Medicaid: Here Come the Block Grants

The Trump administration hasn’t made any official proposals yet, but there are clues that Medicaid spending will decrease

President Trump, House Speaker Paul Ryan, and Vice President Mike Pence (Photo: Caleb Smith, Office of the Speaker of the House)

President Trump, House Speaker Paul Ryan, and Vice President Mike Pence (Photo: Caleb Smith, Office of the Speaker of the House)

Millions of New Yorkers might be about to face a major change to their health care coverage. Back on January 22, White House counselor Kellyanne Conway appeared on the CBS program Face the Nation to discuss the new administration’s policies. Among other things, Conway suggested that President Donald Trump is interested in changing Medicaid to a block grant program.

That’s big, including for New York City. The proposal could impact health insurance for the 3.1 million people on Medicaid in the city, as well as the budgets of both the city’s public and private hospitals. Here’s how.

How does Medicare work now?

Medicaid is health insurance for low-income people, and it exists in every state. The federal government contributes about 60% of the costs, and the states contribute the remaining 40%. In New York State, anyone making 133% of the poverty level or less ($15,800 for a single person, $26,813 for a family of three) qualifies for Medicaid. (In other states, eligibility requirements are different. States that expanded Medicaid with the Affordable Care Act use the same 133% standard, but states that chose not to expand Medicaid are lower.)

As it works now, Medicaid is an entitlement program. That means every American who qualifies for Medicaid gets insurance through Medicaid. If more people become eligible, they qualify for the same amount of coverage all other Medicaid recipients get, without affecting the other people already on Medicaid.

How might a Medicaid block grant change things?

There has not been any formal proposal from the White House, and it is impossible to predict exactly how a block granted Medicaid would look. However, Conway’s statements seem to align with proposals in House Speaker Paul Ryan’s 2016 “A Better Way” agenda-setting document.

Under Ryan’s blueprint, if Medicaid became a block grant, the federal government would give states a fixed dollar amount each year to use to provide health coverage for low-income people instead of a matching grant. The amount might be adjusted every year, said John Davidson, a senior fellow at the conservative Texas Public Policy Foundation. The amount could be based on the factors like the number of eligible people in a state, he said. But what that adjustment would be, or if there would be any such adjustment, is not clear.

But we do know that overall, Speaker Ryan’s plan calls for Medicaid spending to decrease. An analysis of that plan by the independent Congressional Budget Office estimates that federal Medicaid spending could decrease by a third by 2026.

Whether that is good or bad depends on your politics. The conservative Davidson sees decreased federal spending as a good reason to switch to block grants. Davidson thinks it will also decrease state spending, too, which he also applauds. If states are not guaranteed matching funds for the money they spend on Medicaid, they might be less likely to spend on Medicaid themselves—an appealing outcome for fiscal conservatives.

Proponents of block grants like Davidson say changing Medicaid to a block grant would give states more leeway to decide who gets what kind of healthcare: for example, providing a lower level of coverage to young, healthy people, or imposing disincentives for people on Medicaid to seek non-emergency care in emergency rooms.

People who oppose block grants, however, say less spending will simply lead to less care.

Mayor Bill de Blasio is among them. He gave voice to that concern in a January 22 tweet: “When you hear block grant, beware. It simply means less health care.” A study of Speaker Ryan’s plan by the liberal-leaning Urban Institute predicted it would cause between 14 million and 21 people to lose their Medicaid coverage by 2026.

What happens if the money in the block grant is not enough to cover everyone currently on Medicaid?

In that case, the state will either have to spend more from the state budget, or make choices about who gets coverage, and how much. “This could include using waiting lists or capping enrollment,” wrote Edwin Park of the liberal Center for Budget and Policy Priorities in a blog post in November. (De Blasio announced on January 24 that he was setting aside a capital reserve, funds that could counteract cuts from the federal level that may include Medicaid, as well as a host of other programs he believes are threatened.

What would change for hospitals?

Hospitals in New York are already struggling financially, and experts think that block grants for Medicaid won’t help. As Doug Turetsky of New York City’s Independent Budget Office wrote in an email, “If the block grant was set to save federal dollars, then then fiscal problems for some hospitals may worsen.”

The effects might be more pronounced in public hospitals, wrote Turetsky. “Medicaid also includes supplemental funds for hospitals like the city’s public hospitals that serve large numbers of uninsured patients. If these funds were cut or eliminated, the struggles of the city’s public hospitals could deepen.” The 11 public hospitals in New York City are already facing a budget deficit over $1 billion in 2017.

Public hospitals generally rely more on Medicaid than private hospitals, but the private hospitals in the city would hardly be immune. Steven Clark, a spokesman for the private St. Barnabas Hospital in the Bronx said 90% of the patients there are enrolled in Medicaid. Overall, 51% of people in the Bronx are on Medicaid.

But not everyone is fearful. Renelda Walker, a spokeswoman for Lincoln Hospital, a public hospital in the Bronx, pointed out that the hospital has been around since 1839.   “We’ve gone through all kinds of epidemics,” she said.

 

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