Republicans Face a Tough Medicaid Dilemma

Rep. Phil Roe (R–Tenn.) is a member of the Republican Study Committee, the uber-conservative wing of House Republicans. A while back he got the assignment of coming up with a replacement plan for Obamacare, which he cheerfully admits was a difficult task: “I was asked to put together a plan that increased access [and] lowered costs but didn’t increase entitlements, so my hands were a bit tied,” he told Sarah Kliff in an interview yesterday. But she says the most surprising part of the interview was this:

What I thought was going to be easy was I thought Medicaid, we’d just block-grant it to the states. That one actually is going to be a little harder than I thought. The reason is there are states like New York, states that expanded [Medicaid]. How do you cover that 10 or so million people on Medicaid?

As Kliff notes, every Republican is on board with block-granting Medicaid. The reason is that, in practice, it pretty much guarantees a steady reduction in Medicaid spending, which opens up budget room for more tax cuts on the rich. What’s not to like?

So what is Roe’s problem? Allow me to translate. If you block-grant Medicaid, you have to decide how big a grant each state gets. This would be based on how many Medicaid recipients each state has.

And that presents a difficulty. You see, blue states have all taken advantage of Obamacare’s Medicaid expansion, while red states haven’t. This means that blue states now have an outsize share of Medicaid recipients, and therefore would get outsize grants. Here’s a picture to demonstrate the problem using everyone’s favorite red and blue states:

These are rough numbers, but they’re in the ballpark of what Medicaid looked like before and after Obamacare. Assuming a total block grant budget of roughly $350 billion, California’s grant increases from $55 billion to $58 billion thanks to Obamacare’s Medicaid expansion. Meanwhile, the share allocated to Texas declines from $25 billion to $22 billion.

I think you can see why Republicans would consider this a problem. Should they permanently lock in higher grants for blue states thanks to the odious Medicaid expansion? Or should they go back to the pre-Obamacare shares? But if they do that, the red states that accepted the expansion would suffer too. It’s quite a dilemma, isn’t it?