Top Five Threats to Children and Families Posed by a Medicaid Block Grant

Many questions remain about what the new administration and Congress have in store for vulnerable children and families. Of course, the president-elect and congressional leaders have indicated repeal of the ACA will be a top priority early next year and, among other things, would end the Medicaid expansion and children’s coverage protections. But what other changes to Medicaid might be expected? President-elect Trump has said he will block grant Medicaid, a proposal consistent with proposals that some in Congress have put forth in some form reaching back to the 90s—they haven’t been successful yet. But House Speaker Paul Ryan has promoted the Medicaid block grant approach, accompanied by very substantial cuts in federal spending, as recently as this past summer.

With block grants appearing yet again in the public discourse, we figured it might be a good time to remind readers of our top five reasons why transforming the successful Medicaid program into a block grant is still a bad idea. Here’s our list.

  1. It’s a cut. No matter how you slice it, a block grant means cuts. Medicaid is a federal-state partnership — states are guaranteed to receive federal matching funds to run the program within federal guidelines and provide health care to their residents. Today, as long as an eligible person enrolls in Medicaid, federal matching funds will be there to support their care. A block grant caps the federal share, with states left to determine how to spend much more limited dollars. Medicaid is already a very lean program, so those cuts will impact services that children and families need to thrive. Congress’s most recent proposal from earlier this year would cut $1 trillion from Medicaid, or one-third of the program over the next decade.
  1. Jeopardizes the nation’s progress in covering kids. Today, an all-time high of 95% of the nation’s children have health coverage thanks to Medicaid, CHIP and the ACA. Medicaid is by far the MVP here — children make up nearly half of Medicaid beneficiaries. If states were forced to take on more of the cost, it would be nearly impossible to maintain the same benefit and enrollment levels. During the most recent economic downturn, Medicaid and CHIP worked exactly as intended: more kids got coverage even as child poverty rose. Capping Medicaid undermines the point of the program—it would place an arbitrary ceiling on funds that could run out just as more kids and families need it. Medicaid’s unique structure protects children and families from losing coverage during economic downturns or when states face budget shortfalls.
  1. Leaves states holding the bag when a new disease strikes or a new treatment is discovered. A block grant puts an arbitrary cap on what the federal government will pitch in. Under a block grant, once the cap on federal funds is reached – whether tomorrow or down the road—the state is left responsible to either cut off services to those in need or put up a much larger share of the cost. Fundamental restructuring of Medicaid’s financing structure puts states on the front lines for unanticipated growth in health care costs either from a new virus like Zika or a new block buster drug that provides great new treatment options for those suffering from Alzheimer’s, breast cancer or other common and serious medical conditions.
  1. Diminishes state flexibility to respond to changing economic circumstances. Block grant proponents tout additional flexibility for states. In reality, a block grant ties state officials’ hands when Medicaid is needed the most: during economic downturns or unexpected population or health challenges that create additional need. For example, when the economy slows, more people need Medicaid and yet states have fewer resources to cover them due to decreasing revenue. Under a block grant, no additional federal support is available to help states get by. States are also left without options in times when a state experiences larger-than-anticipated population growth or a natural disaster like Hurricane Katrina that places more families in need. Medicaid’s strength lies in its ability to respond to changing need. A block grant sets states up for failure at the exact time when more families will need help. 
  1. Endangers key features of Medicaid that work for kids – namely its strong benefits and cost-sharing protections. Cuts to federal funds coupled with more “state flexibility” would undermine states’ ability to meet Medicaid’s Early, Periodic, Screening, Diagnostic, and Treatment (EPSDT) requirement for children, a core benefit that ensures all children have the screening and treatment services needed to grow and thrive. (Not to mention, federal guarantees like EPSDT could be explicitly repealed.)

Block grants are sold as innovation and opportunity for states. But we know that any substantial changes to the Medicaid financing structure (read: cuts) would have a significant impact on the health and economic security of families and communities across the country— children, people with disabilities, seniors, parents and many others who have come to rely on the program would no longer be guaranteed enrollment. This raises the unfortunate but very real potential for the most vulnerable Americans to compete for scarce healthcare dollars. It would dismantle the social compact we have across generations and abilities to take care of each other, and our own. No one wins when the most vulnerable are competing against each other for a smaller and smaller share of the pie.

Elisabeth Wright Burak is a Senior Fellow at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.