Radically Restructuring Medicaid Would be Bad for Kids

While most press coverage has focused on repealing the Affordable Care Act and scaling back the Medicaid expansion for adults, a less well-known but extremely damaging effort under consideration by Congress would radically restructure Medicaid financing. Proposals would do this through a block grant or per capita cap designed to save money by limiting federal contributions. (Kaiser just put out a helpful video explaining these approaches.)

This is big for a number of reasons. Medicaid’s existing structure has helped states respond to every economic downturn, natural disaster, epidemic or innovative treatment for more than 50 years. Restructuring Medicaid financing would result in a shift of costs and risk to states, eroding health coverage for children and their families. Our new brief highlights a number of specific risks including:

Jeopardizing the guarantee of coverage. States would not be protected from increased enrollment during economic downturns or from any other increased costs, putting states in the position of having to make cuts and/or find ways to increase revenue. This means cuts to eligibility, benefits, provider payments and increased cost-sharing for families.

Removing the guarantee of benefits, including Medicaid’s child-centered benefit package or the Early, Periodic, Screening, Diagnostic, and Treatment (EPSDT). Proposals would likely eliminate the federal benefits guarantee that all children have today regardless of where they live. Ultimately this would mean that politicians, not pediatricians, would be in the position of deciding what services are necessary for children’s health and development.

Putting pressure on other children’s programs in state budgets. A cap or block grant could force states to spend their own revenue on health care, placing pressure on other parts of the budget that support programs such as child care, education, child welfare, juvenile justice, family supports or other services critical to children. Caps would also likely force state leaders to choose among vulnerable populations and/or the programs and services they need.

Putting states and families at risk during an economic downturn. States would no longer be able to rely upon sufficient federal support to help them respond to growing needs during a recession. More families would need health coverage just as state tax revenues take a hit and require states to scale back spending.

Weakening states’ ability to respond to public health crises. Federal caps would undercut an important tool states now use to respond to disasters or public health crises. Medicaid became the primary responder to the HIV/AIDS epidemic, and today is a key part of states’ response to the new opioid crisis.

Tying states’ hands when drugs, new treatments, and other health care costs rise. If costs of critical drugs or devices (e.g. EpiPens) increase or treatment needs (e.g. autism diagnoses) rise, states would either have to take on the full cost of services or deny treatment to children and families in need.

It’s troubling to see such a large amount of risk shifted to states that rely today on a strong federal partner to meet their population’s health care needs. Yet more troubling is that these proposals allow Congress to pass the hardest decisions along to state lawmakers, absolving themselves of the responsibility of making the tough calls on whom and what to cut.

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