At the National Governors Association meeting, Republican governors pushed for a "reform" of the Medicaid program. Their solution is turning it into a block grant program.
The governors, upset with the new healthcare reform law’s requirement for states to maintain Medicaid eligibility standards until 2014, said block grants would provide states with the flexibility to tinker with the safety net for the poor in a responsible way.
“You give me a block grant, let me do whatever I want, and I will cover the right people,” Florida Gov. Rick Scott (R) told a National Governors Association’s meeting in Washington Sunday morning. “If I don’t, I won’t get reelected.”
It's not the silver bullet for reining in Medicaid costs the GOP would have you believe. The Center on Budget and Policy Priorities released this report last week, explaining how a block grant system would result in cutbacks in care for the poor, disabled, and elderly.
Some states may mistakenly believe that proposals to convert Medicaid into a block grant or otherwise cap federal funding would make their Medicaid costs more predictable and stable over time. In reality, a block grant is intended to provide predictability for the federal government by replacing the current financing system, under which the federal government pays a fixed share of a state’s Medicaid costs, with one in which the federal government would pay only a fixed dollar amount and leave the state responsible for all remaining costs. This is a radical change that would significantly shift both financial risks and costs to the states.
If federal funding proved inadequate under a block grant or cap, states would have to contribute more of their own funds or else cut back Medicaid eligibility, benefits, and provider payments. That is an almost inevitable outcome, since federal policymakers who favor a block grant seek to use the conversion of Medicaid to a block grant to secure tens or hundreds of billions of dollars in savings for the federal government. The only way for a block grant to produce those savings is for it to provide states with far less federal funding than they would receive under the current system.
Moreover, under a block grant, federal funding would cease to rise automatically in response to a recession or unanticipated costs resulting from epidemics or medical breakthroughs that improve health or save lives but increase costs. When those developments occurred, states would have to bear 100 percent of the added costs.
There's actually more flexibility—at least in terms of financing—in Medicaid as it currently exists than there would be in a block grant system. As it currently stands, the federal government pays a percentage of the state's Medicaid costs, ranging between 50 and 75 percent of each state's Medicaid bill. As those costs rise, as they have in the great recession, the federal government's outlay keeps pace. A block grant would give states a pre-determined amount of funding, and once it ran out, that's that. In good economic times, states might actually receive more than they spend, but that's an iffy proposition for the millions of low-income, disabled, and elderly patients relying on the program.
It's not a new idea, by any means. President Reagan wanted to implement a block grant program for Medicaid back in 1981. President Clinton vetoed legislation in 1995 that would have done the same. It's a go-to "solution" for conservatives who want to dismantle entitlement programs.