Medicaid Innovation Would Flatline Under Block Grants and Per Capita Caps

  ·  Health Policy Hub   ·   Danielle GarrettKyle Marie Stock

Medicaid provides health insurance coverage to millions of children, older adults and people with chronic health conditions. This has meant many more kids, grandparents and people with chronic health conditions have been able to get the care they need--from well-child exams to medications to services that allow people to age with dignity in their homes and communities.

In addition to providing access to vital health care services, Medicaid has become a more flexible and dynamic program that allows states additional ways to provide more efficient and effective care that’s attuned to the needs of their population. States have been doing innovative things with their Medicaid programs for years through waivers, and the passage of the Affordable Care Act only bolstered states’ abilities to improve care delivery through their Medicaid programs. Through new funding opportunities and mechanisms for innovation, states have been testing out methods that reward value instead of volume and address the social determinants of health. For example, through its Medicaid program, Louisiana provides supportive housing services to individuals with disabilities, and Maryland helps beneficiaries find and maintain employment in their community.

Medicaid coverage and funding is the foundation for these health system transformation initiatives, but the president-elect and Congressional Republicans have proposed dismantling the Medicaid program as we know it by imposing block grants or per capita caps. Either of these options means bad news for our work to address the social determinants of health and to create even more innovative and effective Medicaid programs. The bottom line is that block grants and per capita caps would result in drastic cuts in funding and will leave states scrambling to meet even the most immediate needs of beneficiaries, without opportunities to improve the health care system to keep people healthier (and keep costs down) in the longer-term.

For example, House Speaker Paul Ryan’s proposal released this past summer would cut federal Medicaid funding per beneficiary by as much as 50 percent over 10 years through per capita caps, while block grants could slash total federal Medicaid funding by nearly a third. Rather than increasing innovation, funding cuts due to block grants and per capita caps would hinder innovation and may even prevent it altogether. These policy proposals would result in numerous negative impacts including:

  • Enormous funding cuts that would force states to cut costs dramatically in the short term. This means that states would be focused on ways to cut eligibility, benefits, and provider payments rather than ways to improve care for enrollees and lower long-term costs through innovations and investments in population health.
  • A decrease in available funds meaning that states wouldn’t be able to provide the upfront investments and incentives needed to help providers transform their practices to provide more integrated services and better care coordination.
  • Eligibility cuts that will mean any Medicaid innovations states are able to accomplish would reach even fewer people.

Finally, Medicaid cuts won’t occur in a vacuum and would likely be accompanied by other cuts to social services and supports. Limited funds on all fronts will create competition for resources and make it even harder for states to encourage collaboration with social service providers and address social needs through Medicaid.

Congress is already on its way to rolling back the important advances in the Affordable Care Act, and Congressional Republicans have their sights set on dismantling Medicaid next. In the coming days, we must ensure decision-makers understand that massive funding cuts to Medicaid will constrain – not promote – innovation. We must continue to work together to lift up the message that Medicaid is already an innovative and effective program.