States need tools to stem Medicaid’s red ink

Grace-Marie Turner President, Galen Institute
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States are desperate to find savings to get their budgets in balance. Medicaid spending has nearly doubled over the last decade, and for many it consumes the first or second biggest share of state expenditures, threatening education, public safety, and transportation programs.

Decades of expansion of what is now the largest single health program in the country are finally catching up. Former Virginia governor and now-Sen. Mark Warner (D-VA) says, “Long before Social Security goes bankrupt, Medicaid is going to bankrupt all the states.”

The red ink is starting to flow.

Health and Human Services Secretary Kathleen Sebelius is feigning cooperation and flexibility in helping them, but it is clear that her goal is to keep enrollment in Medicaid as high as possible in preparation for ObamaCare’s 2014 mandates, when as many as 25 million people will be added to the program nationwide.

Chief Medicare Actuary Richard S. Foster anticipates that by the end of this decade, 84 million people will be on Medicaid. Many liberals see Medicaid as the foundation for the government-run health program of the future. But this is arguably the worst health care program in the country. It is riddled with waste and fraud, and it offers a generous benefits package on paper but pays doctors so little that few can afford to see more than a few Medicaid patients, relegating them to long waits in hospital emergency rooms to get even routine care.

In January, 33 governors and governors-elect wrote to President Obama and congressional leaders requesting “flexibility and relief” from the “excessive constraints placed on us by healthcare-related federal mandates.” States say they need to trim their Medicaid rolls now –partly because of the economy and partly because stimulus funding that initially helped many of them pay for the added enrollment ends in June.

And, while Health and Human Services Secretary Kathleen Sebelius has responded by sending her agency’s Medicaid experts to the states to help them explore options to trim Medicaid spending, she is still urging states to do everything they can to keep Medicaid enrollment at current levels before the health law’s changes take effect in 2014.

This week, three senators — Sens. Richard Burr (R-NC), Tom Coburn (R-OK), and Saxby Chambliss (R-GA) — introduced legislation to reform Medicaid by giving states more flexibility and control and creating new incentives to improve the quality of care in the program.

They start by giving governors their first request — repealing the maintenance of effort requirement that forces them to keep Medicaid enrollment high even as health spending is squeezing other state services.

Their “Medicaid Improvement and State Empowerment Act” would give “health grants” to states to provide coverage for low-income Americans and give states more flexibility to provide care that suits the needs and resources of their states and not the dictates of Washington bureaucrats. The bill would also maintain current payments for acute care for patients who are dually eligible for Medicare and Medicaid and the disabled.

Two other congressional leaders this week sent a letter to the governors expressing concern about the quality of care in Medicaid programs, quoting a study that shows “Medicaid patients were nearly 50 percent more likely to die after heart surgery than patients who had either private coverage or Medicare. The letter was from Sen. Orrin Hatch (R-UT), ranking Republican of the Senate Finance Committee, and Rep. Fred Upton (R-MI), chairman of the House Energy and Commerce Committee.

They also expressed concern about fraud, waste, and abuse in Medicaid, and the cost of Medicaid that “is bankrupting both federal and state budgets.”

They asked governors for “feedback on both the challenges you have faced” and “your ideas on how to make Medicaid work better.”

Bringing the governors into the conversation is an important move.

States had been lured into expanding access to Medicaid — originally designed to provide health care to the lowest-income Americans — well into the middle class because Washington pays at least half of the cost. The more people they cover, the more money states receive from Washington. Conversely, whenever they try to turn down the federal spigot, they lose two or more federal dollars for every dollar they cut. Many feel trapped.

Sen. Joe Manchin of West Virginia understands the challenges of the states and wants to give the governors more flexibility, on the model of those he tried when he was governor. “If you are a healthy person who is financially challenged — and you need help from the state — then you’re going to have some responsibilities to meet,” he said. He tried carrots and sticks — rewards to encourage Medicaid recipients to keep appointments and comply with treatment recommendations coupled with the loss of some benefit privileges for those who refused.

Medicaid is the ground war in the larger constitutional power struggles playing out through ObamaCare. The clash is coming as Secretary Sebelius and Washington try to exert more centralized control over the health sector with ObamaCare’s new authorities. But the states will be the power centers over the next two years as they work to chart a new path and wrest and redesign their Medicaid programs to stem the flow of Medicaid’s red ink.

Grace-Marie Turner is president of the Galen Institute and served as a member of the federal Medicaid Commission 2005-06. She is a co-author of “Why ObamaCare is Wrong for America.” (Broadside/HarperCollins)