On April 27, AARP released a policy paper examining the effects of converting Medicaid into a block grant, as proposed under U.S. Rep. Paul Ryan’s (R-WI) $3.5 trillion FY2012 budget.  The authors argue that, while the measure may reduce the federal deficit, it could substantially reduce access to basic health services.  Additionally, AARP argues that, if cost growth is not addressed in the private sector, states will take on disproportionate share of health costs as a two-tiered health system emerges.  The authors also argue that dual eligibles are likely to be adversely affected by a block grant program because they are a small population that constitutes a large portion of Medicaid spending, rendering them a likely target for state budget reductions.

From the report: 

Medicaid is the major source of coverage for low-­income children and the 16 million low-­income older adults and persons with disabilities who need long-­ term services and supports. The program was designed so that financing is shared between the federal government and the states. Medicaid rules require states to spend their own funds in order to receive federal matching funds for covered services provided to qualified individuals. Recent proposals have sought to change this long-­standing financial arrangement that, over the years, has ensured that the Medicaid program is there for people when they need it.

Full Report: The High Cost of Capping Federal Medicaid Funding (PDF | 191 KB)

AARP Public Policy Institute. (2011). The high cost of capping federal Medicaid funding.