1. Update
  2. Economic Justice

New Medicaid Proposal Poses Serious Consequences

By Andre Gobbo, Michelle Caughey, February 25, 2020


The Centers for Medicare and Medicaid Services (CMS) recently released a proposal that would allow states to convert a portion of their Medicaid funding into block grants.

By issuing this new guidance, CMS is encouraging states to seek waivers that would cap federal funding and give states the option to cut coverage and benefits for poor adults. FCNL strongly opposes this change. History proves that block grants reduce the amount of money for government assistance programs targeted at low-income people, and the proposal directly contradicts congressional intent.

Medicaid is a crucial program

Medicaid provides health coverage to over 70 million low-income people. Medicaid’s funding is based on the number of people who qualify, so if the eligible population grows, states have proportionately more dollars to cover more people.

Replacing our safety net with block grant programs would represent a step back from our national commitment to support those who are struggling.

37 states and Washington, D.C. have expanded Medicaid under the Affordable Care Act (ACA). The Medicaid expansion that occurred under the ACA improved access to care, strengthened financial security, increased overall economic growth, and improved uptake in preventive care.

If every state adopted Medicaid expansion, it would save almost as many lives each year as seatbelts do. However, the recent CMS proposal takes Medicaid in the wrong direction. By allowing states to convert the funding into a block grant, it would shrink a program that covers 1 in 5 low-income Americans, therefore forcing people to lose access to coverage and care.

Block grants undermine the social safety net

Block grants provide a lump sum to fund federally supported state-run programs. Usually, the amount of money that a state gets is set by a formula, and states have broad discretion on how to spend the money with little oversight. The new CMS proposal would allow states to opt-in to a block grant for Medicaid instead of the current entitlement structure. Multiple governors have already expressed interest in turning their state’s Medicaid program into a block grant.

Replacing our social safety net with block grant programs would represent a step back from our national commitment to support those who are struggling. Possible consequences include:

  • Lack of funding caused by a dip in the economy or natural disasters
    • If a recession or disaster hits and demand increases, states won’t have the ability to increase spending on benefits– forcing states to either make up the difference or ration care.
  • Assistance can vary dramatically from state to state
    • Block grants shift power to the states, and only some states would implement block grants. This exacerbates current geographical disparities.
  • Creates incentives for states to help fewer people
    • If states have money left over in their block grant, they can spend it on priorities other than Medicaid.
  • Programs become more likely to lose funding in the future
    • Historically, block-granting a program is the first step in long-term budget cuts. After Congress replaced welfare with Temporary Assistance for Needy Families (TANF) in 1996, the amount of cash assistance provided to families has fallen in nearly every state
    • U.S. territories already have block grants for Medicaid and/or similar programs – in territories where this exists, the average reimbursement rate is less than half of that in U.S. states.

The proposal contradicts congressional intent

In 2017, Congress considered and rejected a series of proposals to block grant and cut Medicaid during attempts to repeal the ACA. The Trump administration, however, has continued to pursue many of the goals included in those repeal efforts through budget proposals, litigation, and administrative actions.

This proposal from CMS directly contradicts Congress’s refusal to block grant and cut Medicaid through the legislative process. It is yet another example of the administration’s broader attempt to undermine the social safety net.

Congress stood by the American people in 2017 in rejecting the ACA repeal and protecting Medicaid coverage. We will stand vigilant in the face of efforts like these to weaken vital anti-poverty programs.

Health Care 

Ensuring access to affordable, quality health care is the very definition of a public good—a service that can’t be adequately provided by private interests but that is necessary to benefit everyone.

Andre Gobbo

  • Legislative Representative, Domestic Policy

Andre Gobbo adds capacity to the Domestic Policy team by handling constituent queries, writing action alerts and sign-on letters, assisting with lobbying visits, creating informational content, supporting coalition relationships, and helping execute FCNL’s legislative strategies.

Michelle Caughey

  • Friend in Washington

Michelle is the current Friend in Washington. She is a retired internist and was a high-level administrator at Kaiser-Permanente in California.