Some conservative states have expressed interest in block grants in recent years, but it's not clear how many will take up the Trump administration's new offer.

Capped Medicaid payments would represent a radical departure in how the 55-year-old program is financed. The federal government has long provided open-ended matching funds to states.

Verma is touting block grants as a way for states to take greater accountability for the health of their residents while better controlling spending on the program, which takes up a chunk of state budgets. Verma also sees the policy as a way to constrain Obamacare’s expansion of Medicaid to millions of low-income adults — a program that she argues has siphoned away resources for the most vulnerable populations covered by Medicaid.

"Adult Medicaid beneficiaries can hope for better health and all beneficiaries can expect a stronger, more sustainable program for years to come," Verma said Thursday morning.

The rollout of the policy represents a signature achievement for Verma, who pushed through the plan just weeks after a high-profile feud with HHS Secretary Alex Azar jeopardized both of their jobs. The two have tried to repair their working relationship after an intervention from senior White House officials, and Azar appeared at Thursday’s rollout in a show of support for Verma’s policy.

Still, Medicaid advocates are likely to challenge the policy in court. Democratic lawmakers have long cautioned the Trump administration against advancing the policy, contending the health department doesn’t have the authority to unilaterally cap program spending. In a letter to Verma this week, more than 30 House Democrats warned the move “defies Congress” and threatens care for some of the country’s most vulnerable people.

Democrats are portraying the new block grant policy as a cut to Americans’ health care and tied it to Trump’s efforts to undermine the Affordable Care Act. During the failed effort to repeal and replace Obamacare in 2017, Congress rejected a similar block grant proposal after analysts found it would result in millions of people losing coverage.

"Even after people across the country spoke out and pressed Congress to reject President Trump’s plan to gut Medicaid with his Trumpcare bill, he’s still charging forward with harmful policies that will hurt the many families who rely on Medicaid," said Patty Murray, the top Democrat on the Senate health committee.

The health care law — and in particular its Medicaid expansion — remains popular after the failed effort to replace it during Trump's first year in office. Nearly three-quarters of states have expanded Medicaid since 2014, and support for the program has boosted Democratic candidates in conservative strongholds.

On Wednesday, one day before the block grant rollout, Verma sought to rebut claims that the administration is undermining Obamacare — even as Trump supports a lawsuit that could kill the entire health care law.

“The tired canard that the Trump Administration is sabotaging the ACA rings hollow,” Verma said. “Rather, we are keeping what works and fixing what’s broken.”

Block grants have been a regular feature in Republican health plans dating back to the 1980s. Republicans say that states can better manage the programs on a defined budget and fewer rules set by Washington. However, Medicaid advocates say a block grant would limit states’ ability to respond to economic downturns and expensive new drugs, forcing them to trim their programs.

The administration said states can pursue block grants under the health department’s authority to waive Medicaid requirements to test new payment and health care delivery ideas. Critics argue, however, that the administration can’t legally cap Medicaid spending without permission from Congress.

Sensitive to the negative connotations surrounding block grants, the Trump administration is branding the policy “Healthy Adult Opportunity.” Officials are emphasizing that states receiving lump-sum payments will face stricter oversight to ensure patients aren’t getting sicker or losing access to health care providers. Traditional populations covered by the program — like children, elderly adults and people with disabilities — would not be eligible for capped payments.

State Medicaid programs would also have new ability to limit health benefits and drugs. They would also be allowed to set premiums and cost-sharing, but patients can't be required to pay more than 5 percent of their household income on out-of-pocket costs.

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Some states have been frustrated that Medicaid programs, which must cover every FDA-approved drug, have had limited tools for constraining drug costs. Under the new guidance, state Medicaid programs could establish a list of covered drugs known as a formulary.

States could choose to receive lump-sum funding or receive funding based on the number of enrollees.

Democratic states that expanded Medicaid are unlikely to take up Trump’s offer, but it may draw some interest from conservative states.

Oklahoma Gov. Kevin Stitt, whose state hasn’t expanded Medicaid, appeared alongside Verma to announce he would apply for a new waiver, calling the new policy a "game changer." Stitt for months has been agitating for a block grant as an alternative to a Medicaid expansion referendum expected on the Oklahoma ballot this fall.

Mike Dunleavy, Alaska’s Republican governor, has also expressed interest in a block grant. Tennessee, which hasn't expanded Medicaid, last fall became the first state to formally request a block grant for its program. Verma said that the Tennessee request is broader than the scope of the new guidance.

Litigation could still halt the new policy, potentially leaving another one of Verma’s Medicaid initiatives tied up in courts after a federal judge blocked new work rules. A federal appeals court in Washington, D.C., is weighing the Trump administration’s request to revive the rules requiring some Medicaid enrollees to work, volunteer or attend school as a condition of coverage.

Groups like the National Health Law Program, which sued over work requirements, said they'll closely review the block grant plan. Its legal team will be “carefully assessing the enforcement and litigation options" said Leonardo Cuello, the group's health policy director.

Rachana Pradhan contributed to this report.