What is the Blended Rate Proposal?

Obama’s administration in recent years has put into place major changes into Medicaid and Children’s Health Insurance Program. These changes come in the form of further federalization of health care, namely, proposing blended match rates. This new proposal is defined as an interest rate charged on a loan, which is in between a previous rate and the new rate. So these blended rates are usually charged at a rate that is higher than the old loan’s rate but lower than the rate on a new loan (http://www.investopedia.com/terms/b/blended-rate.asp). This all comes to play in balancing the budget. By having blended match rates, President Obama hopes to federal spending by moving costs over to the states. However, with any attempt at change, there are always sacrifices to be made. The question is, are the sacrifices worth the end result? Judging from recent events, many would disagree.

Current Health Insurance Policies

Many of the health care policies changes that have been in place since the beginning of Obama’s presidency are very much related to one another. The major ones include the likes of the Affordable Care Act and the Children’s Health Insurance Program. The purpose of both is to make health insurance more accessible to the majority of Americans living in low-income households or in poverty. In the case of the Affordable Care Act, it seeks to rid of any policies that may otherwise prohibit Americans from getting health insurance and adds several means in which they can obtain it. This includes:

  • Removing any pre-existing health condition that excludes or limits coverage for children and teenagers under the age of 19
  • Ensuring young adults under the age of 26 have coverage under their parents’ health care plan
  • Ending arbitrary cancellation of health insurance coverage
  • Guaranteeing the right to appeal any denial of payment
  • Banning lifetime limits on insurance coverage for all new health plans
  • Reviewing premium rate increases
  • Making sure the money the client puts in is used properly, such as spending it on health care instead of administrative costs
  • Covering for preventive health care at no additional cost to the client
  • Protecting of the client’s choice of medical doctors
  • Removing of barriers set up by insurance companies for emergency services


For the Children’s Health Insurance Program, the main goal is to make health insurance easily available to children in need, such as those living in families with low income. This program would include benefits such as:

  • Oral care such as dentists visits
  • Eye exams and glasses
  • The ability to choose doctors
  • Prescription drugs and vaccines
  • Mental health care
  • Hospital care and services
  • Lab tests
  • Special health needs treatment
  • Treatment of pre-existing conditions


The Affordable Car Act plays a major role in all of this in that it serves as a general foundation for many of Obama’s health care changes. The Children’s Health Insurance Program is heavily affected by ACA in that it provides an additional $40 million for both Medicaid and CHIP (http://www.medicaid.gov/medicaid-chip-program-information/by-topics/childrens-health-insurance-program-chip/childrens-health-insurance-program-chip.html).

This blended rate proposal would replace the current rate at which the federal government reimburses states for their costs in how they give health insurance to people. The rate would be set at a level that provides the state with less federal funding than under current law, which would save the federal government money. Under the health law, the federal government agreed to cover 100 percent of the cost of newly eligible beneficiaries from 2014 to 2016. Any costs afterwards, the government promised to cover at least 90 percent of them. The Supreme Court has ruled that states have the option to not expand Medicaid. However, opponents of this proposal claimed that this only serves to place pressure on states (http://insidehealthpolicy.com/Inside-Health-General/Public-Content/medicaid-source-rejects-gop-assertion-hhs-blended-rate-reversal-is-bad-for-states/menu-id-869.html).

Blended Rate Proposal’s Weaknesses

How exactly does the blended rate proposal play a role in health insurance? It starts off by changing how it is paid for. Many of the costs for Medicaid and CHIP are moved to the states. This is aimed at reducing federal expenditures. While this may help with reducing federal costs, the reality is that the proposal may be doing more harm than good.  By shifting costs to states, this will likely prompt states to cut payments to health care providers such as doctors and hospitals and scale back the health services that Medicaid covers for low-income children, families, and people with disabilities. Such payment cuts to health care providers will likely have doctors reject patients who do have Medicaid and CHIP, as they lack the incentive and cannot afford to treat them. Here are some noticeable weaknesses associated with the blended rate proposal:

  • This shifting of costs to states would only burden them, not actually constrain the cost overall. States would face their own budget problems, which then in turn cause them to reduce the quality of health care and scale back health insurance services such as Medicaid and CHIP. As mentioned before, this would come in the form of cutting payments to health care providers, giving doctors less incentive to continue their line of work since they will not be able to afford to do so. This will limit the amount of people who can be admitted and covered in health care plans.
  • Calculating each state’s new blended rate would become extremely difficult to do so in an accurate manner. In order to properly compute a blended match rate for each state, officials would have to make assumptions about each state’s future Medicaid and CHIP enrollment numbers and expenditures. This would include factors such as:


  1. The number of people in each state who would be eligible for Medicaid
  2. The number of people who will actually enroll in the program
  3. The health status these people are in
  4. How many people in each state who are now eligible for Medicaid, but are currently not enrolled will enroll after the new health reform expands its coverage

These are, again, based on assumptions which are inherently uncertain and not based on actual state experience.   These officials will not be making assessments based off any hard data, but ambiguous assumptions that could lead to disastrous, long term affects (http://www.cbpp.org/cms/?fa=view&id=3521).

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