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Medicaid has a problem, but block grants won’t solve it

IT’S BECOME a consensus position among the Republican presidential candidates that Medicaid, a federal entitlement program best known for providing health care to the poor, should be turned over to the states as a block-grant program. States know their own needs, the logic goes, and will use fixed grants creatively and efficiency — as opposed to a federal bureaucracy that writes checks on behalf of all who qualify. But if only it were that simple.

In a debate earlier this month, Mitt Romney, Rick Perry, Newt Gingrich, and Rick Santorum all backed the idea of cutting Medicaid costs by letting states administer the program. Many of those savings, though, would come on the backs of those who depend on Medicaid, the health care providers who serve them, or state taxpayers.


Medicaid has a broader and more complicated mission than the sound bites let on. The safety-net program provides health care for more than 60 million low-income people, more than half of whom are children. But about 70 percent of Medicaid spending pays for care for low-income people with disabilities and low-income seniors. One big Medicaid expense is nursing home care for those seniors, many of whom were in the middle class before the cost of their care consumed their assets. In Massachusetts, for example, the majority of nursing home slots are paid for by Medicaid.

Currently, the federal government sets minimum Medicaid eligibility standards and reimburses states at least half the program costs. There is ample reason to fear that, should states instead receive fixed grants, many would limit costs not through greater efficiency but simply by denying medical services.

Under the typical block-grant proposal, allotments to states wouldn’t grow according to need. So far, states have shown no more ability to hold down health care costs than Congress has. It’s more likely that, unless they want to put vastly more of their own tax dollars into the mix, states would end up limiting eligibility, slashing payments to providers, and perhaps cutting off services if federal dollars ran out.


There is a real question of how to control costs in Medicaid — as there is in Medicare and virtually every private health insurance plan in the country. The block-grant proposal doesn’t answer that question. It’s a political slogan, not a practical solution.