Medicaid Block Grants: Theory vs. Reality

Although the debate about converting Medicaid into a block grant program has been lingering on partisan lines for decades, the Paul Ryan budget proposal is again bringing the debate to the forefront. Under Ryan’s proposal, states would receive a set amount of federal funds to sustain their Medicaid programs, but then bear the financial risks should their programs exceed their grant allotments.  While Ryan believes this will curb federal Medicaid spending and give states increased “flexibility” in running their programs, the reality of this drastic change at the state level is proving to be a contentious issue.

In the worst case scenario, it seems like converting Medicaid into a block grant program could inevitably lead to rationing care. Conservative state leaders believe block grants will allow states to run their own programs without government intervention and tailor their programs to their own populations. However, I seriously doubt states will welcome this freedom at the cost of bearing the risks once their funds are depleted. If states already want to cut Medicaid spending under the current system, what would prevent them from making dangerous cuts to Medicaid beneficiaries without guaranteed federal assistance in the horizon? Another shortcoming of this system is the fact the block grants may not be adjusted for inflation and in the event of another recession, low-income families may be worse off.  For example, lessons learned from the TANF program, another block grant program for needy families, shows that states may be able to funnel block grant funds to free up state funds that may not directly benefit low-income families and children.

All in all, I think the block grant debate if more an issue of political ideology. I understand that states want flexibility to run their programs, but this should not be done at the expense of limiting access and care to those that need it most. I would hope that if Medicaid does become a block grant program in the future, states would develop ways to limit the impact of budget shortfalls on Medicaid budgets. But perhaps this is why entitlement programs have been left to the federal government: to ensure equitable access and guaranteed financial support for those eligible in all states, not just those that can afford to do so.