Why Health Care Compact could be solution to Medicaid crisis

Eric O'Keefe Contributor
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This past week, 29 governors signed a joint letter to Sen. Orrin Hatch and Rep. Fred Upton, requesting flexibility for their states’ Medicaid programs. Medicaid is a federal-state partnership program that is jointly funded by federal and state tax dollars. However, because the federal government establishes most of the standards and rules for the program, states are denied the necessary flexibility to create programs that best meet the needs of their residents.

As states struggle to balance budgets, many are reviewing soaring Medicaid spending for potential savings. Medicaid accounts for an average of 22% of state budgets. The health care law commonly referred to as “Obamacare” will exacerbate the state budget crisis by forcing states to raise their Medicaid eligibility from 100% to 138% of the federal poverty level. In some states this Medicaid expansion will result in half a million additional Medicaid recipients. With states facing huge budget deficits as a result of the new federal health care law, some have begun eying other areas for cuts, including education, transportation, and infrastructure.

The governors who wrote to Congress seeking flexibility recognize the fiscal strain the federal government is forcing on their states with these new regulations and requirements. They also understand that one-size-fits-all programs designed in Washington, D.C. are inferior to programs that states can design for their own residents.

Under the current system, states are forced to comply with standards and regulations dictated by the federal government. But each state faces unique health care challenges. For example, states with a large number of retirees like Florida have a higher Medicare enrollment than other states. States like Mississippi and Tennessee have higher Medicaid populations and require additional programs for young families below the federal poverty level. The rigid and uniform standards that originate in Washington, D.C. don’t address the diverse needs of the states.

The issue raised by these governors is not about health care policy. It’s about governance. It’s not about who is covered. It’s about who decides. The Health Care Compact is an interstate compact that addresses the governance of health care by restoring control of and funding for health care to states. It enables each participating state to use its health care funds in any manner it deems appropriate, without federal mandates. As states seek creative fiscal solutions, the Health Care Compact represents a viable way for state legislatures and governors to take charge of their budgets and health care policies. Under the Health Care Compact, one member state may choose to emphasize programs for children and uninsured families, while another state may choose to enhance its programs for senior citizens or adjust its Medicare reimbursement rates. The Health Care Compact empowers states to use their own discretion to address their unique needs.

The legislatures in Georgia and Oklahoma have already passed the Health Care Compact, and the governors in those two states have signed the Health Care Compact into law. Other states, including Missouri, Texas, Tennessee, Arizona, Montana, and Colorado have seen one or both houses of the legislature approve the Compact.

The Health Care Compact, once approved by Congress, will have the full force of federal law and will trump other federal health care laws. Once it becomes law, the Compact will grant each member state the decision-making authority over its federal health care dollars, free from federal regulatory burdens.

As more governors recognize the negative impact of the federal government’s heavy-handed involvement in health care decisions, we can expect even more interest in the Health Care Compact as a realistic and creative solution to restore governance to the states.

CORRECTION: An earlier version of this article incorrectly stated that the South Carolina Legislature has approved the Health Care Compact.

Eric O’Keefe is the chairman of the Health Care Compact Alliance and chairman and CEO of the Sam Adams Alliance. He serves on the board of directors of the Institute for Humane Studies, the Center for Competitive Politics and Wisconsin Club for Growth. Eric authored the book Who Rules America, which won praise from Milton Friedman, and hosts a podcast series, Engaging Democracy.