Top Priority After Obamacare: Fix Medicaid

Published May 17, 2012

President Obama’s health care law could soon be struck down by the Supreme Court, or voters could finish the job in November. In considering what comes next, Medicaid reform is at the top of the list.

Medicaid is the worst health care program in the country—a dismal program that finances care for low-income Americans but condemns them to long waits in emergency rooms for even routine care. The program pays doctors so little and requires so much paperwork that few can afford to see more than a few Medicaid patients.

Instead of reforming Medicaid, which will cost the federal and state governments a total of $457 billion this year for its nearly 60 million enrollees, Obamacare doubled down and will dump as many as 25 million more people into this expensive, fraud-ridden program.

Giving States Flexibility

Several members of Congress, including House Republican Study Committee Chairman Rep. Jim Jordan of Ohio, have introduced the State Health Flexibility Act (H.R. 4160) to streamline federal funding for Medicaid and the Children’s Health Insurance Program into one block grant to the states. Todd Rokita (R-IN) is the lead sponsor of the bill.

The legislation would give the states maximum flexibility to tailor the program to meet their citizens’ unique health care needs without having to plead with Washington for every minor improvement they want to make.

The legislation meets the seven principles for Medicaid reform proposed by 29 governors in June 2011, and it requires accountability to taxpayers. Annual audits are required in each state to report to the U.S. Treasury, state legislatures, and the public to ensure the federal funding is spent properly. That would be a significant step in bringing accountability and efficiency to Medicaid, which wastes at least 10 percent of state Medicaid dollars.

Proving Federalism Works

We have an example of how it ought to work in Rhode Island, where Gary Alexander, who served as secretary of health and human services until 2009, implemented a Global Consumer Choice Waiver. The waiver exempted the state from many of Medicaid’s federal rules and mandates while accepting a five-year spending cap of $12.1 billion, including federal matching payments.

A December 2011 study by the Lewin Group, a consulting firm, found Rhode Island’s experiment allowed it to lower spending and improve the quality of care while maintaining the same enrollment levels. Patients had better access to doctors, reducing the need for expensive emergency room use. Costly long-term care patients were switched to home and community-based care. Rhode Island’s Medicaid spending, which had been projected to reach $3.8 billion, came in at $2.7 billion for the 18 months following the introduction of the waiver. Alexander calculates the nation’s taxpayers could save $200 billion over the next decade if every state followed Rhode Island’s lead.

Rhode Island and the Republican Study Committee are on the right track with block-granting Medicaid to the states. The model works, and it provides a strong platform for the Medicaid part of the “replace” strategy post-Obamacare.