Steve Tetreault reports today that interest groups in Washington, DC are bemoaning proposals for reform of state Medicaid programs on the basis that fewer people might receive free health benefits in the future.
Yet, one thing is remarkably clear: On its current course, Medicaid spending is completely unsustainable. Medicaid is the fastest-growing expenditure item in all state budgets and, in some states, Medicaid spending has already surpassed spending on all other programs to become the largest budget item. Without reform, Medicaid spending will eventually crowd out states’ spending on all other programs, including K-12 education…and this is without considering the financial burden the Medicaid imposes on the federal government.
Medicaid programs are jointly funded by states and the federal government according to a formula that promises greater federal support to states with lower levels of median personal income. The federal government promises to pick up at least half the cost of Medicaid in every state, however. Once a state has opted into the Medicaid program, its benefits become an automatic entitlement for thoe who are eligible. Minimum eligibility requirements are also established at the federal level and, while states can go beyond the minimum, in general, they are obligated to provide coverage to the disabled, the indigent elderly and impoverished children.
State participation in Medicaid is further hamstrung by a cadre of inflexible procedural rules set by the federal Department of Health and Human Services. These rules govern how money within the program must be spent. Yet, many of these rules are cost-ineffective from the standpoint of health outcomes. In fact, there is substantial research to suggest that Medicaid beneficiaries would have better health outcomes if they were uninsured.
This has led many thinkers to consider how Medicaid could be reformed and restructured in order to provide greater health outcomes while also containing the program’s runaway costs. Republicans in the US House of Representatives are considering changing federal contributions to Medicaid from a match rate into a block grant. As Charles Duarte, Nevada’s Medicaid director says, “The idea of a block grant can be a good thing if the flexibility [from restrictive rules] is there and if the methodology for calculating the grant allocation is fair and reasonable.”
In a recent NPRI policy study, “Better Budgeting for Better Results,” I outlined ideas for Medicaid reform that lawmakers can pursue at the state level. There are a number of federal waivers for which Nevada can and should apply. In addition, Medicaid benefits could conceivably be restructured around a health savings account.
Whatever the case, it is clear that Medicaid is in dire need of reform or it will eventually bankrupt the states. Those who oppose Medicaid reform do so at their own peril.