Senate Democrats have pummeled Rep. Tom Price, President Trump’s pick to lead the Department of Health and Human Services, for supporting Medicaid block grants, but it’s a policy unlikely to win a place in Republicans’ Obamacare repeal-and-replace plan.
If Republicans succeed in making significant changes to Medicaid, they more likely would turn to a more moderate per-capita system embraced by a wider swath of Republicans. Like block grants, a per-capita system would limit federal contributions, but it would allow federal assistance to rise with enrollment growth.
“I think a per-capita block grant is a much more likely scenario,” said Matt Salo, executive director of the National Association of Medicaid Directors. “The per-capita stuff makes a lot more sense.”
Republicans have long used the term “block grant” to describe a cap on federal payments into the state-run health insurance program for the poor, without filling in details on how it would work. But they stress a need to limit spending on Medicaid, which eats up an increasingly large share of state budgets.
“The word ‘block grant’ — it’s almost more of a rhetorical term of art than an actual policy proposal,” Salo said. “It’s a way for people to say, ‘I want a change and I want a big change from what we’re doing now.'”
Democrats and liberals are highly skeptical of Republican claims that block grants for Medicaid would push states to be more efficient in the delivery of care, saying it would merely push more of the financial burden onto states.
“When you move to a block grant, you remove the right [to coverage],” Sen. Bob Menendez, D-N.J., told Price at his Finance Committee confirmation hearing last month. “Do you recognize that in doing so, you risk the potential of millions of Americans who presently enjoy health coverage through Medicaid no longer having that right?”
Price, who is awaiting a Senate vote on his nomination to serve as HHS secretary, supported block grants as chairman of the House Budget Committee.
House Speaker Paul Ryan also proposed block grants for Medicaid in his “Better Way” healthcare proposal. But the Ryan plan also suggests per-capita funding as an alternative approach, and that option could prove more palatable to a wider range of stakeholders. After a GOP retreat last month, Ryan suggested Medicaid reform is a critical policy goal.
“Medicaid reform is going to happen pretty quickly, I think,” Ryan said Jan. 27 at a Politico event.
Bill Pierce, senior director of APCO Worldwide, said the idea of Medicaid block grants has been widely criticized because they’re “too static.” If a state experiences a recession, for example, and more people enroll in Medicaid, the state would have to bear the additional costs on its own without federal help.
“The idea of per-capita is perhaps a better idea that tries to be more responsive,” Pierce said.
It’s not just Democrats who are uneasy with changes to Medicaid’s funding. Governors, including Republicans, are pressuring Congress against shifting costs to states, which could be the outcome of block grants and, to a lesser extent, a per-person system.
“In considering changes to Medicaid financing, it is critical that Congress continue to maintain a meaningful federal role in this partnership and does not shift costs to states,” Govs. Terry McAullife, D-Va., and Brian Sandoval, R-Nev., wrote last month to House Republicans.
The insurance industry said as much last month in an outline of its priorities for health reform. America’s Health Insurance Plans wrote that any changes to Medicaid should ensure states have “protection during economic downturns,” indicating it wouldn’t support a block grant approach.
The group urged for the adoption of a more nimble approach than block grants would be able to provide, writing that any new financing system should “adequately account for the changing health of populations served.”
Medicaid advocates push back against block grants and the per-capita approach, noting that 56 percent of all federal contributions to states, not just for healthcare, are for Medicaid programs. Any federal cuts to the program would hurt a lot, said Joan Alker, executive director of the Center for Children and Families at Georgetown University.
“Any change would be very far-reaching and damaging, in my view,” Alker said.
Despite a laundry list of health reform proposals to draw from, Republicans are still unsure how to fulfill their promise of repealing much of the Affordable Care Act and replacing it. Leadership has promised to have a plan ready within the next month or so, but big outstanding questions remain over how much of the law it will ditch and what reforms they might put in its place.
The task is fraught with difficulty, as industry and interest groups pressure Congress to keep the parts of the law they like and eliminate what they dislike. Some Republicans want to replace the law immediately, while others want to take more time to hammer out changes. They’re limited in which provisions they can include in an initial repeal bill, which will be passed using budget reconciliation rules requiring all provisions to affect federal spending.
How to treat Medicaid is a key question, as expanding the program was a major way the Affordable Care Act got more low-income Americans covered. Lawmakers will have to decide whether to roll back expansion, and whether to change the underlying program to a block grant or per-capita system.
They’re facing several competing pressures. Republican governors in 10 states have expanded Medicaid to include people up to 138 percent of the federal poverty level, as the healthcare law outlined. Those governors would be upset if Congress rescinded the extra federal dollars their states are receiving. And Congress risks the wrath of governors without Medicaid expansion if it reduces federal contributions to the program overall.
Yet the additional spending from Medicaid expansion represents a large chunk of change — about $822 billion over a decade, according to the Congressional Budget Office — that could be attractive for lawmakers to repeal and use the savings for other priorities such as Trump’s infrastructure goals or the wall he wants to build along the Mexico border.
The bottom line: Republicans are deeply conflicted.
“I don’t think they know what to do,” Pierce said.
