Republicans Push for Medicaid Reform as Senate Democrats Resist

Published August 9, 2011

Republicans on Capitol Hill are pushing hard to advance reforms of the Medicaid system in response to financial strains at the state level. But despite the calls of some Democrat governors for reform and increased flexibility in the program, several Senate Democrats are resisting the effort, demanding Medicaid reform be moved off the table.

In letters written to President Obama in June, 41 Senate Democrats signaled their opposition to any efforts to block-grant the Medicaid program or increase the ability of governors to prioritize care. Left out of these letters were another 12 Senate Democrats, who some Republicans believe may be convinced to support reform efforts.

Republican Senator Tom Coburn of Oklahoma, who recently introduced the Medicaid Improvement and State Empowerment Act, says the Senate must recognize states need greater leeway to prioritize and manage Medicaid.

“There’s not one governor that doesn’t say Medicaid needs to be reformed and we need to have more flexibility in our state to make sure we take care of our patients and our citizens,” Coburn said. “Every one of them will tell that to you.”

In January, 33 governors requested more flexibility to prioritize care, in a letter to the Department of Health and Human Services. They did not receive a response.

Medicaid’s Significant Expenses

Currently, Medicaid accounts for roughly 22 percent of total state spending—the largest expense for many states—according to figures released by the nonpartisan National Governors Association. Thanks to the economic downturn and a coming influx of new Medicaid patients under Obama’s law, states are increasingly concerned about the impact on a system already strained to the limit.

“You’ve got 41 Senators that want to keep this system, where 40 percent of primary care doctors won’t see a Medicaid patient, where 65 percent of specialists won’t,” Coburn said. “Just because you have Medicaid doesn’t mean you have access. Access delayed is access denied, and we know Medicaid’s outcomes aren’t as good. Why is that? Because the highest quality health providers are not available to them. What we’re telling patients is ‘you can have a system but you can’t actually get it, and when you do get in, your outcomes are going to be worse.’ What kind of system is that?

“The governors would like to say, give us the flexibility. We’ll take care of our folks, but let us manage this thing. Don’t put us on the hook. We’ll spend the money properly and we’ll report back to you, but allow us to do it. And there’s tons of money that can be saved,” Coburn added.

Problems Exacerbated by Obama’s Law

Dr. John Dunn, a physician and policy advisor for the American Council on Science and Health, says Obama’s law will exacerbate the states’ Medicaid problems.

“Medicaid has always been the stingiest and nastiest medical payment system ever foisted upon the American people. Doctors and medical providers hate dealing with it because of the low reimbursement rates and the difficulty in getting paid,” says Dunn.

“The goal of Obama and the Democrats is to put everyone into Medicaid. But Medicaid doesn’t pay very well, and quite naturally doctors don’t want this. If they’re smart, they will go into other, more lucrative areas of medical care. The less competent will remain in the system and churn it to increase their income,” explains Dunn.

Nothing New Under the Sun

Dunn maintains Medicaid’s challenges today are not new, simply larger versions of longstanding access problems caused by the system’s below-market payments.

“My first practice was in Omaha, Nebraska. The two doctors I bought my practice from ran a clinic in a marginalized part of town that served patients who were mostly on Medicaid,” Dunn says. “The practice wasn’t very successful due to the increasingly difficult economic situation caused by treating Medicaid patients. It was so bad that one time I drove down to Lincoln to the Medicaid offices and pleaded with them to pay their bills.”

“That was in 1974; now, 40 years later, and we’re still in the same place,” Dunn says.

Dunn notes patients would be surprised to learn how much less doctors receive from Medicaid for treating them.

“If you’ve ever been in a hospital and gotten a bill, you’d be very surprised by what the insurance or the government pays. Nobody knows what the true cost of health care is, because there is no transparency, a problem that will worsen under Obamacare,” Dunn explains.

Solution: Free States to Innovate

Coburn says freeing the states to innovate is the key to achieving a Medicaid system that meets the needs of the poor and the sick it was originally supposed to serve.

“Arizona has every Medicaid patient on an HMO thanks to a waiver HHS won’t give to anybody else. Rhode Island has a global waiver we got through right before President George W. Bush left office, and they saved $150 million last year,” Coburn said. “North Carolina has a waiver for their Medicaid to where they have them all in a medical home, and have already saved $400 million a year through this. But they’ve asked for a waiver for their dual eligibles between Medicare and Medicaid, and HHS won’t give it to them.”

Coburn remains committed to pursuing reform at the federal level to allow for more permanent flexibility.

“All knowledge is not in Washington. Very little is. There’s great knowledge in the states, and we ought to allow the states to use it,” Coburn said. “[We should be] saying to them, ‘You’re smart enough to take care of your own people.'”