Currently, all states receive matching Medicaid funding from the federal government based on the costs of actual services provided. However, last year, the Centers for Medicare and Medicaid Services (CMS) allowed Tennessee to submit a proposed amendment to its Medicaid program and on January 30, 2020, CMS released a new guidance allowing states for the first time to use Medicaid’s 1115 waiver authority to finance part of their Medicaid program through a block grant or per capita caps. You can find more information on CMS’ new guidance here and on Tennessee’s proposal here.
Under block grant proposals, regardless of services provided, states would receive a preset amount of funding, rather than receiving funding for the actual services provided to Medicaid participants. This places a significant amount of risk on states who are responsible for any unexpected costs, forgoing the matching federal funds they would otherwise receive. This cost-shifting onto states encourages reductions in benefits, access to those benefits, and enrollment eligibility.
Medicaid’s Current Structure
- Federal government and states share actual costs of coverage
- Federal government pays an average of 63%
- Matching rates vary by state from 50% to 75%
- Some services or populations are incentivized with higher match
- Community First Choice Option: provides community-based personal care services to people who otherwise might have to receive care in nursing homes — gives an extra 6% federal match
- Money Follows the Person: federal government pays 100% of costs for the first year someone moves from an institution to the community.
Basics of Block Grants
- Federal government gives the state a set allotment of funding instead of paying for state’s actual service costs.
- Any costs above that level would be entirely the responsibility of the state and would not be eligible for matching funds.
- Block grants typically do not account for the cost of new technologies, an aging population, changing health needs, economic changes (for example, recessions), increased health needs following natural disasters, etc.