http://www.realclearhealth.com/articles/2017/01/24/everything_you_need_to_know_about_block_grants_the_heart_of_gops_medicaid_plans_110404.html

President Donald Trump’s administration made explicit this weekend its commitment to an old GOP strategy for managing Medicaid, the federal-state insurance plan that covers low-income people — turning control of the program to states and capping what the federal government spends on it each year.

It’s called “block granting.” Right now, Medicaid, which was expanded under the 2010 health reform to insure more people, covers almost 75 million adults and children. Because it is an entitlement, everyone who qualifies is guaranteed coverage and states and the federal government combine funds to cover the costs. Conservatives have long argued the program would be more efficient if states got a lump sum from the federal government and then managed the program as they saw fit. But others say that would mean less funding for the program —eventually translating into greater challenges in getting care for low-income people.

Block granting Medicaid is a centerpiece of health proposals supported by House Speaker Paul Ryan and Rep. Tom Price, Trump’s nominee to run the Department of Health and Human Services. This weekend, Trump adviser Kellyanne Conway emphasized the strategy as key to the administration’s health policy.

But what would this look like, and why is it so controversial? Let’s break down how this policy could play out, and its implications — both for government spending and for accessing care.

Q: How would a block grant work?

http://www.realclearhealth.com/articles/2017/01/04/medicaid_reform_the_elephant_in_the_room_110358.html

While headlines fixate on the future of the Affordable Care Act’s health insurance exchanges, a more consequential fight is brewing over the future of Medicaid. Proposed reforms would affect tens of millions of Americans and state governments across the country. Previous attempts have failed, however, and longstanding roadblocks may sink this administration’s efforts as well.

With over 70 million enrollees, Medicaid covers more Americans than any other insurer.   Responsibility for funding the program – which accounts for nearly 20 percent of all healthcare spending – is shared between states and the federal government. At a minimum, the federal government covers 50 percent of costs, with that share rising to nearly 75 percent in the poorest states and more than 90 percent for those covered through ACA Medicaid expansions. This amounts to nearly $350 billion in federal funding per year.

Importantly, this money is allocated in an open-ended manner. As states increase the generosity of their Medicaid programs, the federal government is obliged to pay its portion of the higher costs.

During his campaign, Donald Trump joined a long list of Republican lawmakers who argue that this gives states the wrong incentives. Because the federal government covers at least half of each dollar spent, they argue, states may take less care to weed out inappropriate and inefficient spending as they otherwise would.

To eliminate this open-ended feature, Trump’s plan calls for federal money to be allocated in fixed lump sum payments known as block grants.

First proposed in 1981 by President Reagan, block granting of Medicaid hardly represents a novel policy option. Why then has the current system endured, and what does this portend for the resistance Trump’s efforts may encounter?

To understand, consider the most basic decision for any block grant policy: How should each state’s grant be initially determined?