GOP Medicaid Funding Proposals Could Save $150 Billion, Analysis Finds

A Republican proposal to change how Medicaid is financed could save the federal government up to $150 billion, according to a new report.

Block-granting Medicaid — when states receive a set amount of federal money to put towards the program — would result in $150 billion less in federal Medicaid spending over five years, according to an analysis released Monday by Avalere Health, a health care consulting group.

Shifting to per capita caps — when states receive a set amount of federal money per beneficiary — would save $110 billion over five years, according to Avalere.

“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,” Dan Mendelson, president of Avalere, said in a release.

Republicans in Congress have proposed shifting how Medicaid works, arguing that would put states more in control of the program. Under the House GOP’s Better Way agenda, states could choose between receiving federal Medicaid money through block grants or per capita caps. GOP lawmakers are mulling a variety of Medicaid changes, and a House subcommittee is set to mark up two bills related to the program on Tuesday.

The proposal does face strong opposition, and not only from Democrats. AARP, the interest group representing senior citizens, wrote in a letter to lawmakers last week that they opposed block grants and per capita caps.

Avalere’s analysis shows that under such proposals, many states would have to chip in more of the funds for Medicaid.

Under the block-grant program, only North Dakota would see an increase in federal funding, while every other state would see decreases ranging from 4 percent to 62 percent. In terms of transforming the program to utilize per capita caps, 24 states would see an increase in federal funding, while 26 states and D.C. would see a drop.

Caroline Pearson, a senior vice president at Avalere, said that the per capita cap model gives states more flexibility, but can result in a total loss of funding for state programs.

“States may respond to block grants or per capita caps by cutting enrollment, limiting benefits, or reducing payment rates to providers and plans,” Pearson said in the research.

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