Urban Institute: COVID-19 pandemic highlights risks of Medicaid block grants

Dollar bill with a hole in Washington's face on it and the word "Medicaid" in its place
A new report examines some of the risks of Medicaid block grants. (zimmytws/GettyImages)

The coronavirus pandemic puts a spotlight on some of the biggest risks for states seeking to roll out Medicaid block grants, a new analysis shows. 

The Urban Institute, a left-leaning think tank, released an issue brief that details potential issues with block grants, noting that Medicaid is playing a critical role in providing coverage amid the COVID-19 outbreak as cases grow. 

The Trump administration issued guidance in January designed to assist states in converting their Medicaid programs into block grants, but only for adult enrollees who are not disabled, pregnant or elderly. Adults without disabilities gained Medicaid coverage in significant numbers thanks to the Affordable Care Act’s (ACA's) expansion. 

RELATED: Medicaid block grants would give states more power to oversee managed care 

“The COVID-19 pandemic is a clear illustration of why Medicaid block grants are a bad deal for states,” Kathy Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, said in a statement.  

“Block grants and per capita caps challenge states to adequately cover residents in normal times,” Hempstead said. “Bad times make it clear the risk the risk that they pose to state governments and people that need care.” 

The concerns highlighted in the analysis are: 

  1. It’s hard to set a growth rate to accommodate the spending needs of beneficiaries even without a pandemic. The Centers for Medicare & Medicaid Services issued projected growth rates for programs converted into block grants, but the report warns that to achieve these goals states would need to make dramatic reductions in benefits and enrollment. 

The guidance was also issued prior to the COVID-19 outbreak spreading across the U.S. and, as such, doesn’t account for a potential recession as a result of the virus pandemic, according to the report. 

  1. It’s unclear what issue the block grants are working to solve, the report says. The analysis notes that there is limited evidence that Medicaid spending is out of control in comparison to other types of insurance, such as the ACA’s individual market plans or employer-sponsored coverage. 

In addition, spending growth rates in Medicaid are low when compared to other payers. 

“Block grant and per capita cap proposals are difficult to design so that they will not cause harm,” according to the report. “States’ desire for more flexibility is understandable, but flexibility could lead to harmful cuts.” 

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