If you or a loved one think you might need to apply for long-term care Medicaid in the future, you might want to understand how potential changes to the program — such as a shift to a block grant system — could impact nursing home coverage and home-based long-term care services.
For decades, Congress has debated transforming Medicaid into a block grant program or a variation on the block grant called a per capita cap (limiting the amount of federal Medicaid benefits paid to each individual), which could significantly alter how states administer benefits. While previous legislative attempts have failed, they provide insight into how long-term care Medicaid might be affected if block grants become a reality under the current administration.
What Is a Medicaid Block Grant?
Currently, Medicaid is funded as a federal-state partnership, where the federal government matches state spending based on actual Medicaid costs and enrollment. If Medicaid were converted to a block grant system, states would instead receive a fixed amount of federal funding, regardless of need.
- More state control → States could change eligibility requirements, modify benefits, or restructure programs.
- Capped federal funding → If Medicaid costs rise (e.g., due to an aging population or economic downturn), states would not automatically receive more federal funds to cover the increased need.
Since long-term care (LTC) is one of the largest Medicaid expenses, shifting to block grants could lead to fewer benefits, stricter eligibility rules, or reduced funding for nursing homes and home-based care.
History of Past Legislative Efforts to Block Grant Medicaid
Several attempts have been made over the years to convert Medicaid into a block grant program, and while none have passed, they show how such a change might affect long-term care Medicaid and health care Medicaid. Here’s a look at some of the prior attempts and what happened.
1. 1981 – Reagan Administration’s Budget Proposal
What it proposed:
- Convert Medicaid into state block grants to cut federal spending.
- Allow states greater flexibility in determining eligibility and benefits.
Would It Have Affected Long-Term Care?
- Yes. The proposal explicitly mentioned reducing funding for institutional care (nursing homes) and shifting more responsibility to the states.
- States could have cut long-term care benefits or required higher patient cost-sharing.
What Happened?
The proposal was rejected by Congress due to concerns over nursing home residents losing coverage.
2. 1995 – GOP’s Medicaid Block Grant Proposal Under Speaker Newt Gingrich
What it proposed:
- Capped federal Medicaid funding by giving states lump-sum block grants.
- Eliminate federal Medicaid mandates requiring states to cover certain populations.
Would It Have Affected Long-Term Care?
- Yes. Since Medicaid pays for over 60 percent of nursing home residents, block grants would have put long-term care funding at risk.
- States could have restricted nursing home coverage or limited home-based care due to budget constraints.
What Happened?
- Passed by a Republican-controlled Congress — making this the most serious attempt to turn Medicaid into a block grant program — but vetoed by President Bill Clinton in 1996.
3. 2017 – American Health Care Act (AHCA) and Graham-Cassidy Bill
What they proposed:
- Convert Medicaid to a per-capita block grant (fixed amount per enrollee) or an outright block grant (fixed total amount).
- Reduce federal Medicaid funding over time.
Would It Have Affected Long-Term Care?
- Likely, but indirectly. Unlike earlier proposals, these bills focused on reducing funding for Medicaid expansion rather than cutting nursing home or home care benefits directly.
- However, states facing Medicaid budget cuts could have prioritized other health care services over long-term care.
What Happened?
- The AHCA passed the House but failed in the Senate due to opposition from moderate Republicans.
- The Graham-Cassidy Bill never reached a full Senate vote.
How Would a Medicaid Block Grant Affect Long-Term Care Medicaid vs. Health Care Medicaid?
Historically, Medicaid block grant proposals have targeted both long-term care Medicaid and health care Medicaid, but in different ways:
Possible Effect of Block Grants on the Two Main Types of Medicaid
Long-Term Care Medicaid (nursing homes and home-based care):
- States could cut nursing home coverage, limit home-based services, or reduce provider payments due to funding caps.
- Long-term care beneficiaries (seniors and disabled individuals) would be at high risk if states were forced to cut costs.
Health Care Medicaid (doctor visits, hospital stays, prescription drugs):
- States might reduce covered services, impose co-pays, or restrict Medicaid eligibility.
- Health care Medicaid (for low-income adults, children, and pregnant women) would also see changes, but these groups could have alternative coverage options (such as subsidies under the Affordable Care Act).
