Medicaid Block Grants and Per Capita Caps: The Coronavirus Highlights Risks to States

Health professionals standing near computer monitors.

Coronavirus pandemic highlights weaknesses of Medicaid block grants.

The Issue

Earlier this year, the Centers for Medicare & Medicaid Services allowed states to apply for waivers that would give them more flexibility over Medicaid eligibility and enrollment in exchange for less financial backing from the federal government. The new federal guidance allows states to reduce income eligibility standards to lower overall enrollment and limit benefits.

Key Findings

Such policies would be particularly harmful today, as the COVID-19 pandemic and opioid epidemic increase the need for affordable, quality health care for lower-income people.

  • Block grants and similar proposals called per capita caps, which are supposed to limit spending growth in Medicaid, could result in beneficiaries losing health insurance coverage or certain covered benefits.

  • Block grants will also place states at great risk for the costs of expanded enrollment, highly likely given current economic conditions.

Conclusion

States’ desire for more flexibility is understandable, but flexibility could lead to harmful cuts. Caps on spending growth could too easily result in reductions in coverage and benefits because of budgetary pressures when the nation still has 32 million uninsured people. These caps are particularly harmful in times like today, as the nation is trying to cope with the coronavirus.

About the Urban Institute

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.