President Donald Trump and the Republican-controlled Congress are considering proposals to convert funding for Medicaid into a block-grant program. While this could produce expenditure predictability and lower costs for the federal government, such an approach raises questions for states and the program's core mission, as well as concerns over efficiency, accountability and equity.
Federal Medicaid dollars to states are more than the average 61% federal match (FMAP) when total Medicaid payments are included, particularly for high FMAP and high disproportion-share payment states. Medicaid dollars represent 56% of states' federal expenditures, making it important to state economies and enabling states to provide healthcare for the most-vulnerable citizens. The devilish details for states are many. Governors and state legislators should make certain they are not getting a Trojan horse.
Would a block grant be a specific amount or would it be calculated based on a formula? What would be included? Would it include Medicaid DSH, Medicaid graduate medical education and provider fee dollars that supplement some providers' Medicaid payments? How would current budget-neutrality of waivers be handled?
How would variability among states in the subsets of Medicaid beneficiaries covered be addressed? How would payments for dually eligible individuals be handled?
How would healthcare inflation, population growth and introduction of new expensive drugs be handled? Would coverage continue to be guaranteed for all those eligible for Medicaid? Would states now be left to their own devices when there is an economic downturn or a natural disaster?
There are so many questions, yet so far there have been few specific answers.
One rationale for greater state control is that healthcare is local and states have greater knowledge of their delivery system and are better able to identify and address their population's needs. However, this apparently is not sufficiently important to entice Congress, governors, insurers or patients to want to move Medicare or veterans' healthcare to such a model.
One major consequence of block grants that is not discussed is the impact on efficiency, accountability and equity. There are 56 Medicaid programs (states, territories and the District of Columbia). Each program has its own administration and information technology. States often lack the human resources needed to manage the demands of a 21st century insurer. These issues add complexity, and often make it difficult to obtain uniform and timely data to evaluate performance, cost and quality. They also undoubtedly create duplicative waste. Block grants will likely add to the complexity and wasteful duplication.
Medicaid is a pillar of our health system and offers critical services to the poor, children, pregnant women, the disabled and the elderly, but its federal-state structure poses challenges. The 56-program structure has given rise to marked differences in payment rates and methodologies and in coverage and benefits for potential Medicaid recipients depending upon the state in which they live. The situation for Americans under age 65 markedly differs from the situation for Americans over age 65 who receive the same coverage and benefits regardless of where they live. This intergenerational and geographic inequity will likely be magnified with block grants and increasing state control. Advocates for vulnerable populations should be concerned about this.
Given the issues posed by block grants, there is another reasonable, albeit never discussed option: Federalize the Medicaid program. This runs counter to greater state control and the anti-federal government mood of many and, thus, has little likelihood of being discussed, let alone enacted. Yet, it deserves mention. There appear to be many efficiencies and accountability gains, equity achievements, and perhaps, cost reductions to such an approach. A federal Medicaid HMO-type program could link to the concept of per capita caps. Since 80% of Medicaid recipients are already in some type of managed-care delivery model, this could provide a strong foundation for the approach. Of course, a federal Medicaid managed-care program would have its own share of devilish details.
Before we move to greater state control of Medicaid, the details of these reforms and all of their implications for individuals, providers and states should be articulated and carefully evaluated. Seventy-three million Americans deserve this thoughtful approach. Their lives might well depend upon it.
