older Americans nationwide.
  • Cuts CDC’s total discretionary budget authority by $1.276 billion, compared to 2019 funding levels. Program-level cuts would be $153 million. Other changes include:
    • A cut of $237 million for chronic disease prevention and health;
    • The creation of the America’s Health Block Grant as a means of reforming state-based chronic disease programs; and
    • An increase of $10 million for influenza monitoring and prevention.

Health and Housing Issues and Other Programs Addressing Social Determinants of Health

Some components of the HHS budget, and several aspects of the US Department of Housing and Urban Development (HUD) budget, could affect states’ abilities to address health through housing and other social determinants of health. The proposed budget cuts HUD funding by $8.7 billion — a 16.4 percent decrease from 2019 estimate.

  • Proposes changes to federal investment in rental assistance. The budget request would increase rental assistance to $37.9 billion, which would maintain services for all currently enrolled HUD-assisted households. However, “work-able” residents would be required to pay a greater share of their rent.
  • Adds funds to the Rental Assistance Demonstration (RAD) program, which supports transitioning public housing to housing voucher and project-based rental assistance units. RAD would prioritize the redevelopment of public housing units in designated Opportunity Zones.
  • Increases funding for lead-safe healthy homes by $60 million to $290 million.
  • Supports changes to existing programs:
    • Cuts $45 million from Housing Opportunities for People with AIDS, and
    • Eliminates the Community Development Block Grant (CDBG), “recognizing that state and local governments are better equipped to address local community and economic development needs.”
  • Proposes policy and financial changes for safety net programs. The budget cuts $17.4 billion from the Supplemental Nutrition Assistance Program and cuts approximately $1.1 billion from the Temporary Assistance for Needy Families (TANF) block grant. Adds additional work requirements in federally funded public assistance programs, including Medicaid and TANF.

Other Programs

  • Eliminates several programs serving children and youth with special health care needs (CYSHCN): Proposes eliminating several programs funded by HRSA that help states better serve CYSHCN. These include initiatives to improve systems of care for those with autism and other developmental disorders, pediatric mental health conditions, genetic disorders, and sickle cell disease.
  • Ends programs promoting screenings for infants and mothers: The budget proposes ending an initiative that supports universal newborn hearing screening and a program that promotes screening and treatment for maternal depression.
  • Promotes innovations to address maternal mortality: The budget proposes that the Centers for Medicare and Medicaid Innovation (CMMI) create a service delivery model for states to test interventions to improve maternal morbidity and mortality. This proposal would not require Congressional approval, and is in addition to CMMI’s recently released Maternal Opioid Misuse and Integrated Care for Kids models.
  • Funds Family-to-Family (F2F) Information Centers: Funds F2F Health Information Centers at their current level through 2021.
  • Maintains Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program: Maintains MIECHV program at current levels.
  • Promotes foster care: To promote family-based foster care for children with significant disabilities, proposes spending of $357 million over 10 years on salaries for foster parents. The recent Family First Preventive Services Act (FFPSA) placed restrictions on funding for congregate care placements (such as group homes), so this proposal would support states in developing alternatives to congregate care. Additionally, the FFPSA allows states to provide preventive services, such as mental health or substance abuse services, to keep children with their families. The budget proposes creating a flexible funding option that would further broaden eligibility for preventive services and increase the types of services that states can provide.
  • Caps benefits for families with more than one child enrolled in the Supplemental Security Income (SSI) Disability Program: Creates a cap on the total SSI benefits that families with more than one child receiving SSI disability payments can receive.
  • Increases Individuals with Disabilities Education Act (IDEA) funds: Proposes a slightly increased level of funding ($13.2 billion) for IDEA formula grants to states to support special education and early intervention services.
  • Maintains funding for Women, Infants, and Children (WIC): Proposes maintaining current level of funding ($5.8 billion) for the Special Supplemental Nutrition Program for WIC.