Block grants on the way for Medicaid?

There still are many unknowns on what President Donald Trump's and Congressional Republicans' replacement of the Affordable Care Act will look like. But one thing is becoming clearing — they will pursue a Medicaid block grant.

Kellyanne Conway, a senior adviser to President Donald Trump, said the administration plans to move the health insurance program to a block grant set up on NBC's 'Sunday Today.'

'That those who are closest to the people in need are really administering it,' she said. 'You really cut out the fraud, waste and abuse, and you get help directly to them.'

But what are block grants? And how are they different from how Medicaid currently works?

The idea of converting Medicaid to a block grant program is not a new one, and block grants are in use in other government programs. House Speaker Paul Ryan put forth the idea in 2011 as a way to help reduce the federal deficit. Republicans, including Iowa Lt. Gov. Kim Reynolds, say Medicaid block grants allow for greater flexibility.

'There are so many strings tied to federal dollars,' she said during a recent visit to The Gazette. 'There's a lot of overhead restrictions. We know what the population is and what is needed.'

But critics argue that while the move may stabilize the federal budget, it's not necessarily a good thing for states — making states choose between shouldering additional costs or cutting services.

Medicaid is a more than $500 billion joint federal-state program that covers 73 million children, elderly, poor and disabled people nationwide. The state of Iowa's $4.5 billion program covers about 600,000 people, or 1 in 5 Iowans.

So any changes to the entitlement program would have a significant impact.

Here are three key take-aways about Medicaid block grants and what they could mean for Iowa:

How Medicaid currently works

Under the present funding mechanism, the federal government covers about 60 percent of Iowa's Medicaid costs, while the state covers the remaining 40 percent. With that federal funding comes a guarantee for coverage and core standards for state programs, said Robin Rudowitz, associate director for the program on Medicaid and the uninsured at Kaiser Family Foundation.

That means states cannot cap or close enrollment for individuals who meet eligibility requirements.

'In order to participate, you have to meet minimum standards,' Rudowitz said. 'There is flexibility to go beyond those minimum areas.'

For example, all states have chosen to expand children's health coverage and prescription drug coverage, she said. States also have the ability to chose how they want to deliver their programs, either through Fee For Service — in which states reimburse providers for services — or managed care — where state's contract with private insurers.

That's a move the state of Iowa made, shifting about 95 percent of its Medicaid population into managed care on April 1, 2016.

'There's a saying,' Rudowitz said. 'If you've seen one Medicaid program, you've seen one Medicaid program.'

How Medicaid block grants work

Under a block grant program, the federal government would set baseline financing, effectively locking in states wherever their Medicaid programs currently stand and then increase that funding at a specified fixed, annual rate.

There still are many unknowns, Rudowitz said, including what formula the government would use to set the baseline, if it would take Medicaid expansion populations into account and how the fixed rate of growth would be calculated.

Past proposals have suggested rates increase along with inflation, but that could create an issue, Rudowitz said.

'Overall inflation grows slower than health care costs,' she added. 'Medicaid is not the VA (U.S. Department of Veterans Affairs). Consumers have to purchase services in the private market. Drug costs will not be built into preset growth amounts.'

The implications

Implementing block grants could cause problems during an economic downturn, Rudowitz said, when typically more people rely on Medicaid and enrollment increases. So while federal spending remains under control, states either would have to shoulder more of the costs or make cuts to services to stay within funding restraints.

In addition, capping the federal financing that goes toward Medicaid could hurt beneficiaries, states and providers, according to a Kaiser Family Foundation brief. That's because block grants could result in declines in coverage, financial barriers to care, limited funding for children, elderly and those with disabilities, and reductions in federal revenues to states.

'States may be able to make some efficiencies' if funding tappers off, Rudowitz said. 'But there's not that much they can do.'

l Comments: (319) 398-8331; chelsea.keenan@thegazette.com