Here’s one of the terms know if you’re following Donald Trump’s efforts to restructure the American health care system next year: “Block grant.”
The news that Trump will nominate Congressional representative (and former physician) Tom Price of Georgia to lead the US Department of Health and Human Services is a signal that the US president-elect intends to stick to his campaign promise to change Medicaid, the federal health insurance program that covers more than 80 million low-income Americans, from an entitlement program to a block grant.
What this means is that instead of pledging to provide care to anyone who is covered, the federal government would promise to provide a tranche of Medicaid funding to each state, at a set growth rate. States would be granted more flexibility in how they administer these programs. They would be allowed to change coverage requirements and what the money is spent on. If more people needed coverage than was expected, states would need to come up with the difference themselves, or cut benefits.
Medicaid is only one part of the US health care apparatus, but the people who use it are among the most vulnerable. The program plays an important role in subsidizing rural hospitals so that residents have access to care. People who live in the countryside are more likely to use Medicaid (21%) than people in urban areas (16%), according to the Kaiser Family Foundation. These are the same rural voters who helped put Trump in office by tipping the scales in states like Ohio, Michigan, Wisconsin, and Pennsylvania.
Currently, Medicaid is an entitlement program targeted at families, and anyone who meets eligibility criteria based on household income can access it. These vary state by state, but generally, children and parents can get access to Medicaid if their household income puts them below the poverty level ($24,300 for a family of four in 2016) or up to 2.5 times higher than that. Under the Affordable Care Act, coverage was expanded to childless adults with incomes below 133% of the poverty line, $11,880 for an individual in 2016, in states that choose to opt-in.
The cost of the program varies, then, depending on the poverty level. During tough economic times, it costs more, and the federal government pledges to make up the costs past what states must provide.
Proponents of the block-grant model argue that it will cut costs—and it will, simply because it will result in less money being spent.
As a lawmaker, Price’s plan to block-grant Medicaid would have cut $2.1 trillion in spending over 10 years—or 40% of the program’s total spending in that time—about half of which comes from reducing expanded eligibility requirements created as part of the Affordable Care Act. Proponents of block grants argue that these cost cuts won’t impact the program’s users because states will deliver care more efficiently and effectively.
Critics of block grants say that hopes for massive efficiencies rarely materialize when federal programs become block-granted. When president Bill Clinton and speaker of the House Newt Gingrich combined to overhaul welfare and make it a block grant program in 1996, it resulted in a 32% fall in federal funding for Temporary Assistance for Needy Children and Families (TANF) over the last 18 years, but without leading more people to employment or out of poverty. And because of relaxed rules, states don’t need to spend federal money directly on helping the poor. Some 32% of federal TANF funding isn’t spent on direct assistance or work programs; instead, it gets sent to other priorities, like abstinence efforts or marriage counseling programs that do little to help the poor.
Estimates of block grant plans from the Congressional Budget Office show that 14 million to 20 million Americans could lose their Medicaid coverage under this change, many newly enrolled since the passage of the Affordable Care Act in 2010. As a bonus, those who hope to use the government’s pharmaceutical purchasing power to help rein in costs—one of the real sources of potential savings—fear that Medicaid’s negotiating power could be reduced if it is handed over to the states wholesale.
Trump’s pick to run Medicare and Medicaid is Seema Verma, a health care consultant who worked with vice president-elect Mike Pence to overhaul Indiana’s Medicaid system. A spokesman for the Trump transition told reporters today (Nov. 29) that Price and Verma will “be our point people and be leading the charge on this front,” including “administering medicaid at the state level.”
In Indiana, Pence and Verma adopted Obamacare’s expansion of Medicaid, but spearheaded a conservative program that requires Medicaid recipients below the poverty line to do more to access the program and invest themselves in it. The rules include new work requirements and paying into special health savings accounts; missing payments can lead to loss of coverage. Though the payments can be low, often as little as $1, a family at the poverty line may have little cash after rent, food, clothing, and other costs. Ironically, it’s not clear what will happen to Indiana’s program once Obamacare is repealed.
Pundits attempting to lock in on why Trump was elected tend to focus on the hardscrabble stories of the rural poor, particularly counties ravaged by health challenges like the opiate epidemic that correlates so well with outsized areas of Trump support. Many of these areas have been left behind economically. Trump’s administration is planning to institute large cuts in a health program that benefits perhaps millions of those people, and particularly their children, even as he promises huge tax cuts to wealthy city-dwellers. That’s one kind of populism.