Medicaid block grant proposal would hurt states, consumers and providers

The U.S. House or Representatives is expected to vote tomorrow on a federal budget proposal for the coming year that would —  among other things —  force drastic cuts to Medicaid that would harm Oklahoma seniors, people with disabilities, and children.  The budget plan, introduced by Republican Congressman Paul Ryan of Wisconsin, would also shift costs and risks onto our state and likely would force the state to cut payments to hospitals, nursing homes, physicians, and pharmacies.

Medicaid  is a primary source of health insurance for seniors, persons with disabilities, and children. Medicaid is especially important for Oklahomans receiving long-term care  in their homes or in nursing home facilities. It is also a cornerstone of the health care system for hospitals, physicians, pharmacies, nursing care facilities, home health care providers, and other professionals and businesses across the state. About one out of every five Oklahomans – close to 700,000 people –  receive health insurance coverage through Medicaid.

The Ryan proposal would turn Medicaid into a block grant.  Instead of covering a fixed share of a state’s Medicaid costs, the federal government would write a check each year. It would dramatically cut the amount of money it gives to a state, and that cut will grow bigger and bigger every year.  In total, states would receive $771 billion less over the next ten years under the Ryan plan; Oklahoma would lose some $8.2 billion, according to projections from Families USA.

Some Republican Governors, including Oklahoma Governor Mary Fallin, argue that a block grant would give them greater flexibility to decide their own rules on eligibility and benefits and operate the program more efficiently. However, states already have a lot of flexibility and the capacity to save money through greater efficiency is limited. The cost of care through Medicaid has grown at a much slower pace than in private insurance and it costs less per person than private insurance.  According to analysis by the Center on Budget and Policy Priorities, Medicaid costs 27 percent less for children and 20 percent less for adults than private insurance for people with similar health status, while providing more comprehensive benefits and lower out-of-pocket costs.

In reality, the Ryan budget would cut federal Medicaid spending so deeply that states would find deep cuts unavoidable, leaving seniors, children and people with disabilities without the health care they need.  As the Congressional Budget Office stated in an analysis of Ryan’s budget:

Because of the magnitude of the reduction in federal Medicaid spending under the proposal, however, states would face significant challenges in achieving sufficient cost savings through efficiencies to mitigate the loss of federal funding.  To maintain current service levels in the Medicaid program, states would probably need to consider additional changes, such as reducing their spending on other programs or raising additional revenues.  Alternatively, states could reduce the size of their Medicaid programs by cutting payment rates for doctors, hospitals or nursing homes; reducing the scope of benefits covered; or limiting eligibility.

In Oklahoma, with no end in sight to the state budget crisis, reduced federal Medicaid funding would mean cutting provider rates, benefits or eligibility.  Cutting provider rates would threaten the livelihood of many health care providers, and would likely lead many to withdraw from the program, endangering access to timely and appropriate care. Reducing benefits would risk depriving people in the poorest health – persons with disabilities and chronic health conditions – of needed services. Limiting eligibility is likely to especially affect children, undoing the progress Oklahoma has made in covering more kids, and persons with long-term care needs who are currently being served in home and community-based waiver programs. All these cuts would have their greatest impact in poor and rural parts of Oklahoma, where Medicaid participation rates are highest and provider networks are most limited.

While there is a definite need for reasonable steps to address rising health care costs and tackle the federal deficit, this is the wrong approach. Capping federal spending through a block grant would be bad for the state budget, bad for Oklahoma’s health care providers, and bad for the low-income seniors, persons with disabilities, children and families who count on Medicaid for the health care they need.


Former Executive Director David Blatt joined OK Policy in 2008 and served as its Executive Director from 2010 to 2019. He previously served as Director of Public Policy for Community Action Project of Tulsa County and as a budget analyst for the Oklahoma State Senate. He has a Ph.D. in political science from Cornell University and a B.A. from the University of Alberta. David has been selected as Political Scientist of the Year by the Oklahoma Political Science Association, Local Social Justice Champion by the Dan Allen Center for Social Justice, and Public Citizen of the Year by the National Association of Social Workers.

7 thoughts on “Medicaid block grant proposal would hurt states, consumers and providers

  1. We really need to rethink Social Security and Medicaid. I agree that we need to meet current obligations, but we need to put in a place a plan that would eventually ween the people of this country off government welfare for retirement. People should be responsible for their own retirement and healthcare. If they want to quit work at some point, they should be on the spot to pay for it. Not the tax payer.

  2. Zachary – the problem with applying a philosophy of personal responsibility to Medicaid is that it is a program that serves persons with disabilities, low-income seniors, and low-income children and families. These are populations who simply could not afford to purchase private health insurance due to limited income and, for many, greater health care needs.

  3. Some of the big problems with health care in Oklahoma revolve around the size and scope of our physician workforce. We simply cannot attract new physicians to the state, and half of our OU/OSU graduates leave to work outside of Oklahoma. Therefore, we depend upon a pool of providers that is ever shrinking – and an even smaller pool of doctors who practice primary care AND will accept Medicaid. If cuts to providers are made, the urban and rural poor, disabled, pregnant and aged patients will be forced to seek care in the only places where doctors will still accept SoonerCare (at higher contracted rates): the Universities and the Federally Qualified Health Centers (FQHC’s.) This is highly problematic, because many Medicaid patients have difficulty securing transportation to such far-flung facilities. Moreover, attracting physicians to work in these settings is challenging – especially when a physician can earn 2 – 5 times more income working in the private sector. We need to graduate and retain doctors in Oklahoma who feel a sense of mission (like Dr. Jeff Brenner of Camden, NJ – who was recently featured in ‘The New Yorker.’) This why OU-Tulsa conceived ‘The School of Community Medicine.’ But when medical students are now graduating with over $200K in debt, it’s easy to see why we have a surplus of highly paid urologists and orthopedists concentrated in Tulsa and OKC, and very few primary physicians throughout Oklahoma that will accept Medicaid. In essence, we’re waiting for Superman – but I worry he may have just moved to Texas to become a Neurosurgeon…

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