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A Medicaid Block Grant Program: Implications for People with Disabilities

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Medicaid Block Grant Program Report (PDF, 395K)

Medicaid Block Grant Program Report (DOCX, 106K)



The rapidly growing federal deficit has intensified calls for federal entitlement reforms. A wide variety of proposals to reduce the federal deficit have been advanced in recent years, many of them centered around efforts to control future spending on Social Security, Medicare, Medicaid, and other entitlement programs. One of the most controversial of these proposals involves capping federal Medicaid payments to the states and converting the existing program into a block grant authority.

The aim of this paper is to examine the history of federal block grant programs in general and, more specifically, proposals to block grant federal Medicaid funding. The paper also summarizes findings from studies examining the potential impact of current and past Medicaid block grant proposals, and explains the broader fiscal challenges that have led federal policymakers to consider capping federal Medicaid funding and converting the program into a block grant authority.

Medicaid plays a critical safety net role in financing health care services in the United States, but the future of the program is shrouded in uncertainty because of the nation’s heavy—and growing—debt burden. Approximately one out of five Americans relies on Medicaid for health care coverage, and under current law some 18 million additional people will begin receiving benefits in 2014 when eligibility is extended to virtually all adults with incomes under 138 percent of the federal poverty level (FPL). People with substantial disabilities are especially reliant on Medicaid for health care and long-term supports provided in both institutional and home and community-based settings. The 9.8 million people who qualified for Medicaid benefits in 2010 on the basis of disability accounted for 45 percent of all nonelderly children and adults with substantial disabilities in the nation.2

Proponents of block grants argue that they reduce administrative costs by creating a single, streamlined set of federal requirements, thus eliminating confusing and sometimes contradictory administrative rules associated with the categorical grant programs they replace. In addition, they offer state and local jurisdictions greater flexibility in using federal dollars to pursue their own program priorities. Also, when programs previously administered by several cabinet-level agencies are consolidated, proponents contend that the need for interagency coordination is greatly reduced.

Recognizing the vulnerability of people with disabilities to major structural changes in Medicaid policy, in the fall of 2011 the National Council on Disability (NCD) commissioned a study of the potential impact of converting the current Medicaid program into a state block grant authority. This report is intended to clarify the effects of shifting from open-ended, entitlement-based Medicaid funding to a block grant format under which states would receive a fixed amount of federal assistance each year. Specifically, the report—

  • Examines the underlying rationale for block granting federal Medicaid funding, including the factors fueling current interest in limiting the Federal Government’s role in financing health care and long-term supports for vulnerable, low-income Americans;
  • Discusses the key policy choices involved in designing a Medicaid block grant authority;
  • Reviews available estimates of the likely impact of a cap on federal Medicaid financial participation, combined with statutory provisions allowing states to exercise greater latitude in determining eligibility, benefits, and other key operational parameters of their Medicaid programs; and
  • Analyzes the potential effects of alternative approaches to controlling the growth in federal-state outlays for medical assistance services.