Block Granting Medicaid is a Dangerous Step for Older Adults and People with Disabilities

Just before the New Year, the Medicare Rights Center responded to a proposal that would damage the Medicaid program by allowing Tennessee to convert its Medicaid funding into a block grant. Our comments note that doing so would cause harm to older adults and people with disabilities, as well as the Medicaid program as a whole.

Today, federal Medicaid funding automatically changes to match a state’s spending and enrollment needs—increasing in near real-time if a state’s costs go up. A block grant, by contrast, provides only a set amount of federal funding for a state. It typically does not include a mechanism that allows for adjustment in times of need or due to enrollment variances. In exchange for receiving lower, capped funding, states often request exemptions from certain federal Medicaid program requirements. Because of this, such proposals threaten to leave states fully responsible for all costs in excess of the annual federal allocation and can jeopardize residents’ access to Medicaid.

States often claim they can save money through block grants by being more “flexible” with their program. However, these “flexibilities” save money by reducing the number of people served, the benefits for those who are eligible, or both.

In Tennessee’s proposal, the state would no longer be bound by federal standards for its managed care, prescription drug formularies, eligibility for the program, or paperwork requirements. For example, in an effort to control costs, Tennessee could seek to roll back critical but non-mandatory Medicaid benefits that are often among the services most utilized by older adults and people with disabilities, like Home- and Community-Based Services (HCBS). The state says it does not intend to restrict eligibility or benefits, but the proposal does not require Tennessee to maintain current levels. In addition, the state would be able to redirect any resulting “savings” away from Medicaid to pay for other state expenses, creating an incentive for the state to make such cuts.

Over time, coverage and eligibility restrictions would become inevitable. The initial funding caps would likely be tied to inflation rates that are too low to fully cover the cost of providing care, leaving Tennessee to make up the difference. Each year, the gap between the amount the state gets and the amount the state needs would grow, exposing Tennessee to higher and higher costs. Facing an ever-increasing funding shortfall, Tennessee would have no choice but to cut the program significantly in order to curtail spending.

We strongly oppose any efforts to block grant or otherwise cap Medicaid. Such efforts put the health and well-being of millions of older adults and people with disabilities at risk of losing coverage or access to care. The purpose of the Medicaid program is to provide health coverage for people who need it, and Tennessee’s proposal does not advance that purpose.

Read our comments.