What Is A Medicaid Block Grant?

Posted on: Monday, March 6th, 2017

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Somewhere in the U.S. Capitol is a locked down health care bill that will likely be introduced by the House of Representatives this week. Early indications are that the draft bill contains a concept that will fundamentally change Medicaid – block grants.

Currently, if someone is eligible for Medicaid (i.e., meets the financials and, if applicable, the medical requirements), then Medicaid will pay for the applicable Medicaid expenses. Thus, there is theoretically no cap to the government’s financial exposure to Medicaid. According to the Kaiser Family Foundation, the federal government pays for 72.7% of Michigan’s Medicaid spending (which includes expansion Medicaid), and the state picks up the remaining costs.

Concerned about the unlimited exposure to health care costs and a belief that states and local governments are better equipped to address the specific needs of Medicaid beneficiaries, Republicans have long advocated for Medicaid “block grants.”  In general, with block grants, the federal government gives a capped sum of money to the states for Medicaid expenditures. However, “block grants” is a general term that can have different meanings.

  • True Medicaid “Block Grants”

True Medicaid block grants provide a fix amount of money to states to spend on Medicaid. Most block grants proposals include an inflation adjustment, but most proposals do not base that inflation adjustment on the rising costs of health care. After all, one of the points of block grants is an attempt to control rising healthcare costs that have historically outpaced general inflation. Under a true block grant proposal, the amount given to the states does not take into account the number of individuals needing Medicaid.

  • Per Capita Caps

Under true Medicaid block grants, if the number of individuals needing Medicaid rises, there are no additional funds to cover these individuals. Per capita block grants attempt to address this concern. A per capita system bases the size of the Medicaid block grant on the number of individuals eligible for Medicaid. Thus, while a per capita system does not fully adjust for rising health care costs, it does take the number of individuals in a state that are eligible for Medicaid into consideration.

Early indications are that most proposals lean towards per capita caps, but some proposals give states the options of choosing between a true block grant or a per capita cap.

At first glance, block grants can seem alluringly simple. But there are potentially huge implications for individuals with disabilities, which we will discuss in more detail in future posts this week.

(For a simple video on the different types of block grants prepared by the Kaiser Family Foundation, click here.)

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