Pandemic highlights risk of Medicaid block grants, Urban Institute argues

An option that allows states to cap annual Medicaid funding in exchange for more flexibility would be particularly harmful during a pandemic like COVID-19, according to an analysis from the left-leaning think tank Urban Institute.

In early 2020, CMS launched a program called the Healthy Adult Opportunity that effectively rebrands the government's block grant approach. Under the program, states can submit a waiver to use an annual budget neutrality limit for the Medicaid program, but only for able-bodied adult members under age 65. The budget can be calculated in aggregate or on a per-capita basis.

Analysts with the Urban Institute said funding caps could result in beneficiaries losing health coverage during a particularly challenging time like the COVID-19 pandemic. States could also see greater financial challenges if Medicaid enrollees have higher spending due to COVID-19 treatment.

"States' desire for more flexibility is understandable, but flexibility could lead to harmful cuts. Caps on spending growth could too easily result in reductions in coverage and benefits because of budgetary pressures when the nation still has 32 million uninsured people. These caps are particularly harmful in times like today, as the nation is trying to cope with the coronavirus," the Urban Institute said. 

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