Medicaid Block Grant Funding and HIV

By: Marcus J. Hopkins, Policy Consultant & Guest Contributor

For three decades, Republicans at both the state and federal levels have been attempting to convert social services programs, such as Welfare and Medicaid, over to block grant funding systems. One example of this conversion is the Temporary Assistance for Needy Families (TANF) program, created in 1996 and implemented in 1997. More recently, Republicans have been seeking for much of the past two decades to do away with the existing open-ended funding model that supports our current Medicaid system, and replacing it with block grant funding. Since Donald Trump began occupying the White House, Republicans, for the first time in recent memory, had a real chance to begin overhauling programs they felt were flabby and inefficient money pits with the support of a Republican House, Senate, and Executive running full steam behind it.

Those who work in public health, as well as those who work in HIV advocacy and activism, immediately began a campaign against this effort to do away with current Medicaid funding, particularly after winning in 2010 with the Medicaid expansion portion of the Affordable Care Act (ACA). They predict epic funding cuts, a return to wait lists for HIV treatment, and rationing of care that will put a target on the backs of people living with HIV.

Photo Source: WBBJ-TV

The concept of block grant funding has been a popular one in Conservative circles for decades, stretching back to the Nixon Administration, for Republicans, and also with Conservative Democrats, prior to the point when the party’s support of the Civil Rights Act caused said Conservative Dems to flee for redder pastures. Block grant funding, they have argued and continue to argue, allows local jurisdictions (i.e. – states) more “flexibility” to best determine how funds are used, giving states the ability to “innovate” and “experiment” with new approaches to solving various problems in ways that are unique to their population demographics, geography, and local scarcity of resources.

Critics, on the other hand, argue that, in virtually every instance where block grant funding is used, the number of people who can be helped is restricted by the amount of the block grant. Moreover, they argue that block grant funding is not responsive, meaning that funding stays constant without being adjusted to account for exigent circumstances, such as recessions, depressions, natural disasters, health emergencies, local job markets, et cetera.

Essentially, block grant funding works like this:

1. A legislative body determines the maximum amount of money that can be spent;
2. The federal department where those grants are housed (e.g. – Housing and Urban Development; Health and Human Services; Health Resource Services Administration, et cetera) comes up with a list of regulations that attempt to define how those grant monies must be used, and on what things they cannot be used;
3. That body then allocates those funds and distributes them to states in the form of block grant awards, the amount for which are determined using a formula based upon various objective measures, such as (but not limited to) total population, the percentage of residents earning incomes that fall into the various tax brackets based upon tax filing, the number of children living in families that fall into those tax brackets, the cost of living (a calculation that is, itself, woefully outdated and in need of an update), the federal and state minimum wage, median incomes, et cetera ad nauseam;
4. States receive whatever grant award is decided, and then have relative carte blanche to spend the funds however they see fit, so long as they stay within the federal guidelines of appropriate usage. This includes setting various eligibility standards, annual benefit caps per recipient, lifetime limits on eligibility, and other ways to “save money” while still being able to say that they use the funds as intended by the grantor.

One great example of this type of funding model in action is the Temporary Assistance for Needy Families program.

Photo Source: cva.ks.gov

In 1996, Republicans in Congress succeeded in dismantling the Aid to Families with Dependent Children (AFDC) program created in 1935 by the Social Security Act, replacing it with the Temporary Assistance for Needy Families (TANF) – a block grant-funded program that has a maximum benefit of two consecutive years and a five-year lifetime limit for beneficiaries.

This setup, Republicans and Neoliberals argued, would serve to “motivate” recipients to get off of the government dole and pull themselves out of poverty. It was deemed a “Welfare-to-Work” model, in which recipients either had to find better paying jobs, or else. Doing so, they argue, will give recipients a sense of pride and accomplishment, and help further their upward social and economic mobility toward the attainment of the American Dream.

