Medicaid Reform: Key Considerations for Children's Health Care

Eileen K. Fry-Bowers, PhD, JD, RN, CPNP; Karen G. Duderstadt, PhD, RN, CPNP, FAAN


J Pediatr Health Care. 2017;31(4):517-519. 

In This Article

Medicaid Reform

Legislative reforms focus on instituting block grants or per capita caps in Medicaid to reduce the amount and variability of federal spending and incentivize states to reduce costs. These proposals eliminate the legal entitlement and the guaranteed federal match and give states greater flexibility to decide whom to cover and what to cover under Medicaid.

Under a block grant, states would receive an annual lump sum to spend according to broad federal guidelines. Medicaid program costs in excess of the federal grant become the responsibility of the state. Under per capita caps, federal spending is capped per enrollee, which is determined by a base year amount that is adjusted over time by a measure of general inflation, which, at present, is less than the growth of health care costs. States receive this amount per enrollee multiplied by the number of enrollees for a specified period (Rudowitz, 2017). Under some proposals, per capita caps would be calculated for spending for specific subpopulations—the elderly, blind and disabled, children, expansion adults, and other adults (Kaiser Family Foundation, 2017a). Under block grants or per capita caps, states are left with limited options to address funding deficits, because most states already operate programs with low administrative costs and provider reimbursement rates well below those of other payers (Rudowitz, 2017). According to Congressional Budget Office estimates, current legislation will result in a reduction in Medicaid spending of $880 billion, a 25% reduction in services, and a 17% decrease in enrollment over the next decade (Jost, 2017). A change to either block grants or per capita grants will fundamentally change the structure of Medicaid and shift costs and risks to states, beneficiaries, and health care providers (Georgetown University Health Policy Institute, 2017).