Medicaid Block Grants: It is Never as Good as it Sounds
This post was written by Rick Jacobs, an expert in school-based Medicaid and a Principal at Fairbanks LLC.
The concept of a block grant for Medicaid is far
from a new idea as block grants have been used by the federal government to
reduce federal expenditures and shift costs to the states for decades.
In the late sixties and early seventies, the Nixon
Administration implemented block grants for Community Development and certain
housing programs. President Reagan proposed a Medicaid block
grant in 1981, which Congress rejected, as part of a broad series of
entitlement program cuts and succeeded in cutting Medicaid funding until
1984. President Clinton vetoed Medicaid
block grant legislation that was passed by the Congress in 1995. George W. Bush proposed Medicaid block grants
as well as sweeping cuts in Medicaid funding for schools, hospitals and other health
care providers. The proposals currently
being considered in Congress are building on the 2015 ACA repeal and Medicaid
Block Grant sponsored by Sen. Burr and Cong. Upton as well as Speaker Ryan’s
ACA repeal and Medicaid Block Grant proposal that passed the House in January
2016. The likelihood of Congress passing
Medicaid block grant legislation this session and the President signing it is
near certain.
The concept of a block grant has appeal for
intergovernmental stakeholders that mask the undesired consequences that result
from them. A block grant in simplest
terms is a lump sum allotment from the federal government to the states. Alternatively, it could also be a per capita
cap to consider population differences, but is effectively the same
concept. The benefits to the federal
government of a block grant are both financial and programmatic. The block grant limits the amount of federal
funds that are appropriated providing greater predictability of budget
requirements while concealing the effects of cuts in appropriation. The programmatic benefit of a block grant to
the federal government is that it effectively shifts all accountability for
program management to the states while retaining regulatory and funding oversight. The purported benefit to the states is that
they too gain more predictable funding and are able to exercise more local
control over the program with less regulatory oversight from the federal
government. In practice, it rarely works
out that way.
The fallacy is that:
- A block grant is a concealed funding cut
- A block grant does not account for changes in
program demands
- A block grant effectively ignores that the
underlying services are mandated and change with social needs
- A block grant shifts costs to the states
exacerbating the “hidden budget cut” that is the result of a fixed allotment
- A block grant is not appropriate for entitlement
programs such as Medicaid, especially in schools where services are mandated
regardless of the resources available to pay for them
- The
entitlement to services and the mandates to provide those services does
not end with a block grant and is completely inappropriate for programs that
are integrated in both mandating services and entitlement funding such as Title
19 and IDEA.
It is important to note that if
the federal funds are reduced by Congress, it does not reduce the non-discretionary
expenditures being made on behalf of the Medicaid program, but would merely
increase the amount of the unfunded mandate. Furthermore, since IDEA is
an entitlement program and the integration of IDEA and Medicaid is predicated
on both programs being entitlements, a block grant will reduce the funding for
services provided but the entitlement to provide the services will
remain. This will create a devastating and escalating shortfall for
states as they must provide services pursuant to an open-ended entitlement, but
must rely on a fixed and decreasing amount of funding to support those
mandates.
Block grants (or even per capita
caps) are not bad policy on their face and have valid and appropriate
applications in some situations. The use
of a Medicaid block grant would disrupt and damage a program that has met the
health care needs of children with disabilities for decades and is premised on
the mandate of schools providing services to children without regard to
funding. The devastating effects of
block grants in general would be intensified for schools who cannot turn away
students who require services or ignore their health care needs. Funding for mandated services would be
reduced and would put children at risk and increase costs to state and local
taxpayers as well as increase costly litigation from parents and other
stakeholders.
A Medicaid block grant is bad
policy, bad for children and bad for state and local taxpayers.