Health Reform WK-EDGE Report offers dim outlook for states if Medicaid funding restructured
Wednesday, February 15, 2017

Report offers dim outlook for states if Medicaid funding restructured

By Sarah E. Baumann, J.D.

States could be forced to cut Medicaid program eligibility, benefits, and provider reimbursement if the Trump Administration imposes "fundamental changes" to program financing and structure, according to the Kaiser Family Foundation (KFF). KFF issued a report discussing the basic premises behind block grants and per-capita caps and offered insight into potential effects on state Medicaid programs.

Currently, the federal government matches state spending for eligible Medicaid beneficiaries and qualifying services based on state spending and program needs. A statutory formula determines the federal spending share, which is based upon a state’s per capita income, and is designed so that the federal government pays a larger share in poorer states. Under a block grant, however, the federal government would provide states with a pre-set amount of funding to be used to cover all individuals and services, regardless of specific enrollment needs. Under a per-capita cap, the federal government would cap funding per enrollee, or type of enrollee (e.g. child, adult, elderly, disabled) to be used for all services. Both block grant and per-capita cap amounts would increase slightly over time to account for inflation. Federal share amounts would be established from a "base year" amount, which could potentially be based on actual spending and lock in historical spending amounts. Base year amounts could also be based on individual state spending or national spending, which vary substantially. In addition, it is unclear whether expansion state funding would be included in calculations. To accomplish federal saving, block grants or per-capita caps would be set at levels below what is expected under current law; states that require additional funding would be forced to pay for it themselves.

KFF opined that increased state responsibilities would outweigh increased flexibility in decision-making, which is already significant. Furthermore, block grants and per-capita caps would not allow states to respond to needs stemming from unexpected events, including natural disasters and the availability of new medical treatments. Because increased spending could force states to spend less in other areas, such as education, KFF suggests that states are more likely to effect cuts to eligibility, benefits, and provider reimbursement, putting vulnerable populations who rely disproportionately on Medicaid at risk.

Companies: Kaiser Family Foundation

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