Grace Franz Assignment 4

Healthcare Economics 11/15/2020

XHAD 6230 500

Medicaid was established in 1965, at the same time as Medicare, as part of Title XIX of the
Social Security Act.  Over half of the funding comes from the federal government attached to
federal regulations and oversite, but each state runs their own program. In 2010 the ACA
expanded Medicaid to cover those at or below 138 percent of the poverty level. With this
expansion, the ACA also gave the federal government the ability to cover the cost of that
expansion at 100% until 2016.  (Program History) As our text notes, expansion is not reform and
many Americans are concerned that without changes, federal Medicaid spending will be
unsustainable. Two options proposed for reform are block grants and per capita caps. Both
proposals would “end Medicaid’s open-ended matching structure whereby states receive federal
matching payments based on their expenditures.” (Holahan and Buettgens)

A block grant is a set yearly payment to each state based on the state’s previous spending on
Medicaid.  The payment would increase based on prearranged growth rates, most likely on a
yearly basis. One of the arguments against block grants is that when states encounter economic
hardships the enrollment into Medicaid will also increase and the block grant is not flexible
enough to adapt to the change. This puts an increased burden on state budgets when the economy
is at its worst.  

Like block grants, per capita caps look at a state’s previous spending on healthcare, but instead
of looking at the total spent, it looks at how much was spent on each enrollee. In a per capita cap
program, the federal government would provide some portion of that amount for each person
enrolled. While this plan still decreases the amount of overall spending for the federal
government, it is more flexible than the block grant, continuing to provide funds to each
additional enrollee if enrolment increases. (Holahan and Buettgens)  
Along with the change in funding from the federal government, these programs would also
decrease regulations imposed on states.  States would be bound by fewer regulatory requirements
dictating how their program is run and who must be covered by Medicaid programs.  Proponents
of these programs argue that they will allow states to have more autonomy over the management
of their systems.  Additionally, with less funding, states would find more efficient ways to
manage their programs and care for patients. (Holahan and Buettgens) 

Those opposed to these programs argue that states may try to make programs more efficient by
reducing coverage. In the past some per capita cap proposals have gone further than just creating
caps for each enrollee and have created caps for certain groups of enrollees. Prior to the
enactment of Medicaid, the United States had a similar program to the per capita cap program
proposed by Senator Ryan in 2016.  In that program, “eleven states provided no care for
children; roughly 20 states declined to cover hospital services, doctor visits, or drugs for some
groups of recipients.” (Goodman-Bacon and Nikpay) No matter how these plans are structured,
reducing coverage given to enrollees would be an easy way to decrease the remaining burden on
states. If states selected to decrease coverage, it could significantly increase the uninsured and
thereby decrease access to healthcare.

Those opposed to block grants believe that they will force states to decrease provider
reimbursement to the extent that many providers will stop seeing Medicaid patients entirely,
again decreasing access to care. (Sommers and Naylor) Having continuous health insurance
coverage lowers the probability of seeking emergency care and increases the use of preventative
care. (Lines) Reducing access to primary care and preventive care increases the likelihood of
more chronic health conditions in patients and thus higher healthcare costs later. One major
argument against block grants and per capita caps is that while they may decrease federal
spending in the short term, the declining health of participants left without access to care, will
cost more in the long run.
 In Canada block grants have led to a substantial decrease in funding to hospitals and providers. 
If the same scenario were to play out in the United States provider reimbursement, already low,
would decrease even further.  Those providers not already in a capitation program would likely
be forced into one. (Dyrda) As explained in our text, providers in traditional capitation programs
often have the impetus to decrease referrals and time spent with patients to improve pay. In
response to this, states might enact quality programs that focus payments on outcomes rather
than a straight PMPM reimbursement. 
Another issue with the 2016 per capita program proposed by Ryan was that the per capita
coverage decreased over time.  This would leave states with even less money over the years. The
fear is that this would limit the state’s ability to implement advanced technology or prepare for
epidemics or other crisis situations. (Dyrda) As the country is stumbling through a global
pandemic, it is clear that no matter how Medicaid is funded, managing these sorts of crises are
difficult; perhaps more so when federal, state, and local governments are misaligned.  

The fundamental goal of both block grants and per capita cap programs is to decrease federal
spending and give states more autonomy over their Medicaid programs. While most agree that in
the short-term these programs will prove successful, there is heated debate about the long-term
impacts on the healthcare marketplace and our most vulnerable population. 
 References

Dyrda, Laura. What a Medicaid Block Grant Program Would Mean for Hospitals: 5 Key
Questions Answered. What a Medicaid Block Grant Program Would Mean for Hospitals: 5 Key
Questions Answered. 2017, www.beckershospitalreview.com/finance/what-a-medicaid-block-
grant-program-would-mean-for-hospitals-5-key-questions-answered.html. 

Goodman-Bacon, Andrew J., and Sayeh S. Nikpay. “Per Capita Caps in Medicaid — Lessons
from the Past.” New England Journal of Medicine, vol. 376, no. 11, 2017, pp. 1005–1007.,
doi:10.1056/nejmp1615696. 

Holahan, John, and Matthew Buettgens. “Block Grants and Per Capita Caps The Problem of
Funding Disparities among States.” Urban Institute, 8 Sept. 2016,
www.urban.org/research/publication/block-grants-and-capita-caps#:~:text=Block%20grants
%20would%20allocate%20money,on%20current%20spending%20per%20enrollee.&text=In
%20general%2C%20high%20income%20states,because%20they%20spend%20more%20today. 

Lines, Lisa, et al. “Insurance Coverage and Preventive Care Among Adults.” 2014,
doi:10.3768/rtipress.2014.rr.0021.1404. 

Mann, Cindy. “What Does New Block Grant Guidance Mean for the Medicaid Program?” What
Does New Block Grant Guidance Mean for the Medicaid Program? | Commonwealth Fund, 31
Jan. 2020, www.commonwealthfund.org/blog/2020/what-does-new-block-grant-guidance-mean-
medicaid-program. 

“Program History.” Medicaid, www.medicaid.gov/about-us/program-history/index.html. 

“The Problems with Block-Granting Entitlement Programs.” Center on Budget and Policy
Priorities, 27 Feb. 2019, www.cbpp.org/the-problems-with-block-granting-entitlement-
programs. 

Sommers, Benjamin D., and C. David Naylor. “Medicaid Block Grants and Federalism.” Jama,
vol. 317, no. 16, 2017, p. 1619., doi:10.1001/jama.2017.1952.