Capping Medicaid Funding: The Problem with Block Grants

Publication Date: June 2003

Publisher: Families USA

Author(s):

Research Area: Health

Type: Other

Abstract:

A "block grant" is a fixed amount of money that the federal government gives to states for a specific purpose. (Sometimes, block grants are referred to as "capped" funding or "allocations.") In Medicaid today, states are reimbursed for actual Medicaid costs instead of being limited to a specific amount of federal funding. This financing system ensures that federal funds are spent efficiently and only for the purposes intended in federal law. Under a block grant, the federal government would estimate in advance how much states need so some states get more than they need and others get less than they need.