Making Medicaid a block grant program: an analysis of the implications of past proposals

In 2003, President Bush proposed converting Medicaid from an entitlement to a block grant program. Similar ideas from President Reagan in 1981 and Congress in 1995 were introduced but not enacted. Block grants aim to provide greater federal budget certainty and a stronger state incentive to contain program costs. This paper compares the preestablished funding levels proposed in 1981 and 1995 with what actually happened to federal Medicaid spending. Its results show that previous block grant proposals' funding levels at the national and state levels were quite different from what was anticipated and what occurred. As a result, Medicaid probably could not--and cannot--maintain existing health coverage under a block grant financing structure.