With President Donald Trump’s blessing, House Republicans unveiled the American Health Care Act last week, their replacement for Obamacare. The bill would deny coverage to many children by rolling back eligibility for Medicaid, government-provided health insurance for low-income families.
Equally as significant, the proposal would convert Medicaid into a block grant. Block grants often are sold as a more efficient way to offer the same level of care. Recent history suggests otherwise. In fact, replacing Medicaid with a block grant could be disastrous for the well-being of children.
In a block-grant system, the federal government gives local jurisdictions a fixed amount of money targeted at a broad goal. Locals, then, would have much freedom to spend that money in ways they see fit. This flexibility, proponents argue, would tailor spending to local needs, making programs more effective.
But it isn’t that simple. Medicaid is jointly funded by federal and state governments. The feds give matching funds to states, which are required to deliver certain benefits to anyone who meets eligibility criteria. States also receive more funding if costs increase, either because health care becomes more expensive or more people become eligible.
A block-grant approach would be different. Funding levels would be fixed, and states would have greater autonomy to decide who qualifies, and for what services. If history is any guide, some states will reduce services and restrict eligibility, potentially denying benefits to millions of children.
Consider the 1996 welfare reform, which converted a cash-assistance entitlement into a block grant called Temporary Assistance to Needy Families. The Brookings Institution recently reported the number of poor families with children receiving benefits under the Temporary Assistance to Needy Families plummeted to 26 percent by 2014, down from 72 percent under the old system in 1996.
Why the dramatic decline? With wider latitude, states with a low priority for aid to poor people diverted TANF money to services that, evidence suggests, play a less-direct role in reducing poverty such as child care, substance abuse, pregnancy prevention, or encouraging two-parent families. A few states provided refundable tax credits, an empty gesture for poor families with no earned income.
As I discussed in a recent lecture at UC Center Sacramento, substituting a block grant for Medicaid could have a detrimental effect on health care access for low-income children, with adverse long-term results.
Economic studies by researchers affiliated with UCLA, University of Michigan, Columbia, University of Chicago and others have shown that prenatal and early-life access to Medicaid influences physical well-being throughout a person’s lifetime. It improves infant health and reduces child mortality, lowers rates of obesity and diabetes, and helps reduce later-life hospitalization.
Given the high cost of health services related to these conditions, it is likely to generate significant long-term savings.
Improved health also appears to boost educational achievement. A 2015 study by researchers from Yale and the Treasury Department found that access to Medicaid throughout childhood increases the probability of attending college nearly 7 percent for women and 3.6 percent for men. Higher levels of education affect individuals’ earning potential, which enhances tax revenue and decreases spending on assistance programs.
The 2015 study estimates that each additional year of Medicaid access from birth to age 18 is associated with increased tax payments by age 28 – $247 for women; $127 for men. And revenue grows as individuals age.
Using conservative assumptions, the same study estimates that government recoups at least 56 cents for each $1 spent on childhood Medicaid by the time those children reach 60. Using another set of realistic assumptions, the same study estimates that the government’s entire investment is recouped by the time the child is 36.
Medicaid is a cost-effective tool to improve economic mobility, a core principle of the American Dream. Millions of low-income children rely on Medicaid for basic health services that, in the long term, pay off. Converting the program to a block grant is short-sighted, potentially undermining those services and reducing opportunities for vulnerable children – to the detriment of everyone.
Marianne E. Page, professor of Economics at UC Davis and deputy director of the Center for Poverty Research, won the 2017 Bacon Public Lecture competition at UC Center Sacramento. She can be reached at email@example.com.