On June 22, the Kaiser Family Foundation released an issue brief examining "per capita caps" proposals that would impact Medicaid. The brief is in response to the plan "A Better Way" released the same day by House Republican leaders. Part of the plan would convert Medicaid financing from the current system of an open-ended match of state expenditures to a per capita allotment or a block grant. Either of these proposals would involve giving states a fixed, presumably lower, amount of federal funding with which to administer their Medicaid programs.
Proponents of block grant or per capita cap proposals highlight the need to reduce federal spending, stabilize the Medicaid program, and increase state responsibility and flexibility. Critics of the proposals note that setting fixed funding makes it challenging to account for growth in operating costs, determining base per enrollee amounts, and maintaining federal core requirements and state accountability.
The report notes that if such fixed funding structures are used, if costs outpace spending, the result is that costs will shift to states, providers, and beneficiaries. This could result in incentives for states to reduce Medicaid payment rates and benefits overall, as well as restrict eligibility for high-cost enrollees.