Some federal policymakers support converting Medicaid to a block grant authority or instituting a per capita Medicaid spending cap because it would result in large budgetary savings that could be used to pursue other policy goals deemed to be of higher priority (e.g., permanently reducing federal tax rates and increased defense spending). If the federal share of Medicaid funding were capped, responsibility for making the tough calls on slicing benefits or trimming eligibility would be shifted to the states, which lack the fiscal resources to replace lost federal assistance. Instead of the Federal Government picking up half to three-quarters of the cost of future recessions, epidemics similar to the HIV/AIDS outbreak of the 1980s, and the introduction of new, high-cost pharmaceuticals and breakthrough treatments, states would be left to their own devices in coping with the financial uncertainties of the health care marketplace. Block grant funding would place states and program beneficiaries in a far more vulnerable financial position than they are today.

Older Americans and people with disabilities would be at special risk. At present, they constitute about a quarter of all program beneficiaries but account for almost two-thirds of Medicaid spending because of their elevated need for health services and high reliance on Medicaid to pay for long-term services and supports. States would face strong financial pressures to reduce services to low-income seniors and people with disabilities if federal Medicaid funding were to be capped.

Improving the overall cost-effectiveness of health care delivery systems represents a far more responsible approach to placing Medicaid outlays on a sustainable course. As noted earlier in this paper, many other industrialized nations offer universal access to health care and long-term supports at a fraction of the per person costs incurred in the United States. The ACA contains multiple initiatives aimed at improving health outcomes while lowering system-wide costs. With a renewed commitment to improved efficiency and achieving better outcomes, there is no reason why Medicaid, Medicare, and other health care costs cannot be brought into line with the general rate of inflation. This is a better solution to the current debt crisis for all Americans, especially for older adults and people with physical, mental, sensory, and developmental disabilities.