In an effort to limit federal Medicaid funding, the Trump administration has offered states the option for a Medicaid block grant. Medicaid block grants have been proposed by conservatives for many years. Texas requested a block grant in its last legislative session. Although there are new wrinkles to the proposed new policy, the concept is states would get less federal funds and incur more financial risk in exchange for more flexibility and less oversight by the federal government and freedom from its rules. Presently, Medicaid is a joint (federal-state) program administered by the states, but funded mostly by the federal government. There is presently no cap on expenditures – so if enrollment in Obamacare rises or drug prices increase, the federal contributions increase. The new policy proposal would cap contributions by the federal government.

Trump's Medicaid Pill - Cure or too many side effects?

The proposed policy would give states the right to choose either a cap of total funds that could be spent or a cap based on how many are enrolled. However, states who opt for Affordable Care Act expansion for the first time (like Texas) would initially be required to have a per capita cap for two years which allows federal funding to change with enrollment, but it would not on health care costs. So, if drug costs soar, the state would lose money. After two years, they could then move to a block grant – which puts states at even higher risk for both higher healthcare costs and increased enrollment.

Although caps are based on prior spending, this could be problematic for Texas as our population continues to grow. Texas would bear much risk for unanticipated costs. In that event, Texas would likely increase premiums or reduce benefits or impose work requirements. States which have tried the work requirements have been sued and lost in the federal courts. States would no longer need to get prior approval for fee-for-service providers, payment rates, or managed care rates if the state had a Medicaid block grant.

It is likely that block grant guidance will result in lawsuits – especially if there is a work requirement. Block grants were a part of the Republican legislation in 2017 to (in effect) repeal Obamacare. Democrats may propose legislation to stop the block grant plan. However, that could reduce the ability for a bipartisan health care plan. There is a May 22 deadline to fund extensions of several Medicaid and Medicare programs. As a result, it is likely that the block grant debate will be decided by the courts.

It is also anticipated that many other safety net programs will be at risk of losing substantial funds with the proposed budget of the White House. Over the next decade, the proposals would result in a half-a-trillion-dollar cut to Medicare, $900 billion to Medicaid and $24 billion to Social Security as there would be anticipated reform.

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