October 10, 2019

How Per Capita Caps on Medicaid Would Endanger Recipients

Medicaid, a program serving 72 million poor Americans, is again at risk of being undermined by state legislatures. This latest scheme, Per Capita Caps, is a variation on the long struggle by Republican legislators to have federal contributions toward their state’s Medicaid program be merged into “block grants” that states can use as they see fit, and not mandatorily assigned to support health care services for people with low incomes.

The idea of issuing federal block-grants to states has been pursued regularly for decades. The Nixon administration called for block grants in 1971, as did the Reagan administration in 1981 and the Bush administration in 1996. Some, such as the Mental Health Block Grant system established in 1981, have resulted in dramatic changes in the level of heath care provided by states – a change distinctly for the worse in the case of the MHBC.

Moves now toward more block granting in the health care arena are being strongly resisted because, as the Urban Institute observes, they “contradict an individual’s rights to benefits… Litigation over these rights has resulted in court orders to provide benefits to whole categories of individuals denied assistance (emphasis added)… Block grants give Congress more control over future spending; entitlements are more responsive to macroeconomic conditions.”

Approximately 42% of Americans with HIV are enrolled in Medicaid and 25% are enrolled in Medicare. Even given that there is some overlap (people enrolled in both), over half of all Americans with HIV are at risk of having their access to health care directly affected by political decisions on this issue.

The Pew Trusts reports that, with the Trump administration’s support, Congressional Republicans are now working to change “Medicaid from an entitlement program — open to anybody who is eligible — to a program with a spending limit.” Last May, the Tennessee legislature passed a measure asking for permission to fund their Medicaid through a block grant. Alaska, Georgia and Florida are also considering this option.

If approved, these states could adopt per capita cap systems, accepting a limited dollar amount in federal funding for each person they enroll in Medicaid. This would sharply limit the federal Medicaid contribution each state receives. The costs of taking care of Medicare and Medicaid recipients in fragile health are considerable. States’ costs could be expected to exceed its federal cap. At that point, each state would either find other revenues to maintain coverage, or simply reduce health care costs by reducing care, thus disregarding the individual’s right to benefits.

Last May, Tennessee’s legislature passed legislation to compel Governor Bill Lee to submit their 1115 waiver request. The state currently has a $12 billion Medicaid program covering 1.3 million Tennesseans. The legislature’s request is to change their system “from an open-ended entitlement program to one where the federal government makes fixed payments,” Modern Healthcare reports. The Tennessee Hospital Association added that a block grant program could “threaten TennCare benefits, enrollment and reimbursement to hospitals and providers.”