Recent Congressional proposals to alter Medicaid through block grants could eventually set the District back by more than $2 billion or more each year, and critically harm gains that have led DC to have one of the highest rates of health insurance coverage in the nation.
In the District, the federal government generally covers 70 percent of Medicaid costs—meaning for every dollar the District spends on Medicaid services, it receives 70 cents back from the federal match. This structure ensures that DC gets additional federal dollars as needed, for instance, if more people become eligible for Medicaid if they lose a job in an economic downturn.
Block grants would upend that partnership entirely, by instead providing states with a fixed amount each year, regardless of changes in enrollment or health care costs. This raises concerns that a block grant would reduce federal health care funding so significantly that DC may be forced to scale back health benefits that recipients rely on, or to even cut residents off Medicaid entirely.
One key question is how a block grant’s baseline funding would be set. For example, would a block grant take into account DC residents who became eligible when DC expanded eligibility under the Affordable Care Act, since not all states chose to expand? If not, this could be incredibly harmful for the District, since 77,000 residents are now covered by Medicaid as a result of the expansion—one-third of DC’s Medicaid population.
Another question is whether block grant funding would grow over time. Many federal block grants, like the TANF block grant that supports cash assistance and employment services for families, have not been adjusted since they were established, even for inflation. Even if a Medicaid block grant were tied to inflation, the District and states would face problems if health care costs rise faster than inflation, a common occurrence, making a block grant a chronically and increasingly under-funded option for states over time.
A new report from the Office of the District of Columbia Auditor highlights the possible impact of policies proposed by President Trump and Congress that would repeal the Affordable Care Act and convert Medicaid into a block grant. These proposals would result in substantially lower federal payments to states over time, according to the report, and DC in particular could lose as much as $2.1 billion annually by fiscal year 2028 and leave tens of thousands of DC residents without insurance.
Supporters argue that block grants would give DC and the states greater flexibility on how they spend money because there would be fewer stipulations tied to how they spend their block grant. But current Medicaid rules already allow states significant flexibility, much of which comes from the spending formula that allows states to be responsive to needs—such as an economic downturns, public health epidemics, or promising pilot programs that may generate health savings down the road.
The District should be applauded, not penalized, for leveraging the Affordable Care Act to provide affordable and quality insurance options for all DC residents. It’s through these efforts that DC’s uninsured rate is now one of the lowest in the nation. Any plans to change that would be unwise.
