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Rebecca Farley

Director, Policy & Advocacy, National Council for Behavioral Health

House, Senate Budget Proposals Would Convert Medicaid to Block Grant

March 19, 2015 | Federal Budget | Medicaid | Comments
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This week, the House and Senate Budget Committees released their proposed budget resolutions for 2016, calling on Congress to convert Medicaid to a block grant, repeal the Affordable Care Act, and balance the budget within 10 years, without net tax increases. The proposals unveiled by Senate Budget Committee Chairman Mike Enzi (R-WY) and House Budget Committee Chairman Tom Price (R-GA) aligned closely along several key Republican priorities:

  • Converting Medicaid to a block grant. Both budgets would replace the current “open-ended federal-state matching formula” with a lump-sum annual block grant, paired with increased state “flexibility” to design benefits, limit eligibility, increase beneficiary cost sharing, and enact other administrative reforms.
  • Affordable Care Act repeal. Both budgets include a wholesale repeal of the Affordable Care Act, “including all of the tax increases, regulations, subsidies, and mandates” along with the Medicaid expansion. The resolutions include instructions for Congress to make these changes through a filibuster-proof process known as a “reconciliation bill,” in which only a simple majority of votes is needed to pass the bill through the Senate.
  • Sequestration. Both budgets presume that the sequestration caps imposed by the 2011 Budget Control Act will remain in place. The Senate budget provides a separate “deficit neutral reserve fund” that could be used to raise defense spending caps later in the year if Congress approves changes to the Budget Control Act. Simultaneously, the Senate budget proposes to cut domestic non-defense spending by $236 billion below the caps set by sequestration.

Impact of a Medicaid Block Grant on Mental Health and Addiction Providers

The budget resolutions change the Medicaid financing structure in order to save $400 billion over 10 years by allowing states greater latitude in meeting their specific population needs while controlling overall program costs. Many organizations, including the National Council, have opposed proposals to convert Medicaid to a block grant, because of the potentially devastating impact on both patients and providers that could occur as this approach does not address fluctuations in Medicaid enrollment that occur after natural disasters, economic downturns, or other factors.

Currently, Medicaid spending has the ability to rise as program enrollment increases or as new, innovative treatments become available. Should Medicaid be converted to a block grant, states would be limited to a lump sum of money each year – funding that could not be adjusted during times of recession or when beneficiaries’ need for services is greater. The result? Major pressure on states to continually cut costs by reducing eligibility, reducing available services, or drastically cutting provider pay well below already low levels.

For more information about the ruinous effect that a Medicaid block grant could have on the provision of mental health and addiction treatment services, take a look at our one-pager on this topic. The National Council will continue to keep readers informed about the progress of this proposal and opportunities to take action against it. If you have not done so already, please sign up for our Action Alerts to stay on top of every opportunity to get involved!

Route to Passage Unclear

A number of differences between the resolutions will complicate their path to passage. For example, while the House budget proposes to convert Medicare into a voucher system with federal government subsidies to help seniors purchase private health insurance, the Senate budget instructs two key committees to find $430 billion in unspecified Medicare savings. Though this number is similar to the level of Medicare cuts in the President’s recently released budget proposal, the Senate budget stops short of endorsing the President’s proposed changes.

Additionally, differences of opinion between defense hawks and fiscal hawks have set the stage for a conflict over how to address the sequestration caps. Fiscal hawks have generally been opposed to modifying the caps, while defense hawks insist that the caps be disregarded in order to provide additional funding for national defense.

While the budget resolution does not have the force of law, it sets standards and priorities for the upcoming work the 12 Appropriations Subcommittees will do in allocating specific line-item spending for the coming year (including in the Substance Abuse and Mental Health Services Administration). It also establishes the rules for enacting any filibuster-proof reconciliation bill; without a budget resolution, Affordable Care Act opponents would not be able to use reconciliation as their vehicle for repealing the President’s signature health law.