WV Center on Budget and Policy > Press > OpEds > Kathleen D. Stoll: Block Grants And Caps Bad News For West Virginia Medicaid

Kathleen D. Stoll: Block Grants And Caps Bad News For West Virginia Medicaid

February 5, 2017

Gazette-Mail – Republican leadership in Congress has promised to move quickly to change the fundamental nature of the Medicaid state-federal program partnership. What could these proposals mean for West Virginia?

In 2016, about 30 percent of West Virginians were covered by Medicaid, including children, low-income adults, people with disabilities, low-income seniors and many people in long-term care (nursing homes or in home- or community-based care).

Right now, for every $1 spent by the state on Medicaid, the federal government matches with $2.55. There are no caps or limits on the federal matching dollars if our Medicaid program costs go up. The Medicaid program — created in 1965 — has been financed this way from the start. Republican leadership hopes to undo this historical state-federal financial partnership.

Republican Medicaid proposals — block grants and per capita caps — dramatically limit the federal dollars available to West Virginia for the Medicaid program and shift enormous program costs onto state budgets. Regardless of the amount that might be allocated to West Virginia in the first year, over time the federal commitment will shrink.

First, the rate of growth allowed for the restricted federal funds would likely not keep up with medical inflation, and more state funds will be needed to keep the current program in place. Second, if a recession or economic downturn, a natural disaster (a flood, for example) or a health crisis (for example a severe flu season or our current opioid addiction crisis) increases the number of people on Medicaid or the services that enrollees seek, the federal dollars will not increase to help pay the additional cost of this expanded need. This endangers the ability of Medicaid to respond to unexpected and uncontrollable future circumstances and would force West Virginia to meet increases in demand with state-only funding.

The March 2016 House Budget Committee Chairman Paul Ryan’s proposal to convert Medicaid to a block grant is similar to what we will see in Congress this year. That proposal would have cut federal funding for the Medicaid program by 49 percent in 2026 when the proposal is fully implemented. Even if the Medicaid expansion is not touched, the cuts to the traditional Medicaid program before the Affordable Care Act would be $169 billion, or 34 percent.

The West Virginia state budget has about a $500 million budget shortfall for fiscal year 2018; our state cannot shoulder more of the cost of the Medicaid program if the federal government reneges on its responsibility and shifts costs to the states.

West Virginia is at risk of seeing larger percentage cuts relative to other states. For example, a funding formula built on national average spending could lock West Virginia into an allotment that cuts federal dollars by even more than 41 percent.

In 2017, West Virginia is projected to spend per Medicaid enrollee an average of $6,443. If funding levels were based on the national average spending per enrollee — $4,954 — we would start with significant reduction in federal dollars. A base cut coupled over time with growth rates that do not keep up with medical inflation or take into account growth in enrollment and/or services will literally bankrupt the West Virginia Medicaid program.

Hand-in-hand with the loss of federal dollars, the Republicans propose new rules that will allow states to charge higher premiums, eliminate covered benefits and raise out-of-pocket spending requirements in Medicaid. With a dramatic loss of federal dollars, West Virginia will be forced to make these kinds of draconian cuts. This is not new state Medicaid program “flexibility” as Republicans describe it — this is federal blackmail.

People who rely on Medicaid will no longer be able to afford coverage, and others with coverage will face financial barriers to necessary care. Any innovation and improvements in Medicaid will be impossible. Medicaid’s role as a leader in improving care coordination and reducing health costs in our state will end. The hospitals and doctors who rely on Medicaid to pay for the care of lower-income people will have to provide more care without reimbursement or turn them away.

It is not hyperbole to say that the Medicaid block grants or per capita caps will lead to more uninsured West Virginians, unnecessary deaths from lack of health care and the closure of rural health hospitals and clinics across the state.