Medicaid Block Grants Reduce Flexibility & Less Responsive to Changing Need – Say Ahhh! A Children’s Health Policy Blog

House Budget Committee Chair, Paul Ryan, will soon release a budget that will likely include a Medicaid block grant. Meanwhile, I have been busy preparing for a debate on block grants in a class I’m taking. I found that block granting Medicaid is a risky idea because it would make the program less flexible for states, less responsive to economic downturns and have a disproportionate impact on children, seniors in nursing homes and other vulnerable populations.

The argument we always hear supporting block grants is that they will create flexibility. While a block grant may give the appearance of providing flexibility, it is only shifting costs from the national to state level. It actually hurts states because when they don’t receive adequate federal funding, they are forced to cut benefits, create waiting lists or both.

The inflexible nature of a block grant becomes clear during times of economic hardship. In 1996, the Temporary Assistance for Needy Families (TANF) block grant replaced Aid to Families with Dependent Children (AFDC). It froze the spending level of the program at $16.5 billion/year. In 1995, AFDC (before the block grant) assisted 75% of families with children in poverty. By 2009, TANF assisted just 28% of families with children in poverty. Social programs that are block granted often lose the capacity to meet their initial objective. Currently, Medicaid is strong because of its defined purpose and flexibility to expand and contract based on need.

A Medicaid block grant would harm groups that are disproportionately represented among Medicaid beneficiaries, such as: children, seniors and people with disabilities. Children are particularly vulnerable because of their high poverty rate, 21.6% (the highest rate among any group). Medicaid covers two-thirds of children living in poverty. About half of all Medicaid enrollees are children. If Medicaid were to be block granted, these vulnerable populations would have to fight against each other at the state level for dwindling resources.

In the end, block grants don’t work because they’re designed not to work. They’re not designed to adapt to changing economic circumstances and that leads to undermining the safety net–not strengthening it.

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