Congress is debating the American Health Care Act (AHCA) that would end the enhanced matching funds for the ACA Medicaid expansion and would also end the program-wide guarantee for federal Medicaid matching dollars by setting a limit on federal funding through a block grant or per capita cap. Under a block grant, federal spending would be limited to a pre-set amount. States could cap enrollment or impose waiting lists as mechanisms to control costs. Under a per capita cap, per enrollee spending would be capped, but the total amount of federal dollars to states could vary with enrollment changes and states would not be able to impose enrollment caps.
Faced with restrictions in federal financing, states would have to make hard choices. Research shows that there is not strong evidence to support large savings through options aimed at achieving Medicaid efficiencies. Under a block grant, states could cap or limit enrollment; however, the incentives and options under a per capita cap could be different. This brief outlines the key measures states could use to manage their budgets and the associated challenges under a per capita cap: