The Washington PostDemocracy Dies in Darkness

The GOP plan to fund Medicaid through block grants will probably weaken it

House Speaker Paul D. Ryan (R-Wis.) and House Majority Leader Kevin McCarthy (R-Calif.) at a Capitol Hill news conference on Jan. 10. (J. Scott Applewhite/Associated Press)

Republicans in the 115th Congress are wasting no time trying to remake the social policy landscape. Barely a week after the new Congress was sworn in, GOP members took an initial step toward repealing aspects of the Affordable Care Act, the major domestic piece of President Obama’s legacy.

Republicans seem likely to set their sights on other components of the U.S. welfare state, including Medicaid, Medicare and Social Security. President-elect Donald Trump may not go along with congressional Republicans if they try to alter Medicare and Social Security.

But many key Republicans are especially interested in changing Medicaid, the nation’s health insurance program for the poor — including Trump, House Speaker Paul D. Ryan (Wis.) and Tom Price (Ga.), Trump’s nominee to head the Department of Health and Human Services. Each of those three has proposed converting Medicaid from a program funded jointly by the federal government and the states into a block grant program. Doing so would send a set amount of money to each state, thus capping total Medicaid spending, and would let each state decide how to disburse those funds.

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Turning Medicaid into a block grant would result in less funding. Here’s how we know.

Under the current arrangement, the federal government pays states a certain percentage of program expenditures based on criteria, such as per capita income. The percentages are regularly adjusted at three-year intervals based on changes in the economy. How would changing that into a block grant change the program?

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1. Data shows that the move to block grants leads to less funding over time.

Historical data suggest that a shift to block grants would result in a gradual decline in Medicaid funding. A 2016 report by the Center on Budget and Policy Priorities (CBPP) showed that when the federal government uses block grants, the funding for the programs shrinks over time:

[O]ur analysis of the 13 major housing, health, and social services block grant programs that policymakers have created in recent decades shows that funding for all but one has shrunk in inflation-adjusted terms since their inception, in some cases dramatically. … Overall funding for the 13 block grants has fallen by 37 percent since 2000, adjusted for inflation and population growth.

Does that mean that the switch to block granting is the factor that drove down spending? It’s hard to say. But here’s one example that is instructive. From 1935 to 1996, under Aid to Families With Dependent Children, the federal government matched state expenditures based on need. Poorer states received a higher federal match rate than wealthier states. And federal expenditures responded to cyclical variation in the economy. From 1970 until the mid-1990s, state and federal expenditures for AFDC were relatively stable.

But in 1996, the Clinton administration and congressional Republicans teamed up to replace it with Temporary Assistance for Needy Families (TANF), in which funding was distributed via block grants so that states could experiment with how they would deliver it. As the CBPP report points out, after adjusting for inflation, TANF funding has dropped by 32 percent since its inception. Or to put it differently, before the federal government converted AFDC into the TANF block grant, 68 out of 100 poor families received cash assistance. By 2014, only 23 out of 100 poor families did.

2. Reformers argue that block grants need less funding because they reduce costs. But they don’t.

When reformers propose switching a program to a block grant, they increasingly ask to have the funding reduced at the same time.

In the 1960s and 1970s, both Democratic and Republican administrations used block grants primarily to consolidate existing programs, which did not automatically result in funding reductions. In some cases, block granting actually increased funding for the programs involved — as happened with the Community Development Block Grant and the Omnibus Crime Control and Safe Streets Act.

But since the 1980s, most new block grant proposals have gone in the other direction. Proponents argue that the difference would be made up by increased efficiency and administrative savings.

That’s the approach with Medicaid, as well. Trump’s health-care reform website claims that under a Medicaid block grant, “States will have the incentives to seek out and eliminate fraud, waste and abuse to preserve our precious resources.”

Public administration scholar Carl Stenberg’s analysis of block grants, however, found no empirical evidence that the shift to block grants reduced total administrative costs. Rather, these costs are passed from the federal government to the states.

3. Block granting leads to drops in funding because the policies don’t get regular tuneups.

Cornell political scientist Suzanne Mettler’s research shows that just like cars and houses, policies need periodic upkeep to remain effective. Legislators can maintain policies by reauthorizing them to guarantee funding streams, adjusting them for inflation, and periodically reassessing and reforming them.

But legislators often don’t maintain existing policies, leaving them to fall into disrepair. That neglect is not unique to block grants. But certain features of block grants make them particularly susceptible to deferred maintenance and policy drift. Block grants typically do not keep pace with inflation, population changes, rising poverty rates or increased housing costs.

Further, many block grant programs are designed to help low-income people — a group that is least likely to mobilize politically. Unlike, say, the elderly — drawn from every economic strata — the people who rely on poverty programs probably won’t organize to protect their programs from cuts or call for improvements. And so those programs atrophy.

With TANF, for instance, research finds that what citizens need isn’t the factor that pushes states to make sure its policies are effective. Rather, three factors make the difference in how well TANF is designed: the race of most of the state’s beneficiaries, the state’s political ideology and the state’s wealth. Poor, conservative states with a high proportion of African Americans tend to have less generous benefit packages, firmer eligibility rules and stricter work requirements than comparatively well-off states that are more racially homogeneous. Some states take better care of their low-income residents than others because of race, ideology and capacity, not because of need.

In other words, while proponents argue that block grants let states better respond to their residents’ needs, the results show significant inequality across the states.

Republicans may be unable to change Medicaid into a block grant.

Efforts to do so failed in 1981, 1995 and 2003. Medicaid survived — and even expanded under the Affordable Care Act — because many governors, hospitals  and others rallied to keep it as is. Some Republican governors, in predominantly GOP states, accepted that expanded Medicaid funding — and may oppose attempts to cap the amounts available each year.

What’s more, Medicaid beneficiaries may be seen as more “deserving” than those who received AFDC. AFDC recipients were painted as the “undeserving” poor because since the mid-1960s, media coverage increasingly portrayed the poor as African American and stories about the poor became less sympathetic. Stereotypes about “welfare queens” and “welfare cheats” made AFDC an easy target for reform.

But converting Medicaid into a block grant would probably cut into health-care funds for children, people with disabilities and pregnant women. That might be harder to do.

Ryan LaRochelle is a visiting lecturer in the politics department at Brandeis University.