Medicaid Reform: Flexible Federal Matches Versus Capped Block Grants

Nearly 75 million Americans receive health coverage through Medicaid, the nation’s largest health insurance program, including children, pregnant women, parents, seniors, and the disabled.

Medicaid is a federal program, but it’s administered by the states. To participate in Medicaid, federal law requires states to cover certain groups of individuals, such as low-income families and individuals receiving Supplemental Security Income (SSI). States may choose to cover other groups, such as individuals receiving home- and community-based services.

Federally Guaranteed Funding as Needed

Funding for the Medicaid program comes from both the federal government and the individual state governments. Currently, the federal government gives each state a specific percentage of its program expenditures. This Federal Medical Assistance Percentage (FMAP) is based primarily on the per capita income of the state receiving assistance, so it can vary from state to state. Funding spent by each state is matched by the federal government. The FMAP is adjusted every three years to account for economic changes. The federal government doesn’t cap funding to the states, and states can’t cap or stop enrollment for those eligible for Medicaid. Flexibility ensures funding is available to cover everyone in need.

Block Grants

Conservatives have long argued that Medicaid would be more efficient if states received a lump sum—a block grant—from the federal government and manage the programs as they see fit. The amount of funds would be limited or capped. The amounts may change annually, but once determined, it’s not flexible. It could limit the number of people who can enroll should funds be exhausted due to rising costs or needs. The Medicaid program could save money by bearing more risk in exchange for less flexibility and oversight. The most recent attempt to employ block grants was unsuccessful during the Trump administration’s attempt to repeal and replace the Affordable Care Act in 2017. Medicaid expansion offered states a choice to continue with the current federal funding process or opt into the block grant. Many states did not feel the potential shared savings justified the financial risks.

The Pros and Cons of Reforming the Medicaid Program

Proponents claim this could save the government billions of dollars and give the states more opportunities to be creative with their programs. Critics are afraid that people won’t have access to the care they need. They are concerned that the states would cut benefits or force beneficiaries to take on more cost-sharing. Most of the Medicaid spending is on the elderly and disabled, with Medicaid paying for the care of almost two-thirds of the people in nursing homes, and critics are afraid they will suffer. In addition, they claim hospitals and clinics that treat large numbers of Medicaid beneficiaries would have to adjust their services and staff.

Despite decades of debate and concerns about whether the Medicaid program remains a sustainable option for the future, block grants have not been implemented.

If you have any questions about the Medicaid program or would like additional information, please feel free to contact our elder law attorneys. Our law firm is dedicated to informing you of issues affecting seniors who may be experiencing declining health and struggling financially to cover medical costs. We help you and your loved ones prepare for potential long-term medical expenses and the need to transition to in-home care, assisted living care, or nursing facility care. Medicaid planning is one of the tools elder law attorneys use to help you cover the costs of long-term care and preserve your family’s legacy. We understand the laws and how to make them work for you.

We hope you enjoyed this article. If you would like to discuss a personal legal matter, we would be happy to talk. Please contact our Heber Springs, Arkansas Office at (501) 365-3934.