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Block-Granting Medicaid Would Limit State Flexibility to Innovate

While supporters of converting Medicaid to a block grant often tout the greater state flexibility it would provide, states already enjoy expansive flexibility under Medicaid, which they’re using to streamline health care delivery and improve health.  A block grant would likely sharply cut federal funding over time and shift large costs to states, eliminating states’ ability to invest in innovative reforms.  It would only give states the flexibility to make draconian cuts, leaving many beneficiaries uninsured or without access to needed health care.

With their current flexibility, states are innovating in the following ways:

  • Missouri is coordinating care for Medicaid beneficiaries with chronic physical and behavioral health conditions, reducing emergency room visits.
  • Tennessee helps beneficiaries transition from nursing facilities to their homes, saving state dollars by reducing unnecessary nursing facility stays. 
  • A Wisconsin hospital is testing a new way to integrate health services for children with complex medical needs, a rapidly growing group with high health care costs. 
  • Oregon has created accountable care organizations — groups of providers and other entities that partner to provide a range of health care services in a coordinated way — to integrate hospital-based services with primary care, behavioral health care, and other social supports and reduce emergency room visits. 
  • Medicaid providers in Illinois and Louisiana are integrating health services and social services such as housing to streamline care for their most vulnerable beneficiaries, improve health, and reduce costs. 

States have the flexibility to innovate because they get sufficient federal funding under the current financing structure.  The federal government shares in the costs of undertaking these reforms and shares in the resulting savings. 

In contrast, a block grant would leave states with highly inadequate funding, with federal funding shortfalls likely growing each year.  As we’ve explained, the block grant in the House Republican budget plan would cut federal Medicaid funding by $1 trillion over ten years.  Because Medicaid is already extremely efficient, states would either have to contribute much more of their own funding or (as is far more likely) make severe cuts to their programs.  States wouldn’t have the resources to test innovative new ways to deliver care, many of which require upfront investments but could improve care and cut costs over the long run.  Instead, states would have no choice but to make immediate, blunt cuts to their programs.

As for such cuts, states would likely gain new flexibility to cut the comprehensive benefits that they now must offer children.  States could also use waiting lists, cap enrollment, or charge adults unaffordable premiums.  Medicaid health plans might be allowed to restrict access to family planning providers for women.  The list goes on. 

States shouldn’t be fooled by the promise of state flexibility.  They already have expansive flexibility under Medicaid to innovate while protecting the most vulnerable.  Their flexibility under a block grant is simply the flexibility to make the draconian cuts that a block grant necessitates.