Medicaid block grants — bigger threat to US healthcare than ACA repeal
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As the new administration and congress begin their work, much of the healthcare world is focused on the effort to repeal and replace the Affordable Care Act (ACA).

But while the ACA proposals are critically important as they may immediately imperil the health insurance of over 18 million Americans, there is a potentially greater threat to the health and wellbeing of over 80 million of Americans. Proposals circulating to reform Medicaid would change the very structure, function and purpose of the program and would result in a reduction in benefits for millions, at best, and an elimination of benefits for millions, at worst.

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Medicaid is best known as the collaborative federal/state health insurance program that covers the cost of care for low-income Americans. Many assume that the average Medicaid beneficiary is an able-bodied adult, but the true picture of a Medicaid recipient is quite different. According to AARP, 65 percent of seniors in nursing homes in the United States are covered by Medicaid. The Kaiser Family Foundation found that Medicaid pays for 39 percent of American children’s health insurance. And MedPAC reports that over 9 million people with disabilities receive services from healthcare to home care through Medicaid.

Medicaid reform proposals floated by Speaker Paul RyanPaul Davis RyanHenry Kissinger, Tim Cook among guests at White House state dinner Overnight Finance: Stocks fall hard | Trump sending delegation to China for trade talks | SEC fines Yahoo M over breach | Dodd-Frank rollback dominates banking conference To keep control of House, GOP must have McCarthy as next Speaker MORE and President-elect Trump’s nominee for Health and Human Services (HHS) Secretary Rep. Tom Price would convert Medicaid from a defined benefit to a block grant or per capita cap program. That means that individuals who qualify for Medicaid benefits would no longer be guaranteed benefits. Instead states would receive a fixed amount of money from the federal government to spend on Medicaid services.

That amount would be static and would not necessarily increase based on the number of people who need benefits — meaning that even if an additional thousand people became eligible for Medicaid, the amount of money for the program stays the same. Further, the size of the grant would increase at a slower rate from year to year than current federal Medicaid spending. In practice block grants or per capita caps would mean that states would either have to fill the gaps in federal dollars with state tax revenue or would have to redefine who is eligible for benefits and what benefits are covered.

Supporters of the block grant and per capita cap approach argue that changing the structure of Medicaid will spur innovation as the program is forced to do more with less. But make no mistake, the goal of block grants is simple — to cut federal Medicaid spending. According to the Congressional Budget Office, under Speaker Ryan’s proposal federal Medicaid spending would be reduced by $1 trillion over the course of ten years.

Critics of Medicaid often view the program as an expense without a return on investment. The truth is that Medicaid provides benefits to the individuals enrolled in the program — numerous studies demonstrate the link between access to care and improvements in wellbeing — but also to society as a whole.

Studies highlighted by the National Bureau of Economic Research indicate that children who receive Medicaid benefits are more likely to finish high school, attend and graduate from college and, as a result, go on to earn more as adults. By covering home care services for people with disabilities and seniors, Medicaid reduces the burden on working families and allows caregivers to continue working — without which income and benefits losses total hundreds of thousands of dollars.

Providers of Medicaid services — including the over 300 health and human services nonprofit organizations located around the United States that make up Lutheran Services in America — would welcome opportunities to innovate that block grant supporters promise, but innovation is not born in scarcity.

Cutting federal Medicaid spending by $1 trillion will not create an environment in which innovation can thrive. Innovation requires that basic needs are met and that resources are available to pursue new technologies.

A $1 trillion reduction in federal Medicaid spending will not result in innovation; it will result in seniors losing spots in nursing homes, children going without basic pediatric care and people with disabilities losing not just healthcare, but services that allow them to live independent, abundant lives.

Seniors, children and people with disabilities rely on Medicaid for essential health care services.

Changing the underlying structure of Medicaid from a defined benefit to a block grant, or per capita cap, will undermine the program leaving millions of vulnerable Americans without the access to health care that they desperately need. Congress should reject such so-called reforms.

Charlotte Haberaecker is President and CEO of Lutheran Services in America, one of the largest health and human services nonprofit networks in the United States serving one in 50 Americans each year.


The views expressed by contributors are their own and not the views of The Hill.