Medicaid Block Grant Plan Resurfaces in Budget Proposals – Would Shift Costs to States

By Sean Miskell

Though my creative side longs to contribute novel analysis and insight to the health policy world, too often reality makes doing so difficult. Such is the case this week, as both the House and Senate Budget Committee have submitted proposals that would restructure Medicaid as a block grant to states and repeal the Affordable Care Act (ACA). Say Ahhh! readers know that there have been numerous such proposals to turn Medicaid into a block grant, and as others before me at CCF have already argued, doing so would result in less Medicaid funding for states, constraining their ability to provide health coverage to families.

Though the House budget proposal argues that converting Medicaid into a block grant provides “flexibility to States so the program can better serve those who it is intended to benefit,” doing so would inevitably result in fewer people receiving coverage. Instead of paying a percentage of state Medicaid costs to cover all who meet the program’s eligibility requirements, a block grant would provide states with a fixed amount of money each year to pay for Medicaid coverage as they see fit. But while the prospect of such flexibility may seem appealing, the reality is that the fixed amount the federal government provides to states would likely grow less than the amount states need to continue covering those who are eligible for Medicaid. For example, the Center on Budget and Policy Priorities points out that under the House budget plan, by 2025 Medicaid spending would be 34 percent less than under current law. Turning Medicaid into a block grant is a way to cut Medicaid spending, not “better serve those it is intended to benefit.”

For its part, the Senate budget proposal argues that turning Medicaid into a block grant “improves Medicaid based on the CHIP model.” But doing so would not be an improvement for Medicaid. Rather, the result would be insufficient funding for state Medicaid programs that could lead to instability and waiting lists for families looking for care. For all the laudatory platitudes offered in favor of state ‘flexibility,’ children and families are better served by programs that provide strong federal protections that prevent states from making changes that scale back coverage. For example, Joan Alker and I recently illustrated that without federal protections, states will respond to tough fiscal environments by cutting back on coverage that families rely upon such as the Children’s Health Insurance Program. Further, unlike CHIP, Medicaid eligibility responds to need, rather than fixed funding levels. Turning Medicaid into a block grant would reduce the program’s ability to cover more people when need rises during economic recessions. If states did want to try to meet the needs of their residents in tough economic times, they would have to do so with their own money. The increased need during economic downturns generally hits states just when their coffers are running low and they are least able to respond. As the last recession vividly illustrated, states need a strong federal partner to keep safety net programs in tact during tough economic times. Turning Medicaid into a block grant shifts costs to states. I don’t think that is the kind of ‘flexibility’ that states should be asking for as it would undermine their ability to respond to their residents’ needs.

Again, we’ve heard this all before. However, what is different about these proposals this time around is that they are being made in an environment where the ACA has been fully implemented. In a study of contrasts, both the House and Senate budget proposals were released on the heals of a report from the Department of Health and Human Services finding that 16.4 million people have gained coverage under the ACA, bringing the uninsured rate down from 20.3 percent to 13.2 percent. While turning Medicaid into a block grant would reduce coverage for those who might otherwise have it in the future, repealing the ACA would take away coverage from the millions that currently receive coverage through the ACA’s insurance marketplaces and Medicaid expansion. In this regard, the budget proposal is not just the same old tune; it is a bad remix.