Medicaid: Stronger After Senate Rejects Cap

A dramatic 49-51 vote in the Senate last Friday brought an end to the effort to cap federal payments to state Medicaid programs–at least for now.

This was the third major push to cap federal payments to states in Medicaid’s 52-year history. In 1981, President Reagan and his Budget Director, David Stockman, narrowly failed in their effort to convert the Medicaid program into a block grant to states when the House, then under Democratic control, refused to go along.

In 1995, House Speaker Newt Gingrich fell short in his effort to “transform” the Medicaid program into a block grant to states when President Clinton vetoed that year’s Budget Reconciliation Act the Congress had passed. (In 2003, President George W. Bush proposed giving the states the option of accepting federal block grant funding, but the Congress did not take up the proposal).

This year, after a determined seven-month push by the House and Senate Republican Leaderships, the Congress could not quite find the votes to send a Medicaid per capita cap/block grant to President Trump as part of legislation to “repeal and replace” the Affordable Care Act.

The consequences for children and families cannot be understated. Medicaid is the nation’s largest health insurer for children, covering 37 million, or about 1 in 3 children. It also covers nearly 10 million parents. Had the federal government capped its payments to state Medicaid programs, in 1981 or in 1995, millions of children would not have realized the gains in overall health, educational attainment, and earning power that Medicaid coverage made possible, and millions of families would not have had the financial protection it provides.

And if federal Medicaid funds had been capped starting in 2020, as the House-passed “repeal and replace” bill would have done, the current generation of children, and all those to follow, would have been denied the benefits of this smart investment. Faced with a cap on federal funds designed to shift more and more costs to states over time, State Medicaid programs would have had only bad choices: cutting eligibility, cutting benefits, and/or cutting payments to providers.

Of course, the drive to cap federal payments to state Medicaid programs is not over. Some federal policymakers will continue to look to Medicaid for cuts in spending to “pay for” tax cuts or deficit reduction. Medicaid will remain politically vulnerable because about half of all Medicaid beneficiaries are children, who do not have the right to vote in order to protect their coverage. And, not to put too fine a point on it, last week proponents of a Medicaid cap came within one vote of achieving that long-sought goal, so they are clearly within striking distance.

That said, the effort to cap the program has failed for now. And whether or not you think that Medicaid is the new “third rail,” there is no question that Medicaid has emerged from the debate with more support than before, for the simple reason that more people have come to understand (1) how important Medicaid is to children and families and (2) how important uncapped federal funding is to a Medicaid program that works.

As Kelly Clarkson might sing, “What doesn’t gut you only makes you stronger.”

Advocates, state and local agencies, and providers all stepped up to the educational challenge. To cite just a few examples:

  • The Children’s Hospital Los Angeles, which cared for Jimmy Kimmel’s son, reminded everyone that Medicaid dollars help support centers of excellence that are resources for the entire community.
  • The school superintendents documented concerns about the impact of Medicaid cuts on the ability of schools to maintain special education quality and meet federal mandates.
  • The early childhood community helped policymakers understand the linkage between Medicaid and other insurance coverage and the wellbeing of infants, toddlers, and their families, which in turn enables school readiness and future success.
  • And advocates for foster care children and birth parents reminded us that the ability of child welfare agencies to do their jobs is heavily dependent on Medicaid funding.

The list could go on and on, but the basic point remains: the public and its elected representatives have a much better understanding today than seven months ago that Medicaid is foundational to the health and well-being of our nation’s children and families, and that uncapped federal funding is foundational to Medicaid’s success. That understanding is one that Medicaid’s beneficiaries and their advocates need to build upon, so that when the next effort to cap the program begins, the program emerges even stronger.

Andy Schneider is a Research Professor at the Georgetown University McCourt School of Public Policy.