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Illustrating the Harmful Impact of Medicaid Block Grants and Per Capita Caps on State Funding of K-12 Education [1]

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Date: 2020-07-09

In This Report:

Key Findings States are facing large and growing budget deficits due to the COVID-19 health and economic crisis. School districts are bracing for substantial cuts to state funding of K-12 education. Those funding cuts would be even more dire if the Medicaid program had been previously converted into a block grant or per capita cap as part of the failed effort by the Trump Administration and Congressional Republicans to repeal and replace the Affordable Care Act in 2017.

Medicaid block grants and per capita caps shift significant costs and risks to states, with the cuts to federal Medicaid funding growing larger over time. If states compensate for these funding reductions by cutting other parts of their budgets, state funding of K-12 education would be at considerable risk as it constitutes the largest share of state spending in their budgets.

The likely adverse impact of Medicaid block grants or per capita caps on K-12 education should be considered as part of the debate over the future of Medicaid and its financing at both the federal and state levels.

Introduction

States now face large and growing budget deficits due to the COVID-19 health and economic crisis. In turn, school districts are bracing for substantial cuts to state funding of K-12 education. These funding cuts, however, would likely be even deeper if the Trump Administration and Congressional Republicans had succeeded in radically restructuring federal financing of the Medicaid program by converting it to a block grant or a per capita cap as part of their failed effort to repeal and replace the Affordable Care Act in 2017.

For years, critics of Medicaid have claimed that Medicaid spending “crowds out” state K-12 funding, an argument intended to generate support for cutting spending on the program at both the federal and state levels and to generate opposition for states expanding Medicaid. Instead, as this issue brief illustrates, Medicaid block grants and per capita caps which would cut federal Medicaid funding would likely pose a considerable risk to state funding of K-12 education. In other words, preserving the current federal Medicaid financing structure is essential for sufficient state funding of K-12 education.

By cutting federal funding and shifting costs (and risks) to states, with the cuts growing larger over time, Medicaid block grants and per capita caps would impose considerable adverse pressures on overall state budgets.

Full Report

Download and read the report.

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[1] Url: https://ccf.georgetown.edu/2020/07/09/illustrating-the-harmful-impact-of-medicaid-block-grants-and-per-capita-caps-on-state-funding-of-k-12-education/

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