A new report by Avalere analyzed the impact of a Medicaid block or per capita cap’s effect on health care funding. The results are very negative especially for children. The study shows that between 2020 and 2029 federal funding lost under a Medicaid block grant would result in a $163 to $143 billion cut in children’s health funding depending on whether it was a straight block grant or per-capita cap. It would result in a $110 to $89 billion in funding cuts based on a more generous calculation. The totals represent cuts to children’s health and no other populations. The study used a 10-year budget projection for 2 different measures of inflation—the Consumer Price Index-Urban and the Consumer Price Index Medical.

According to Richard Kane from Avalere “Capped funding models such as block grants or per capita caps could significantly reduce the amount of federal funding provided to states for children’s medical care.”

A Tennessee law passed in May directs the state to submit a waiver request to CMS to convert nearly all Medicaid federal funding to a block grant. The Avalere study modeled a national block grant policy based on the Tennessee law and assumed that funding for all eligibility groups would be provided in a single block grant per state. The study range under the two different CPI measures ranged from -16% to -24 percent in cuts under a medical inflation model or states would see federal funding reductions for children ranging from 6% to 33% under an urban CPI model. Avalere Health conducted the study for the Children’s Hospital Association.

CWLA has opposed Medicaid block grants and proposals for a per capita cap, most recently during the 2017-18 congressional debates to repeal the ACA. Under per capita caps, various populations are divided out such as the elderly, people with disabilities, children and more general populations. Then states are awarded an annual allocation based on a fix per capita cost for each of those populations. Many times, the per capita caps are adjusted by an inflation factor that may under-calculate true health care cost increases. States would absorb the overruns in health care costs, and it is not clear how the current mandates or entitlements to health care coverage for certain populations such as pregnant women and poor children would be affected. If a state has to absorb such cuts, children tend to lose out since there tends to be less political will to fight for funding for this population although under a per capita cap all people in need of health care would lose out as costs are shifted to the states.