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Capping Medicaid Funding Could Hurt Millions of People With Disabilities and Poor Seniors

Medicaid is the country’s largest public health insurance program, providing access to needed health care and long-term services and supports  (LTSS) to millions of low-income Americans, including more than 17 million children with disabilities, adults with disabilities, and poor seniors.

Right now, states and the federal government share the cost of Medicaid in a way that guarantees services to all who are eligible. Under this arrangement, federal funding increases (or decreases) in response to changes in enrollment, service costs and service use.

That could change, and the implications are significant. Recent proposals would limit federal Medicaid funding by giving states a lump sum of money to cover the cost of their entire program (a block grant), or by giving them a specified amount of money for each enrolled person (a per capita cap). Because both approaches aim to save federal Medicaid dollars, it is likely that neither will adjust over time to reflect increases in cost. This means that the funds will pay for less and less over time and states will need to find ways to deal with the significant loss of federal dollars.

Under these proposals, states would have several choices. They could allocate more tax dollars to Medicaid, which is unlikely, given competing pressures on state budgets for education, law enforcement and other essential functions. They could cut back on the amount of money they pay health care providers, which could cause providers to stop serving the Medicaid population and thus create access problems. They could also stop covering certain groups of people.

Finally, states could limit or eliminate services they are not legally required to provide (also known as optional services) — like home- and community-based services (HCBS). The result would mean that millions of poor seniors and people of all ages living in community settings could lose access to HCBS — like help with dressing, bathing, toileting and eating — to meet their daily needs. These individuals would end up with unmet needs or be forced to rely on costly institutional care (e.g., nursing homes).

The result would be a bad deal for these vulnerable individuals, the vast majority of whom prefer to remain in their homes and communities as long as possible. It would also be a bad deal for states. States pay nearly three times as much per person in institutional settings than they do for each individual receiving LTSS in the community.

Under the current shared financing structure, many states have elected to provide optional services (e.g., HCBS) because they recognize that providing such options best meets the needs and preferences of their residents, including those who require LTSS — not to mention that it can even save them money by keeping people out of institutions. Shifting costs to states through block grants or per capita caps could lead states to cut the critical services and supports that millions of people count on.


Lynda Flowers is a senior strategic policy adviser with the AARP Public Policy Institute, specializing in Medicaid issues, health disparities and public health.




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