The analysis assumes states would continue to operate Medicaid programs as they do today. Under a block grant program, which has been proposed by President Donald Trump and other Republicans, states are given fixed federal Medicaid funds. Under current law, states receive federal funds for Medicaid that is based on a percentage of total spending on the program.
The analysis estimates the potential spending gaps if states continued to operate Medicaid programs as they are today, though they would likely be adjusted if federal policy changed. For the analysis, researchers used projections of Medicaid spending and growth rate factors from CMS’ 2016 Medicaid Actuarial Report and the National Health Expenditure Accounts and National Health Expenditure Projections. The researchers assumed the Medicaid growth rate is tied to inflation and assumed no changes in spending or enrollment by states. They used this data to model how Medicaid funding would have changed on a state-by-state basis under a block grant program from 2001 to 2008.
They found just one state would receive increased federal funding — North Dakota, which would receive 11 percent more federal funding under block grants. All other states and the District of Columbia would receive less federal funding under a block grant scenario. The greatest reduction in federal funding would occur in Arizona (62 percent decrease) and the smallest would occur in Wisconsin (4 percent decrease), according to the report.
“The Medicaid block grant model is more limiting to states because it constrains both spending growth and enrollment growth,” Caroline Pearson, senior vice president at Avalere, said in a statement.
Avalere also tested how a per capita cap model would affect states. Under this model, states are given a fixed amount of federal funding per Medicaid enrollee. The analysis showed 24 states would receive increased federal funding under this model, while 26 states and the District of Columbia would receive less funding. Avalere determined the general rule of thumb is “states that spend more per enrollee will fare worse under per capita caps,” while “states that experience large increases in enrollment will struggle in a block grant scenario,” according to a press release.
“The per capita cap model allows for greater flexibility and better absorbs marketplace fluctuations like financial downturn; however, it can still result in an overall loss of federal funding for state Medicaid programs,” Ms. Pearson said in a statement. “States may respond to block grants or per capita caps by cutting enrollment, limiting benefits, or reducing payment rates to providers and plans.”
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