A new brief from the Urban Institute, with funding from the Robert Wood Johnson Foundation, finds that block grants and similar proposals called per capita caps, which are supposed to limit spending growth in Medicaid, could result in beneficiaries losing health insurance coverage or certain covered benefits. Such policies would be particularly harmful today, as the COVID-19 pandemic and opioid epidemic increase the need for affordable, quality healthcare for lower-income people.

Block grants will also place states at great risk for the costs of expanded enrollment, highly likely given current economic conditions.

Earlier this year, the Centers for Medicare & Medicaid Services allowed states to apply for waivers that would give them more flexibility over Medicaid eligibility and enrollment in exchange for less financial backing from the federal government. The new federal guidance allows states to reduce income eligibility standards to lower overall enrollment and limit benefits.

"The COVID-19 pandemic is a clear illustration of why Medicaid block grants are a bad deal for states," said Kathy Hempstead, senior policy adviser at the Robert Wood Johnson Foundation. "Block grants and per capita caps challenge states to adequately cover residents in normal times. Bad times make it clear the risk that they pose to state governments and people that need care."