How would a Medicaid block grant work?

A block grant is a fixed amount of money that the federal government gives to states for a specific purpose. Sometimes block grants are called “capped” funding or “allocations.” If a Medicaid block grant formula were based on historical spending levels, the picture would not be rosy: By several measures, Mississippi has the most limited Medicaid program of any state.

Under an annual block grant funding scheme, Mississippi would receive a fixed amount of money each year. If the federal money was exhausted before the end of the fiscal year, the state would have to pay 100 percent of additional costs – or terminate health care coverage for vulnerable seniors, children, or people with disabilities. A block grant would be based on today’s expenditures, at a time when the Legislature has cut Medicaid’s budget. Such grants over time would not take into account population growth, public health threats, natural disasters, costly medical technology advances or new medicines, continued rising costs of prescription drugs, other medical treatments or a down-turn in the economy. Mississippi would have to pay for all inflationary costs, not just our current 26 percent state share. Even if Congress added a built-in inflation factor to increase the grants from year to year, because medical inflation is unpredictable and has been rising at double-digit rates in recent years, the state would be assuming a big financial risk.

Mississippi has a bare-bones Medicaid program with very few optional services or expanded coverage, and we have among the most stringent eligibility requirements in the nation (that is, the income limit for Mississippi participants is among the lowest). Thirty-one other states have expanded Medicaid to cover low-income adults, and others have added optional services, such as dental treatment for adults. States that have chosen to broaden the population served or to provide additional services beyond federally mandated minimum categories will likely be rewarded with much larger block grants than Mississippi.

Traditionally, block grants have meant a state received a frozen amount of money with no strings attached. But “strings” are what keep Medicaid programs from charging co-pays that poor people cannot afford; strings insist the program provide certain benefits such as doctor visits, hospital stays, x-rays, treatments; strings tell states they must serve pregnant women, the disabled as well as children, the elderly and foster kids.

There are many unanswered questions about what Congress will propose. The proposal might be to roll chip funding and Medicaid funding into one block grant. It could end Medicaid’s entitlement status, meaning that states would not have to serve everyone eligible. Some eligible patients could be turned away, or benefits could be cut. States could create waiting lists, or end the program if the money ran out before the end of the fiscal year. Congress could tell states they would receive a 1 percent reduction in funding over last year’s amount and reduce funding by 1 percent each year over the next 10 years. How would a state like Mississippi, with its already minimal program, respond?

Coverage Implications for Mississippi Residents

Resources

Mississippi Insurance Commissioner Mike Chaney's Response to U.S. House Majority Leader Kevin McCarthy's Invitation to Provide Suggestions on How America's Health Insurance System Can Be Improved in Mississippi

Mississippi Insurance Commissioner Mike Chaney's Response to Senate Committee Chairman Lamar Alexander's Invitation to Provide Suggestions on How America's Health Insurance System Can Be Improved in Mississippi

CBPP Fact Sheet: 229,000 Mississippi Residents Would Lose Coverage in 2019 Under ACA Repeal

Medicaid & Chip: March 2016 Monthly Applications, Eligibility Determinations and Enrollment Report

Strategies to Stabilize the Affordable Care Act Marketplaces: Lessons from Medicare

Mississippi Division of Medicaid – Medicaid Briefing

Block Grant and Per Capita Caps Would Dismantle Medicaid As We Know It

Medicaid Block Grant Would Slash Federal Funding, Shift Cost to States, and Leave Millions More Uninsured

Per Capita Caps or Block Grants Would Lead to Large and Growing Cuts in State Medical Programs

What Would Block Grants or Limits on Per Capita Spending Mean for Medicaid?

Overview of Medicaid Per Capita Cap Proposals