Not only did we get sparks at the vice-presidential debate last week, we got a good deal of substance. The social safety net inevitably came up, and Biden and Ryan sparred over Social Security (the one drawing a hard line on making changes to benefits, the other refloating the idea of privatization) and how to reform Medicare, with the word “voucher” tossed back and forth.
One major program that didn’t get much airtime, though, was Medicaid. Perhaps it gets less play because it’s targeted at those living in poverty, not necessarily the middle class politicians so love to love. The program provides healthcare for low-income people through both federal and state financing. Currently, the federal government gives states money with requirements attached for maintaining a certain level of benefits and eligibility. While Social Security and Medicare get the spotlight, this program is in serious danger, as past experience with Romney and Ryan’s preferred “reforms” shows.
Both Ryan and Romney are in favor of changes to Medicaid that would do it real damage. First, they would spend a lot less money on it . Romney and Obama basically agree on how much to spend on Medicare, but they differ sharply in the case of Medicaid. Obama’s healthcare law will expand the program. Romney, on the other hand, has said he’d support the spending levels in Ryan’s budget plan, which would eventually cut spending on the program in half .
But it doesn’t stop at starving the program of funds. Romney and Ryan would “reform” the program in such a way that could destroy it. They would block-grant it, which means giving the states lump sums of money and then basically handing over control. States would have far more freedom to do what they want with that money.
Sounds great, right? In theory, states could choose to get creative with how they spend the money to find ways to ensure more care at a lower cost. But past experiences with block grants don’t paint an optimistic picture.
The most obvious case study is TANF, the program formally known as welfare. After welfare reform passed in the ’90s, it became a block grant to states. What it did do: put a hard cap on federal spending on the program. What it didn’t do: help the families who rely on welfare. Every year, the federal government gives states $16.5 billion and requires that they maintain a certain level of their own spending depending on certain factors. But both of those pots of money can be put to a pretty wide variety of uses. Some states have put it toward the original purposes of welfare, such as childcare support and welfare-to-work programs. But as the Center on Budget and Policy Priorities reports , “over time, states [have] redirected a substantial portion of their TANF…funds to other purposes.” Those include plugging budget holes and freeing up money for other needs—wandering pretty far from the original program.
When the recession hit and an influx of people found themselves in need of TANF benefits, the program failed to expand in proportion. That’s because states were largely unable to get back the money that they’d moved around elsewhere and had to slash benefit amounts or shrink rolls. Less than 30 percent of the families living in poverty in 2010 received benefits, a major failing. Meanwhile, SNAP, or food stamps, which isn’t block-granted and wasn’t under such pressures, was successful in meeting demand: the number of beneficiaries shot up  from 26 million pre-crash to 45 million in 2011, reflecting widespread economic pain.
But there are other examples of how block grants have done more harm than good. A new report from the National Women’s Law Center  exposes another program that’s failing to meet Americans’ needs: childcare support. The primary source of childcare funding comes from a block grant from the federal government to the states called the Child Care and Development Block Grant.
Just as with TANF, states have a lot of flexibility in making changes to the program that deeply affect those who rely on it. And sure enough, this year was the second in a row in which more states pulled back support than improved it. Families living in twenty-seven states were worse off in February of 2012 than in the previous year under one or more childcare policies, including lowered income eligibility limits, increased waiting lists or freezes on accepting more families, increased copayments, lowered eligibility for parents who are job hunting and others. But it’s not just the past two years that have been bad. Families were worse off this year as compared to over a decade ago in more states than they were better off.
This is despite the fact that childcare costs continue to explode —they can reach as much as $11,700 a year to put a four-year-old in full-time center care and they exceed annual median rent payments in all fifty states—while incomes have been on the decline . That cost gives low-income parents an often impossible dilemma: go to work and make barely enough to cover the cost of care, or stay home to care for a child and forgo the income and skill building. And for the unemployed who are looking for work, it’s nearly impossible to get to job interviews, let alone a new position, if you can’t afford childcare. Yet most states are pulling back support in the face of this increased need, something they are free to do under the block grant system.
There are, of course, some states that have improved policies—all seventeen of them. But state budgets are under huge financial pressures, as they are required to balance their budgets even in hard times, which makes cutting back support and/or shifting money around very attractive. Block grants may sound like a great way to unleash the innovation lurking in our laboratories of democracy, but it so often doesn’t end up that way. They don’t even end up being a very good deal for the states themselves. As the CBPP puts it, “Block grants may initially entice states with offers of flexibility but ultimately leave them worse off over time.” The only winner when a program is block granted is the federal government, which gets the ability to put a firm limit on how much it will spend. Everyone else—states and the citizens they serve—seems to end up worse off.
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