What Could This Mean for Future Long-Term Care Applicants?
If Medicaid were converted into a block grant system, obtaining Medicaid long-term care coverage could become more difficult due to:
1. States Possibly Imposing Tighter Financial Eligibility Rules
- States may lower income limits or impose harsher asset tests for nursing home coverage.
- Medicaid spend-down rules could become stricter, making it harder to qualify.
2. States Possibly Reducing Availability of Home and Community-Based Services (HCBS)
- Home-based care programs (which allow seniors to stay out of nursing homes) may receive less funding.
- States might create wait-lists for home care services or limit hours of care.
Nursing Home Access May Decline
- Medicaid reimbursement rates to nursing homes could drop, leading to fewer beds available for Medicaid patients.
- More seniors might be forced into lower-quality facilities.
State-by-State Differences in Coverage
- Some states may expand long-term care services using their block grant flexibility.
- Other states facing budget shortfalls may cut nursing home benefits or increase co-pays.
What You Can Do to Prepare
If you or a loved one think you may need Medicaid long-term care in the future, consider:
✔ Planning ahead with legal and financial strategies (e.g., Medicaid Asset Protection Planning, probably with an irrevocable trust called the Living Trust Plus®).
✔ Exploring long-term care insurance as an alternative funding source. See Lifecare Financial Services – Insurance and Medicaid-Compliant Products from an Elder Law Experts.
✔ Staying informed about Medicaid policy changes at the federal and state level.
If Medicaid block grants are enacted, qualifying for long-term care benefits could become harder, so early planning is critical because states may tighten policies on various asset protection strategies such as the Living Trust Plus, but federal case law says that Medicaid laws can’t be changed retroactively, so if you create and fund your Living Trust Plus now, before a block grant system is possibly enacted, your trust should remain grandfathered under the current law.
Is Medicaid Too Big and Too Popular to Be Block Granted?
The Kaiser Family Foundation postulates that Medicaid has become too big and too popular for block grants to be imposed. KFF says “Republicans target Medicaid because they see it as an unpopular welfare program, perhaps remembering a bygone time when the program mostly covered women and children on the old AFDC program. When Reagan first backed a Medicaid block grant, the program covered fewer than 20 million people. Today’s Medicaid program bears little resemblance to that early program. Medicaid now has a considerably wider reach than Medicare, and as Medicaid has expanded, it has become part of the fabric of American life and vastly more popular with the general public and voters. While not quite sacrosanct like Social Security and Medicare are, it is not far behind and for some time now, the public has been almost as resistant to cutting Medicaid to reduce the deficit as it is to cutting Social Security or Medicare. The program’s reach into American society is now deep and wide. For instance, KFF has found that:
- Two-thirds of adults in the US say they have had some connection to the Medicaid program, including health insurance (59 percent), pregnancy-related care, home health care, or nursing home care (31 percent), coverage for a child (31 percent), or to help pay for Medicare premiums (23 percent).
- Three-fourths of the public say they have an either “very favorable” (29 percent) or “somewhat favorable” (47 percent) view of the program, while one-fifth say they have an unfavorable view. A majority of Democrats (89 percent), Independents (75 percent), and Republicans (65 percent) view the program favorably.
- Two-thirds of the people living in states that have not expanded their Medicaid programs under the Affordable Care Act to cover more low-income adults say they want to see their Medicaid programs expand.
Perhaps tellingly for the prospects for cutting Medicaid, a back-of-the-envelope internal estimate from several of our polls is that almost a quarter of Medicaid beneficiaries are Republicans and/or lean Republican, a number that likely has grown since Trump came on the scene and built his populist base of non-college educated rural White adults and some minority Americans.
Like The Terminator, the idea of a Medicaid block grant keeps coming back. But the program and its politics have gradually changed. Medicaid is now a much larger and more popular program, touching a wide cross section of American society. That makes it even tougher to reverse course after years of coverage expansion and end the Medicaid entitlement, cap and cut federal Medicaid spending, and hand the largest health care program off to the states.”
Stay proactive, stay informed, and take the steps necessary to build a lasting legacy for you and your loved ones.
Print This Page
About Evan H Farr, CELA, CAP
