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Providers concerned about future Medicaid block grant models

December 01, 2016

Healthcare providers are becoming increasingly concerned about suggestions by President-elect Donald Trump and GOP proposals that would transform Medicaid into a block grant model. Today, the program is operated as a federal and state partnership with the federal government funding about 57% of the costs.

Such a model would place absolute limits on federal outlays and make its spending more predictable. Some advocates fear the fundamental change in the program’s structure would result in less funding in the future, causing a reduction in health services and/or cost shifting to states, counties and consumers. According to the Commonwealth Fund, some 73 million people have Medicaid coverage currently—the majority are children—and 80% of the program is administered by contracted managed care organizations.

Brian Bowden, associate legislative director of health for the National Association of Counties (NACo), says any potential Medicaid changes could be critical for behavioral health providers because the program funds the largest share of delivered services in mental health and addiction treatment.

He says Medicaid is currently designed to allow the federal government’s matching funds to follow the need, while a block grant could limit that responsiveness.

“From our standpoint, if there’s a recession or economic downturn, unlike how the Medicaid program is structured now, block grant Medicaid wouldn’t be there as a safety net in those times,” Bowden says. “Public providers know that when that happens, costs go to the county. It’s a huge concern.”

GOP models

In House Speaker Paul Ryan’s “A Better Way” strategy, a per capita limit would be employed for Medicaid enrollees, but states could opt for fix amounts of federal funding, Bowden says. Both models would contain federal costs. Ryan also suggests that Medicaid expansion under the Affordable Care Act would be phased out, sending some enrollees to the private, individual market to shop for commercial coverage with proposed tax credits instead. Other enrollees might move into high-risk pools.

Bowden says the concern is the shifting of costs to states and counties when federal outlays don’t cover enough of the healthcare tab. Counties now contribute about $28 billion to Medicaid programs and act as payers, providers and administrators, according to NACo.

“Counties have to make tough choices every day,” Bowden says. “There are 1,000 county hospitals now that have to provide for the uninsured. And counties already pull out of the general fund to help, especially in rural areas, to keep hospitals afloat or to fund behavioral health services. It definitely has impact across the spectrum.”

GOP proposals do not outline specific formulas for calculating federal contributions under a Medicaid block grant model, but key questions remain as to how much flexibility states might have to respond to local health needs.

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