6 Facts About Block-Granting Medicaid Funding


Block-granting Medicaid could reduce federal spending.

Under the Affordable Care Act (ACA), states could choose to expand their Medicaid programs to include individuals with income below 133% of the federal poverty level. Income alone affects eligibility in these states, whereas in states with traditional Medicaid, eligibility depends on income, household size, disability, and family status.

With GOP lawmakers working to repeal the ACA, Medicaid expansion will likely be reversed. Legislators have long voiced support for revising the Medicaid program, including funding the program through a block grant.

A recent report from the Commonwealth Fund gave an overview of issues related to funding Medicaid through block grants.

1. Why are Medicaid costs rising?

A large reason why Medicaid costs keep rising is due to increased enrollment in the program. In 2014 alone, Medicaid spending grew 8%, mainly due to Medicaid expansion, as a result of the ACA. Since the federal government picked up the bill for these individuals, federal spending skyrocketed 13%, while states only spent 1% more, according to the Commonwealth Fund.

Advocates of block grants believe that this method would reduce costs for the federal government, while still providing care for eligible individuals.

2. How would block grants be used for Medicaid?

Under this method, states would receive a fixed amount of funding to provide care for beneficiaries. This amount would not increase if there is an influx of beneficiaries, or if health costs increase, according to the Commonwealth Fund. However, the amount received by states would likely increase annually to account for inflation.

3. Have other cost-containment strategies been tried?

Other cost-related reforms have included decreasing prescription drug costs, increasing access to preventive care, and increasing managed care. These strategies were seen to keep per-beneficiary costs comparable to Medicare or private insurer spending since the 1990s, according to the report.

4. How would block grants change Medicaid?

Medicaid has always relied on federal funding growth along with enrollment and health needs in addition to state funding. This funding model allows Medicaid to account for healthcare needs stemming from a rise in poverty, reductions in employer-sponsored plans for low-income employees, longer life spans, and both natural or manmade disasters. Block granting would not account for these occurrences.

5. Would block grants affect eligibility?

According to the Commonwealth Fund, it is likely that a block-grant Medicaid program would have to deny coverage of new beneficiaries and/or reduce benefits to those covered in the event of a budget shortfall.

6. How would block grants save money?

Proposed legislation to repeal and replace the ACA that was introduced in 2015 would have created block grants for Medicaid based on pre-expansion funding. Researchers have estimated that this legislation would reduce federal spending by $62 billion, but would leave 17.6 million individuals without Medicaid insurance, according to the report.

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