Medicaid block grants could take $150 billion out of play, study shows

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A recent proposal to fund the Medicaid program through block grants could result in $150 billion in savings for the federal government, according to a new study.

That analysis, published Monday by Avalere, found that converting Medicaid to block grants — where each state would receive a fix amount of money for the program — could cut Medicaid spending by $150 billion over five years.

Switching Medicaid to per capita caps, which would deliver a fixed amount of money for each beneficiary, would trim $110 billion from the program's spending over five years.

“Medicaid block grants and per capita caps serve as vehicles to control federal spending on the program and put more of the decision-making on things like covered services and program eligibility in the hands of the states,” said Avalere President Dan Mendelson.

Avalere's analysis noted that states that spend more Medicaid dollars per enrollee would have a harder time under per capita caps, while states that have surges in enrollment may struggle if the program is moved to a block grant system.

“States may respond to block grants or per capita caps by cutting enrollment, limiting benefits, or reducing payment rates to providers and plans,” said Caroline Pearson, senior vice president at Avalere.

Block grants have been viewed favorably by advisors to President Donald Trump for their perceived ability to “cut out the fraud, waste and abuse,” and provide services to beneficiaries in a more direct manner.