In practice, however, the TANF program has had a net negative result for the very reasons opponents of block grant funding warned:

1. States are allotted a dollar amount that is not adjusted for inflation, meaning that the pot of money they’re given has less spending power, over time. The value of all state TANF grants in 2014 was 30% lower than when those amounts were first allotted in 1997 (Hahn & Coffey, 2017).
2. State grants for TANF are fixed, meaning that they do not increase (or decreased) based upon changing levels of need. This means that, for each increase in the number of residents who qualify for TANF dollars, the amount available for each recipient decreases (Hahn). 
3. State grants for TANF also lock in inequality in state funding, because those grant award amounts were determined based upon pre-TANF state spending on welfare-related activities prior to TANF being enacted (Hahn & Coffey). This means that states that spent a lot of money on welfare per capita prior to reform received higher grant amounts, while states that spent the least amount of money were locked into receiving the lowest grant awards until such time as TANF is dismantled or grants are reconfigured.

So, how have states implemented the TANF program and utilized the block grants? The answer is, “Mostly poorly.”

The key feature of the TANF program, proponents argued, was that states could shift the funds freed up when families left welfare for work to childcare or other work supports, where need would increase.  States also could invest more in work programs to reflect the increased emphasis on welfare as temporary and work focused.

That is not what happened:

In TANF’s early years, when the economy was strong and cash assistance caseloads were shrinking, states used the flexibility of the block grant to take some of the funds that had gone as benefits to families and redirect them to child care and welfare-to-work programs to further welfare reform efforts.  But over time, states redirected a substantial portion of their state and federal TANF funds to other purposes, to fill state budget holes, and in some cases to substitute for existing state spending.  Even when need increased during the Great Recession, states were often unable to bring the funds back to core welfare reform services and instead made cuts in basic assistance, childcare, and work programs. (Schott, Pavetti, & Floyd, 2015).

At its outset, 70% of combined federal TANF and state Maintenance of Effort (MOE) funds went for basic assistance to poor families. By 2014, basic assistance represented only 26% of spending (Schott). Moreover, states are using a larger and growing share of TANF funds for “Other” state services by replacing existing state funds, thereby freeing up those existing state funds to be used for purposes unrelated to providing a safety net or job opportunities for TANF recipients (Schott).

With rare exception, the states that use more than 30% of TANF funds on Basic Assistance were Democrat-run (of 11 states in 2014, only Tennessee, Virginia, Alaska, Kentucky, and South Dakota were run by Conservatives). By comparison, the 10 states spending less than 10% on Basic Assistance were all run by Republicans (Schott).

This is largely indicative of a difference in ideological spending priorities between the parties, but is also reflective of attitudes toward assistance for the needy: for the most part, Republican-led legislatures prioritized “Other” spending priorities over providing Basic Assistance to needy families, while Democratic-led assemblies made that spending more of a priority.

After the Great Recession hit, in 2008, most states (both Democratic and Republican) cut state spending on childcare. These cuts reflected more restrictive policies about who could access childcare assistance, rather than being responsive to the need for childcare assistance (Schott).

What Schott and other researchers have found is that the so-called “flexibility” provided to states to address poverty-related spending priorities resulted in fewer innovative programs (such a Welfare-to-Work initiatives), and more spending in areas that did not result in direct assistance for needy families.

TANF is a great predictor of what is likely to occur should the Medicaid program be converted to a block grant-funded model. In practice, what has occurred is that the poorest people still end up receiving less, because TANF is not responsive to real world conditions.

When Republicans once again trotted out the idea of switching Medicaid to a block grant-funded program, public health experts and chronic illness advocates cried out in near unison, “THIS IS A TERRIBLE IDEA!!!”

So unpopular is the term “block grant,” that the Trump Administration rolled out a new and improved rebranding in 2020, calling it the “Healthy Adult Opportunity” program.

See? It’s not a “block grant,” anymore. It’s an “opportunity.”

If this sounds like the same justification used to push welfare reform, that’s because it is. The intent behind this movement is the same: to get as many people off of government assistance programs as possible, regardless of the method or the end results.

