Medicaid
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The Chopping Block: How Medicaid Block Grants Will Create Access Problems for Ohio’s Kids

April 22, 2019
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More than 1 million children, or 40 percent of all children in Ohio are covered by the Medicaid program. As the largest single source of health coverage in the United States, Medicaid plays an integral role in ensuring successful outcomes for children from birth and throughout adolescence. It is primarily responsible for decreasing the uninsured rate for kids to below 5 percent. Additionally, longitudinal research has shown that Medicaid may be one of the most influential policy efforts for removing barriers, enabling economic opportunity across generations, and increasing educational outcomes and lifetime earnings for children. Importantly, Medicaid also plays a critical role in covering children with special health needs (more than 14.2 million, nationally). This is true not only for low-income families, but for those who may be middle-income as well. This means Medicaid is a critical support for families in all parts of our state. Despite these apparent policy successes, however, national policy conversations surrounding block grants pose the single largest threat to ensuring children, particularly those with special needs, have access to this critical source of coverage.

 National policy conversations surrounding block grants pose the single largest threat to ensuring children, particularly those with special needs, have access to this critical source of coverage.

Block grants are not a new concept in public policy. Simply put, a Medicaid block grant is a fixed amount of money that the federal government would give to the state to implement its Medicaid program. As supporters of this concept describe, this approach would empower states to be more flexible with their Medicaid dollars and address non-traditional needs of enrollees, such as the social determinants of health like housing and food. However, while this sounds good in concept, its application in the real world would likely result in rationing and the weakening of protections for some of the most vulnerable, particularly children.

 Time and again, this block grant concept has been advanced only to be defeated during the Reagan, Clinton and recently, Trump administrations.

Time and again, this block grant concept has been advanced only to be defeated during the Reagan, Clinton and recently, Trump administrations. The reason for this regular defeat is primarily due to the realities of medical economics in the United States and the incongruity of a block grant with the policy tools deployed. As data from the US Bureau of Labor Statistics shows, since 1948, the medical care consumer price index (M-CPI) has risen at faster rate than the headline consumer price index (CPI) at a rate of 5.3 percent to 3.5 percent. As was the case with the most recent defeat in Congress, the CPI is a tool often used to mark the growth of the dollars a state would receive. As the M-CPI outstrips the CPI, however, the gap between program expense and federal reimbursement grows and which means states would have to make tough choices about where and how to invest their dollars.

 Puerto Rico has long received its Medicaid dollars through a block grant and a number of problems have risen as a result, including longer wait times for service, less physician access and significant challenges in addressing emergent public health crises like the Zika outbreak of 2016.

Puerto Rico provides a good laboratory for understanding the shortfalls of the block grant idea. Puerto Rico, as a territory of the US, has long received its Medicaid dollars through a block grant and a number of problems have risen as a result, including longer wait times for service, less physician access and significant challenges in addressing emergent public health crises like the Zika outbreak of 2016. But Ohio has its own example from which to draw. During the last budget, as a part of Ohio’s Joint Medicaid Oversight Committee (JMOC) process, the General Assembly established a target for program growth tied to the CPI. This target was summarily exceeded as the Kasich administration developed its budget request, and the General Assembly had to revise appropriations to meet the goals of the state budget. Unlike this JMOC process, however, a block grant would not give Ohio the option to “go back” to the federal government to revise its request, creating a potential problem in either A) finding more state-only resources or B) cutting benefits.

 Block grants…would pit the interests of these consumers against one another, resulting in the state government having to make difficult choices about who and what to cut to meet program goals.

Not all categories of eligibility in Medicaid have proportional spending. Some groups, like the Medicaid expansion group, average lower costs than the aged, blind and disabled. This is because the resource needs are different for each group and are thus affected by more market price factors (costs of durable medical equipment, pharmacology, availability of specialist providers, etc.). Block grants, then, would pit the interests of these consumers against one another, resulting in the state government having to make difficult choices about who and what to cut to meet program goals.

 But rather than experiment with access for children as a way to control costs, it may be wiser to look at why prices are high in the first place.

Children with special needs average costs 15 times that of children without special needs. This means that the services that lead to those expenses are going to be more susceptible to cuts when states have to make tough choices about resources. And, if cuts don’t affect services for these more expensive categories of folks (the disabled and elderly), then the covered families and children group, which is half of all enrollees, become the next largest target. This is why there is no single medical association in support of the Medicaid block grant idea. Advocates of block grants point to flexibility and design as ways to accommodate the potential challenges these policies could create. Perhaps. But rather than experiment with access for children as a way to control costs, it may be wiser to look at why prices are high in the first place.

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