Powerful Republicans are pushing the twin ideas of capping the federal contribution to Medicaid and eliminating federal regulation of the program. These changes would do profound damage to the Medicaid benefit for long-term care, whether it is provided at home or in nursing facilites.

This plan would turn Medicaid from a federal entitlement into a block grant. Over time, states would be responsible for paying a growing share of the program costs but in exchange would have broad flexibility over who to cover and what benefits they’d receive. In such an environment, chances are good that fewer aged and disabled would be eligible for benefits and they’d receive less assistance than they do today. At the same time, providers such as nursing homes and home health agencies would likely get lower Medicaid payments even though the program reimbursements are already at dangerously low levels.  

Today, the federal government pays about 57 percent of Medicaid costs (the actual amount varies from state to state and ranges from 50 percent to about 80 percent). While the elderly and disabled account for only 25 percent of the 50 million Medicaid enrollees, the program spends two out of every three of its dollars on this population. More than one-third of the total Medicaid budget, or $125 billion, went to long-term care supports and services alone in 2009, according to a new study by the Kaiser Family Foundation.

Under the current arrangement, the federal government pays its share no matter how quickly Medicaid costs rise. Thus, because Medicaid rose by 7.7 percent in 2009 (mostly because the recession drove many newly-unemployed into the program), the federal contribution increased to keep up. In fact, Washington’s share actually grew even more thanks to the much-reviled 2009 stimulus law.

By contrast, under a block grant the federal share would increase only up to a cap, say equal to the growth rate of the economy plus one percent. In 2009, this would have resulted in no increase in federal payments for the program. As a result, states would have had to scale back their Medicaid programs, including their long-term care services.

Over time, the federal contribution would fall significantly, leaving the states with more and more responsibility for the program and less and less assistance to pay the bills. Governors who support a block grant insist it would drive greater efficiencies.And it might, for instance, make it easier for states to expand their home and community based long-term care programs. 

But it is also likely to generate major cuts in both benefits and reimbursements. In addition, without minimum federal standards, the differences among state long-term care benefits, already dramatic, would only grow.As a result, residents of one state may receive much better long-term care than residents of a neighboring jurisdiction.  

Despite these risks, GOP governors came to Cngress today to demand the changes. Mississippi Governor Haley Barbour, who is mulling a presidential bid–told a congressional committee that states should not have to “kow-tow” to the federal government and insisted the program be turned into a block grant. Mississippi, as it happens, recieves a greater federal Medicaid payment than any other state.

Even more troubling, these Medicaid cuts would come on top of what are likely to be freezes or cuts in non-Medicaid benefits for the frail elderly, such as nutrition, energy assistance,and housing.  

My guess is that much of this call for a Medicaid block grant is political posturing. It is hard to believe that many governors would turn their backs on hundreds of billions of dollars in federal aid at a time when they are struggling to balance thier budgets. I suspect what Barbour and his colleagues really want is the money with less regulation. But given federal budget pressures, their GOP friends on Capitol Hill may give them both.