January 31 2017
On NBC's "Sunday Today," President Trump adviser Kellyanne Conway said Medicaid block grants would be a part of a Republican replacement for Obamacare. Block grants have long been among conservative proposals to reform the government health insurance program for the poor.
Liberal commentators have seized on Conway's comments about block granting Medicaid, saying it is an attempt to "slash federal funding" for the program. It's true that a block-grant approach would change the way Medicaid is funded, but this change would be for the better. More importantly, Medicaid reform would allow states the opportunity to make significant improvements in the quality of the program for those who depend on it.
Currently, Medicaid is funded by state dollars and federal "matching" dollars. As states spend more on Medicaid, they get more federal dollars. This may seem like free money to those in charge of state budgets, but Americans should remember we all pay federal income taxes. This system creates an incentive for states to spend more and more. After all, state leaders can score political points by boasting new benefits or expanded eligibility, while the state only partially funds the program.
If you can recall from your high school civics class, block grants are large sums of taxpayer dollars granted from the federal government to the states with very few strings attached (unlike categorical grants, which come with specific rules). Block grants, as opposed to a federal match, are fixed amounts indexed to grow each year along with inflation or other factors. These grants take away the incentive to spend more, but instead allow states more flexibility to make policies of their own about how they use that money and how the program will operate.
You probably didn't learn this in civics class, but our most recent experience with changing a federal social program (Aid to Families with Dependent Children) to a block-grant program (Temporary Assistance to Needy Families) in 1996 was wildly successful. This major welfare reform, passed by a Republican congress and signed into law by Democratic President Bill Clinton, resulted in increased employment among low-income families, reduced child poverty, and decreased dependence on welfare.
As President Ronald Reagan once said, "We should measure welfare's success by how many people leave welfare, not by how many are added." This used to be a shared bipartisan sentiment, but it appears that modern-day Democrats have rejected this attitude (at least when it comes to health care) in favor of bragging about how many Americans now depend on government programs.
But Medicaid reform isn't primarily about saving money. More important than any financial consideration is this: block granting Medicaid would finally allow states to truly innovate to provide better quality coverage to those who are truly in need.
Opponents to block grants, like Gov. John Hickenlooper, D-Colo., paint a bleak picture: "We should not be forced to choose between providing hard-working older Coloradans with blood pressure medication or children with their insulin," he said.
This way of thinking reflects a marriage to the status quo. Indeed, if states wanted to continue to administer Medicaid as they do today, they could face budget pressures. But why on Earth would states want to continue today's Medicaid program as-is? The data is damning: Medicaid patients don't have the health access or health outcomes that other patients do, sometimes even faring worse than the uninsured.
The success of welfare reform in the 1990s wasn't just the result of block grants. With the inclusion of work requirements and time limits, it was a true reform. Similarly, states should use the transition to block grants to make real changes to Medicaid so that it improves the health outcomes and lives of patients.
Some states have already experimented (within today's federal restrictions) with the idea of allowing Medicaid patients to purchase private insurance plans instead of staying in the traditional Medicaid program. This would open up much wider networks of providers and improve access to care.
For the sake of taxpayers, and more importantly for the sake of needy families, it's time to bring on the Medicaid block grants.