John O'Connor
John O’Connor

One of the great things about the Medicaid program is that it allows for experiments. But one of the bad things about experiments is that they can go horribly, horribly wrong.

We may soon get to see examples of both in Tennessee.

There, Republicans who control the legislature want to take up the Trump administration’s offer to embrace Medicaid block grants.

To understand why this could become a catastrophe for operators and the beneficiaries they serve, it helps to understand what state block grants are. Essentially, they are a bag of money from the federal government.

Conservatives like them for the same reason employers prefer to offer 401(k) plans over defined pensions: They create predictable, fixed and usually lower costs. That’s a good thing when one is grappling with a budget.

Nor is it too difficult to see why the White House is pushing this particular flavor of Medicaid. The president’s proposed budget predicts the shift writ large would cut Medicaid outlays by $1.48 trillion over 10 years.

Of course, it’s not just Tennessee kicking the proverbial tires. Several other states also have expressed an interest in pursuing waivers that would unlock the door to block grants.

But here’s the downside to the bag-of-money approach: When the money is spent, there are no refills. As a practical matter, let’s say you filed for Medicaid reimbursement late in the state’s fiscal year. But your state already has gone through its bag of block grant money. In the immortal words of Seinfeld’s Soup Nazi, “No soup for you!”

And when the Medicaid money is gone, what do states do then? Tell former Medicaid recipients that life is tough, so deal with it? Tell operators better luck next year?

To be sure, the Medicaid program in its current program is far from perfect. It has been and continues to be a major funding challenge for many states. But as Tennessee residents and operators soon may learn, block grants may not be the wisest available choice.

In fact, they have less to do with rational policy than with healthcare rationing.