Medicaid Financing: Dangers of Block Grants and Per Capita Caps Summary and Full Report

Summary | Full Report

Since 1965, Medicaid has been providing affordable access to health care for children, workers, seniors, and persons with disabilities through a shared state-federal funding arrangement. Medicaid provides health insurance for one in five Americans, including 83 percent of children living in poverty; 48 percent of children with special health care needs; 45 percent of nonelderly adults with disabilities; and more than 60 percent of nursing home residents. Medicaid covers about one-third of the non-elderly Black and Hispanic populations and 15 percent of the white population. People of color are more likely to be insured by Medicaid because of systemic racism and economic oppression that has denied them access to quality jobs, including those that provide health insurance. 

In 2017, Congress repeatedly rejected proposals to change Medicaid's financing to a block grant structure, which would provide states with a capped amount of federal funds and shift the risk of increased costs to states. Nonetheless, in January 2020, the federal Centers for Medicare and Medicaid (CMS) released guidance to states encouraging them to use waiver authority to apply for per capita caps—which would provide states with a set amount of dollars per Medicaid enrollee—and eventually block grants. This updated brief draws lessons from the experiences under TANF and CCDBG to explain the harmful effects that could be expected from a Medicaid block grant or per capita cap.