Why Block Grants Would be Disaster for Health Care

By Peter Edelman

Peter Edelman is faculty director of the Georgetown Center on Poverty and Inequality at the Georgetown University Law Center.

Republicans are advancing yet another effort to repeal the Affordable Care Act that is as bad as the one defeated in July, if not worse. This one makes large use of block grants, a long-standing Republican idea to promote “state flexibility.” The concept might sound good, but in reality, it would be disastrous for the millions of low- and moderate-income people it purports to help.

The Cassidy-Graham bill adds a new coat of paint to the Republican repeal-and-replace effort, but the content is still poison. It would slash the ACA’s Medicaid expansion and premium subsidies by $243 billionbetween 2020 and 2026, and then completely end federal funding in 2027. It would also turn these provisions into a block grant, which lends states enormous leeway in spending the money. On top of all that, the bill would hit each state’s federal Medicaid spending with a per-person limit, allowing states to receive pre-ACA Medicaid dollars in the form of block grants for non-elderly, non-disabled people.

Those facts should end the discussion. But it’s still worth diving into the destructive potential of block grants. We’ve had them since the days of President Richard Nixon, and all of them — tiny compared with those Cassidy-Graham would enact — have come to the same end: programs withering on the vine and, in some cases, no accountability for spending of federal money.

I should know. I resigned in protest from the Clinton administration when it turned the guaranteed cash assistance for low-income families into the Temporary Assistance for Needy Families (TANF) grant. Unfortunately, virtually everything I warned about this change came to pass.

Republicans say it was a success, but in fact it produced deeper povertyfor children and badly spent federal funds. More than 6 million peoplenow have no income other than food stamps, which provide a little more than $500 monthly for a family of three. Cash assistance is essentially gone in most of the country. Half of the states help fewer than 20 percentof families with children living in poverty. In 1996, before welfare was converted into a block grant, more than two-thirds of families with children in poverty received welfare benefits; by 2015, less than 1 in 4 did.

This is what block grants — and their cousin, per-capita caps — do. They disconnect funding from need. They offer a capped amount of federal money to states or local governments and allow them to spend it with little to no oversight. Block grants typically mean massive funding cuts immediately, over time, or both, as is the case with Cassidy-Graham.

And with fixed funding levels, block grants create a powerful incentive for states to reduce assistance even as need rises. After all, they get to keep the “savings” in what essentially becomes a slush fund. As has been seen in the TANF program created by the 1996 welfare law, states have used the malleability of the block grant to make it harder for people to receive benefits. As a result, the number of families experiencing poverty who receive TANF has fallen precipitously.

It appears that Cassidy-Graham could have similar effects: Beyond the gargantuan budget cuts, states could use these funds for a broad range of health-care purposes, not just coverage. We should expect states to make it harder to get coverage so they can use the money for other things.

Block grants can’t respond to changing conditions. Past attempts have been unsuccessful in reacting to economic downturns, and block grants have trouble adjusting to the dramatic increase in need due to natural disasters. In the wake of the massive hurricanes that have recently hit Texas and Florida, we should remember former Florida senator Bob Graham’s observation in the mid-1990s: “Acts of God and block grants do not mix.”

Finally, block grants are likely to exacerbate racial disparities. As has been seen with TANF, limited federal oversight of block-grant programs can lead to differential access to benefits based on race. Some argue that states don’t need the federal government to guarantee civil rights. But those claims are evidently wrong: Just look at all the efforts to restrict voting access that would disproportionately affect people of color.

We have already seen what happens when programs for lower-income Americans become block grants, and it isn’t pretty. Access to health care through insurance coverage helps ensure the foundation for well-being and economic opportunity in the United States. Transitioning that to a block-grant system would put the health of millions at risk.