THE BLOG

Medicaid Block Grants: A Zombie Idea With Lipstick in Texas

04/09/2013 05:02 pm ET | Updated Jun 09, 2013
  • Bruce Lesley President, First Focus & First Focus Campaign for Children

The latest proposal to block grant Medicaid in Texas is a terrible one for the state, its children, people with disabilities, and the elderly. Unfortunately, this bad idea, which just never seems to die, is once again being trotted out by Texas governor Rick Perry and his friends at the Texas Public Policy Foundation.

Federal block grants are, by definition, an arbitrarily capped amount of federal funding that go to states in the form of a lump sum payment and fail to adjust for population growth, economic changes, public health crises, or natural disasters such as hurricanes, tornadoes, etc.

Thus, states with growing populations, such as Texas, or states often in the pathway of natural disasters, such as Texas, or states with a disproportionate share of low wage jobs, such as Texas, would be most negatively impacted by a federally-imposed block grant. As need increases due to any of these factors, block grants and federal assistance are, by definition, unresponsive and unhelpful. States would be left facing the full brunt of any calamity or crisis.

Looking to protect the states from the problems inherent in their block grant proposal, former Congressman Dick Armey and former State Rep. Arlene Wohlgemuth argued in a Politico op-ed on April Fools' Day, "Once a block grant is in place, Texas should fundamentally transform Medicaid from a defined benefit program to a defined contribution program for most eligibility groups. This would undoubtedly lead to cost savings and a more sustainable system over the long term. With skin in the game, and without an unlimited guarantee of state and federal funds, Medicaid enrollees would be more efficient in their use of health care and more engaged as consumers."

Put another way, states would not have to worry because any costs above the per-determined and federally-imposed arbitrary limit in the block grant would simply be shifted to low-income children, the disabled, and the elderly -- the very people that Medicaid is intended to protect. Asking low-income children, the disabled, and the elderly to put "skin the game" when need is increasing and support is capped will lead to one outcome: health care rationing.

Since block grants are arbitrarily capped, federal support would no longer adjust for changes in need or population and this would particularly be a disaster to Texas because it is one of the fastest growing states in the country. In fact, between 2000 and 2010, the number of children across the entire country increased by 1.9 million. But, in Texas alone, the number of children increased by 979,000 -- which is more than half of all the growth in the combined 50 states and the District of Columbia.

Moreover, since block grants fail to adjust appropriately for changes in need, current inequities and disparities are permanently locked into place and often expand. For Texas, which already starts with the 2nd highest uninsured rate for children in the country, the situation would get worse with the federal government cutting back and capping its support to Texas despite its rapidly growing population.

Underscoring this very problem, proponents of Medicaid block grants, such as the Texas-based National Center for Policy Analysis (NCPA), often cite the Temporary Assistance for Needy Families (TANF) block grant as a model for Medicaid "reform."

However, when TANF was converted to a block grant structure in 1996, Texas initially received just 31 percent of the national average in the amount of federal support per child in poverty. Rightfully so, the state was deeply concerned the block grant would lock in this inequity forever. Consequently, Texas Senator Kay Bailey Hutchison attempted to negotiate a more favorable formula change to help Texas. However, since block grants are set at an arbitrarily capped amount, any increase for Texas would led to reductions to other states so she was unsuccessful. Instead, to get her support, small Supplemental Grants were approved with the intent of reducing the inequities among states.

However, population growth quickly outstripped the small adjustment for Texas. Even worse, the Supplemental Grants were allowed to expire in 2011. As a result, today the states receive the same level of federal TANF funding they initially received in 1996 without any adjustments for population or economic changes. As a result, inequities have increased and Texas now receives less than 26 percent of the average level of federal spending per child in poverty. In fact, in 2012, Texas received just $294 per child in poverty from the federal TANF block grant compared to the $2,782 per child in poverty that New York received.

For Texas, block grants only make sense if you think that the children of New York deserve 9.5 times more federal support per child than what Texas receives for its children and think that disparity should also increase over time, as it has in TANF. Although I doubt that any Texan would approve of that incredible and growing disparity in federal funding, that would be the "pig in the poke" that Texas would be buying into if it agreed to a Medicaid block grant as touted by TPPF and NCPA.

Incredibly, TPPF clearly recognizes the inherent unfairness in such block grant formulas. As they acknowledge in their ironically-named report Save Texas Medicaid: A Proposal for Reform, "Determining the amount of the block grant based on historical funding presents a number of inequalities. Medicaid programs vary between the states, such that states with higher health care costs get more federal funding. In addition, some states have negotiated more favorable waiver arrangements than others, and Disproportionate Share Hospital (DSH) payments reflect historical use rather than rational policy choices."

Again, for Texas, a block grant would lock in and exacerbate those inequities. So, how would TPPF address this issue that they recognize is a problem? They would not. As the report reads, "Nonetheless, basing the initial block grant amount on historical spending is the most acceptable method because it represents the political status quo."

Interestingly, the solution to this inequity in their "reform proposal" is to adhere to the "political status quo" even if this "solution" is detrimental to Texans and reflects "historical use rather than rational policy choices." At least TPPF admits it is not rational.

However, in addition to being really poor policy, it is also poor politics. In fact, with respect to the politics of cutting and capping health coverage to children, former State Rep. Arlene Wohlgemuth should know better after having led the effort in the Texas Legislature to cut 147,000 children off of coverage in the Children's Health Insurance Program (CHIP). Despite beginning her subsequent 2004 political race for Congress with a lead in the polls, Wohlgemuth was defeated by Rep. Chet Edwards after he ran a devastating ad about the impact of Wohlgemuth's efforts to slash children's health coverage.

In a country as wealthy as ours, with the best medical care in the world if you can afford it, the American people do not think we should be not be threatening and rationing the health care of our children, seniors, and people with disabilities. Medicaid provides long-term care to millions of seniors, helps Americans with disabilities live independently, and enables millions of children to see a doctor. In fact, a Bloomberg national poll found that over three-quarters of the American public oppose cutting Medicaid and that it is the least popular option of all for deficit reduction.

In short, block granting Medicaid is a poorly conceived and arbitrary form of health rationing that in opposed by the American people and has been defeated on a bipartisan basis time-and-time again. Putting a new picture on the cover of this latest proposal does not change that fact. As former Texas governor Ann Richards would say, "You can put lipstick on a pig, but it is still a pig."

Rather than, once again, trotting this zombie idea to ration the health care of others: politicians (both current and former) should test the idea on themselves. Medicaid block grant proponents should first agree to cap and limit their own government insurance coverage. After such an experiment, they can then let us know whether they still consider health insurance for seniors, children, and people with disabilities should be rationed.

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