Yesterday we walked you through the basics of how the Federal Medicaid per capita financing mechanism would work if the American Health Care Act of 2017 were to make it to President Trump’s desk. Even if the ACHA does not pass, we anticipate that the Trump administration will use its considerable administrative powers granted, ironically, by the Affordable Care Act, to encourage and even impose similar reforms.
Under the AHCA, block grants can only be used for the enrollment categories of children and non-expansion adults (i.e. pregnant women) for a 10 year period. The legislative language does not appear to contemplate an exit before the end of 10 years if things don’t go well.
Calculating the Initial Block Grant Annual Amount. For the first fiscal year of the 10-year block grant program, the block grant amount will be equal to the target per capita medical assistance expenditures (as described in this note) for the states multiplied by the number of Medicaid enrollees in that category to which the block grant applies for the year FY 2019 multiplied by the Federal average medical assistance matching percentage (FMAP) that would have been in effect had the AHCA not passed.
Calculating Subsequent Block Grant Annual Amount. In subsequent years, the block grant amount will inflate on CPI-U. Any unused money from a previous year can be rolled over to a succeeding fiscal year.
Unlike the per capita payment system, block grants do not increase to account for enrollment growth. The two enrollment categories eligible for block grants, however, have historically predictable growth patterns.
While the legislative language does not spell it out, block grants are generally perceived as more flexible than the per capita system which is more flexible than the current FMAP system. Generally, the concept of block grants has not been as fully developed as the per capita system has among Congressional leaders so how it plays out will depend on how the HHS Secretary Tom Price chooses to implement regulations.
Governors have sought access to a block grant financing structure for years. Failure of the AHCA is unlikely to restrain their ambitions to block grants and a per capita system.
Call with questions.
Emily Evans
Managing Director
Health Policy
@HedgeyeEEvans