Photo Source: HIV Plus Magazine

Medicaid is the largest source of insurance coverage for people living with HIV, estimated to cover 42% of the adult population living with HIV, as opposed to just 13% of the overall adult population. Medicaid spending on HIV also accounts for 30% of total federal spending on HIV care, and is the second-largest source of public financing for HIV in the U.S. Moreover, Medicaid covers a variety of wraparound health services which are important for people living with HIV, including prescription drug coverage, inpatient and outpatient care, and preventive health services (Kaiser Family Foundation, 2019).

While the Healthy Adult Opportunities façade does allow exceptions for medications used to treat behavioral health (read: addiction) and HIV, the decision about whether or not states include those exceptions is left up to the individual states. Even if states do allow for exceptions for HIV, our experience with how the TANF program has been implemented, particularly in Conservative-run states, serves as an excellent omen of things to come:

• the types of services covered will be cut;
• states will increase eligibility requirements to make it more difficult to qualify for coverage;
• enrollment numbers will be capped or frozen to prevent newly-diagnosed people from enrolling in state Medicaid programs, even if they’re eligible;
• the number and types of drugs covered will decrease, meaning fewer available treatment options will be available for patients;
• providers will face lower reimbursement levels
• patients will be required to pay for a larger percentage of covered services. (Molozanov, 2020)

These aren’t theories; they’re based upon example of how various states have attempted to “save money” by reducing how much they spend after they’ve used up their allotted block grant funds. Just like with the TANF program, should states be allowed to “experiment” with Medicaid block grant funding, we will assuredly see similar attempts to “save money.”

The cost of treatment and healthcare is going to rise. With the pandemic outbreak of COVID-19 threatening to throw us into another Great Depression (because, let’s face it – we’re already in the beginning stages of another Great Recession), more people will be in need of coverage from state Medicaid programs as employers attempt to cut costs by furloughing or outright laying off employees, and thereby ending their employer-provided health insurance coverage. Were Medicaid currently funded using a block grant model, those people would be, for lack of a better word, “screwed,” as states would rush to tighten eligibility requirements, reduce the number of covered services, and everything in their power to cut spending on this “entitlement,” regardless of the skin color or political affiliation of eligible citizens.

Even with exceptions for HIV and certain other conditions, evidence has shown, time and again, that, when faced with tough times, states will opt to restrict access to social services programs, whether or not block grant funding is employed. At least with open-ended Medicaid funding, the funds won’t simply stop after a certain point; at least people won’t be faced with lifetime limits on whether or not they can even apply or be eligible.

References:

• Hahn, H. & Coffey, A. (2017, February 05). What TANF can teach us about block granting social services. Washington, DC: Urban Institute: Urban Wire: Poverty, Vulnerability, and Safety Net. Retrieved from: https://www.urban.org/urban-wire/what-tanf-can-teach-us-about-block-granting-social-services
• Kaiser Family Foundation. (2019, October 01). Medicaid and HIV. Washington, DC: Kaiser Family Foundation: HIV/AIDS: Medicaid and HIV. Retrieved from: https://www.kff.org/hivaids/fact-sheet/medicaid-and-hiv/
• Malozonov, D. (2020, January 30). MEDICAID “BLOCK GRANTS” WOULD BE DEVASTATING TO PEOPLE LIVING WITH HIV AND HEPATITIS. Washington, DC: National Alliance of State and Territorial AIDS Directors: Blog. Retrieved from: https://www.nastad.org/blog/medicaid-block-grants-would-be-devastating-people-living-hiv-and-hepatitis
• Schott, L., Pavetti, L., & Floyd, I. (2015, October 15). How States Use Federal and State Funds Under the TANF Block Grant. Washington, DC: Center on Budget and Policy Priorities: Research: Family Income Support. Retrieved from: https://www.cbpp.org/research/family-income-support/how-states-use-federal-and-state-funds-under-the-tanf-block-grant

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.