With the state of Washington facing a projected $4.5 billion budget shortfall, officials are debating the possibility of opting out of Medicaid to preserve flexibility in state health care spending.
The alternative is the potential elimination of state-only health care programs such as the Basic Health Plan, prescription drug coverage, and Disability Lifeline program. The state can’t afford to fund state-only programs in addition to Medicaid match programs.
This debate is not unique to Washington. Health care officials in Nevada and Wyoming have already drafted white papers discussing the impact of opting out of Medicaid to provide more budget flexibility. And Texas, which has ordered an extensive report on the ramifications of such a decision in advance of their 2011 legislative session, is considering dropping out of Medicaid entirely.
‘Will Have to Choose’
The Washington Policy Center, which participated as a member of Democrat Gov. Chris Gregoire’s Budget Transformation Committee, recently surveyed state Medicaid directors across the nation on the topic. Among the responses received was from Carol Steckel, commissioner of Alabama’s Medicaid Agency.
“We have not specifically discussed this issue with the Governor. However, we [are] about to be transitioning to a new Governor (January 17th). That may be an option he wants to consider,” Steckel said. “I definitely think that if HHS pushes an expansive definition of the health benefits package and continues to expand in other areas, many states, including Alabama, will have no other choice. If it goes too far, states will have to choose between Medicaid and ALL other general fund services!”
Crowding Out State-Only Programs
According to Washington Medicaid Director Doug Porter, the crowding out of state programs is imminent.
“Given the targets I have to reduce expenditures in the current fiscal year ($113M general fund state) and over the next biennium ($521M), I cannot see how Washington can afford to support both the Medicaid program and our state-only programs, such as Disability Lifeline and the Basic Health program,” Porter said.
Block Grant Option
Dann Mead Smith, president of the Washington Policy Center, says it’s unlikely the state will opt out of Medicaid, but the fact that it’s openly being discussed indicates the need for more flexibility regarding Medicaid.
“Since Congress created the new restrictions that are now tying states in knots, it has the responsibility to provide states flexibility so health care decisions that are in the best interests of patients and taxpayers can be made by local officials,” said Mead.
One possibility would be to move away from the Medicaid categorical spending categories dictated by federal officials, transforming the program into an indexed block grant. Mead maintains this would allow each state to design its own program to meet the needs of its citizens.
Mead says that to help determine what indexed growth factor should be used for a Medicaid block grant program, the National Governor’s Association and the National Association of State Medicaid Directors should work to design a growth factor that would meet state needs while helping to provide predictability of federal Medicaid exposure, thus assisting federal deficit-reduction efforts.
“Voters don’t want another federal bailout or to be administrators of federal programs, but instead want D.C. to get out of the way of critical decisions being made in our state capitols,” Mead said.
Jason Mercier ([email protected]) is director of the Center for Government Reform at the Washington Policy Center.
“Medicaid Opt Out,” Nevada Department of Health and Human Services and the Division of Health Care Financing and Policy, January 22, 2010
“Medicaid Opt-Out Impact Analysis,” Wyoming Department of Health, September 1, 2010