To Fight Trump’s Medicaid Block Grants, Defense Isn’t Enough for Democrats

President Donald Trump’s Medicaid block grants will only make our health care cost challenges worse.

Medicaid, the program that provides health care to over 65 million low-income Americans, is  once more under assault by the Trump administration. Last week’s guidance from the Centers for Medicare and Medicaid Services granted new authority to states to convert Medicaid funding into “block grants,” which cap spending but allow cuts in enrollment and benefits.

This is a misguided policy that will not save money, expand access or improve the health of those who depend on this program for medical care. Block grants are a meat ax approach to reducing the cost of the Medicaid program to the federal government while doing nothing to reduce the total cost of the care being delivered in the program.

The national crisis in cost and access is driven by the total cost of care in a system that, by even the most conservative estimates, wastes 30 percent of the money it spends. Not only does the Trump administration’s block grant approach do nothing to address the total cost of care or hold the delivery system accountable for quality and outcomes, it ignores the role that cost-shifting plays in the current system.

When those who lack access to the health care system get sick enough, or desperate enough, they turn to hospital emergency rooms where federal law requires that they be seen and treated.  That’s why we end up treating strokes in the hospital, rather than managing blood pressure in the community; or resuscitating 500-gram infants in the neonatal intensive care unit, rather than providing access to prenatal care. These uncompensated costs are then shifted to those with commercial insurance, driving up premiums, copayments and deductibles.

This arrangement defies logic and makes no sense as either an economic or social policy because it costs us far more to treat people without coverage in the emergency room than it would to ensure all of our citizens have access to some basic level of care in the first place. The only way the current block grant proposal saves money is if it is accompanied by legislation that allows hospitals to deny access to the emergency room to those without coverage and simply let them die on the ambulance ramp.

Would Trump and Senate Majority Leader Mitch McConnell (R-Ky.) be willing to introduce and champion such legislation? I suspect not. 

Is there a problem with the open-end nature of the Medicaid program? Yes. Currently, the federal government matches a percentage of state Medicaid spending — the more the state spends, the more the federal government spends in matching dollars. 

To get the match, however, states must cover certain services and populations. There is no requirement that states address the total cost of care or hold the delivery system accountable for quality and outcomes — and that’s the problem

The answer, however, is not to simply give the states a fixed amount of money and let them spend it any way they choose; nor is it to simply cap funding and drive more Americans into the emergency room for their care. 

The answer is to fund Medicaid through a global budget indexed to a sustainable per-capita growth rate — so that funding increases with enrollment — and hold the delivery system accountable by tying funding and flexibility to the requirement that states cannot reduce enrollment or benefits and must meet clear outcome and quality metrics. 

If we hope to ever effectively deal with the crisis in health care cost and access, we must fundamentally reframe the debate. The political gridlock on this issue has resulted largely from the fact that neither Republicans nor Democrats assume any change in the cost structure or business model that underlies the U.S. health care system — we either fund it or we don’t. This creates a zero-sum, false choice between cost and access.

Health care is the only economic sector that produces goods and services that none of its customers can afford. This system only works because the cost of medical care for individuals is heavily subsidized — increasingly with public resources — either directly through public programs like Medicare and Medicaid; or indirectly through the tax exclusion for employer‐sponsored health insurance; as well as the public subsidies for those purchasing insurance through the Affordable Care Act exchanges.

For decades, the debate has focused on these subsidies — on who gets them, who pays them and how much they pay — rather than on why health care costs so much in the first place. Unless we can shift the debate from a narrow focus on the subsides to a broader discussion of the delivery system itself, we will not resolve this issue.

The CMS guidance on block grants will only reinforce the political paralysis, drive up the total cost of care and further undermine access to care for millions of Americans. We can do better.   


John A. Kitzhaber, MD, is a former emergency physician, three-term governor of Oregon, author of the Oregon Health Plan and architect of the Coordinated Care Organization delivery model.

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