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No, Oregon did not get a block grant

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I posted a lengthy story Friday about some sweeping Medicaid reforms happening in Oregon, with the state trying to get the cost of the entitlement program to grow significantly slower than the rest of the country.

One question I've fielded a lot since then is whether Oregon's funding could be considered a "block grant." Readers have pointed to this passage in particular:

In this way, the Oregon plan has some parallels to Republican ideas to “block grant” the Medicaid program, and give states a set amount to run their programs. Both rely, in part, on a fixed budget to put downward pressure on health spending.


“You can call it what Oregon calls it, a global budget, or you can call it a block grant,” said Tevi Troy, assistant Health and Human Services secretary under George W. Bush. “There’s a semantic aspect to it. At the end of the day, we’re talking about putting limits on what we’ll spend on Medicaid.”


So, did Oregon get a block grant? The short answer is no: The federal government has not put a hard cap on what it will spend on the state's Medicaid program, a key feature of the block grant concept. But, as I wrote in the story, health policy experts do see similarities between Oregon's reforms and the theories that underlie block grants.

The idea of block grants is a pretty simple one: Set a fixed budget for a given program, like Medicaid, and let the state figure out how to best spend those dollars. The hope is that when funding for a federal program is not endless, it will give states an incentive to spend Medicaid dollars smarter. They might, for example, make huge investments in prevention, in order to prevent expensive hospital procedures down the road.

Making health care less expensive is really hard. The concern with block grants is that states would take the easy road out. They might just drop Medicaid patients from the rolls or cut back on benefits.

Liberals have also balked at the severity of the funding cuts in certain block grant proposals. The Ryan budget, for example, would cut Medicaid spending by 34 percent over the next decade. While those numbers aren't a key feature of the block grant concept, they are part of the reason why there's concern about such a proposal becoming law.

Now, back to Oregon. The state is trying to grow its Medicaid program 2 percent slower than the rest of the country. The way its hopes to do that is by dividing the state up into 15 regions, and giving them a set amount to care for each patient.

The idea, as many Oregon officials explained to me, was to tell each region: You have a set amount of money - spend it wisely.

"We're telling them, 'here is your global budget, and do what you want with it,'" Mike Bonetto, a health policy adviser to Oregon Gov. John Kitzhaber (D) said. "They know how fast their funding will grow. However they want to get there, whether they think primary care needs to get paid more, those are their own conversations."

Oregon's program is different from most block grant proposals in that it gives states a per person cap, taking away incentives to drop Medicaid enrollees. (This is actual pretty similar to a "per capita cap" that President Clinton proposed in the mid-1990s).

Still, the idea is, like block grants, to use firm budgets to save money: When Clinton laid out the idea, he hoped it would save $59 billion over a decade.

Bonetto added that each region - known as a coordinated care organization - will have to meet certain quality metrics to ensure that they aren't hitting their targets by skimping on care. But aside from that, its really up to each region to divvy up a set amount of health care dollars.

What happens if the regions don't meet their targets? Or if there's one bad apple who can't stay on budget? The federal government will not cut off Oregon altogether: As Medicaid officials stressed in interviews, the Obama administration has an open-ended commitment to funding Oregon's Medicaid program, just as it does in every state.

What the state does risk, though, is $1.9 billion in federal bonus payments, dollars above and beyond the government's regular commitment to Oregon, which were meant to patch a temporary budget hole.

"We could be at risk of losing our out year federal payments and that would mean a dramatic cut to the program," Bonetto explained. "We would have to make substantial cuts and probably lose our waiver for a breach of contract."

Oregon did not get a block grant from the federal government. But the way its trying to drive down health care costs - by setting firm limits on per patient spending - does use some of the same ideas that block grant proponents have touted.