Reuters

Trump is moving to allow states to cap their spending on parts of Medicaid, a public health insurance program for low-income Americans.

The new initiative allows states to convert portions of Medicaid into a system of block grants, likely scaling back health benefits for those insured.

Congress rejected the idea during the Trump administration's effort to repeal and replace the Affordable Care Act.

Democrats and patient advocates staunchly oppose the change, contending it will strip health coverage from Americans entitled to it.

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The Trump administration unveiled a plan on Thursday to allow states the option of capping spending on health benefits for millions for Americans, likely prompting them to cover fewer people after Congress rebuffed the idea during the drive to repeal and replace Obamacare in 2017.

Branded as the "Healthy Adult Opportunity," the new conservative initiative would allow states to convert parts of Medicaid into a system of block grants. Those that join can receive a fixed lump-sum payment to cover healthcare for able-bodied adults who became eligible for Medicaid coverage under the Affordable Care Act.

Medicaid has expanded under Obamacare in 37 states since 2014, and around 20 million Americans gained coverage.

The change would give states broad flexibility to design health coverage as they see fit — a drastic shift to the financing structure of safety-net health programs.

Seema Verma, the head of the Centers for Medicare and Medicaid Services, called it "a groundbreaking new policy that holds the potential to transform the Medicaid program."

Some of the changes to Medicaid hadn't been allowed in the past. Per The Washington Post, they include:

Shrinking the amount of drugs that Medicaid insures and creating a list of covered medications.

Restricting the program to people with select health issues or medical diagnoses.

Enacting a cap on the total enrollment of people covered.

Charging premiums or co-pays equaling no more than 5% of an enrollee's income.

States that opt for the block grants, though, cannot leave out coverage for groups traditionally covered by the safety-net program, including children, pregnant women or the disabled. Tennessee has signaled interest in pursuing the new approach.

Democrats and patient advocates steadfastly oppose it, arguing it would strip many low-income Americans of their health insurance.

"After being stopped in the Congress from repealing the health care law and destroying the lifeline of Medicaid, the Trump administration has decided to ignore the law and steal lifesaving health care from seniors and families anyway," House Speaker Nancy Pelosi said in a statement.

Jessica Schubel, a senior policy analyst at the left-leaning Center on Budget and Policy Priorities, said the waivers would create incentives for states to make slash their Medicaid budget and divert federal dollars elsewhere.

"People enrolled in Medicaid will likely see cuts to their benefits, and coverage will likely become more unaffordable," said Jessica Schubel, a senior policy analyst at the left-leaning Center on Budget and Policy Priorities.

The proposed change is also likely to encounter immediate legal challenges as well.

Medicaid now covers over 70 million people, or one in five Americans, according to the Kaiser Family Foundation. States operate it alongside the federal government, which funds over half their spending. The program has grown into a critical part of the nation's social safety net since it was created in 1965 under President Lyndon Johnson.

But conservatives have long called for cuts in the program to rein in mounting federal health spending.

During Trump's effort to repeal Obamacare, the legislation that sought to replace it included provisions for Medicaid block grants, and moderate Republicans balked at the notion of trimming insurance benefits.

That hasn't stopped the administration from pursuing new ways to reform Medicaid. Legal roadblocks have dogged it in the past year over efforts to impose work requirements on Medicaid beneficiaries, which critics say led to large coverage losses in states like Arkansas where it was attempted. Federal judges blocked the efforts.

The White House also supports a lawsuit that would toss out Obamacare in its entirety, jeopardizing coverage for millions of Americans who gained it under the law.

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