Policy Tip Sheet: Don’t Wait for Congress, States Should Pursue Medicaid Waivers Now

Published June 22, 2019


Since the passage of the Affordable Care Act (ACA), the federal government and several states have spent hundreds of billions of dollars on Medicaid expansion and state-based Obamacare exchanges. Consequently, the federal government now has considerable control over health insurance policies. The results have been atrocious. Insurance premiums and deductibles have skyrocketed, people have lost their coverage, and health outcomes are not improving.

Reforming Medicaid is essential to ensuring the program’s long-term survival. Over the past decade, Medicaid rolls have expanded much faster than many states can handle. From 2013 to 2018, the number of Medicaid enrollees increased by nearly 28 percent, to more than 67 million. In 2017, the cost of Medicaid reached $581.9 billion.

As more states expand Medicaid, these costs will continue to rise. According to a recent report from the Centers for Medicare and Medicaid Services, Medicaid expenditures are expected to grow at an average annual rate of 5.7 percent from 2017 to 2027, a rate that far exceeds annual U.S. gross domestic product growth.

According to Modern Healthcare, Congressional Budget Office projections in 2018 found the government is “paying out an average of $6,300 annually for every subsidized enrollee in fiscal 2018. It estimates that number will rise to nearly $12,500 in 2028. In contrast, Medicaid spends $4,230 per non-disabled adult, set to inflate at 5.2% annually to just over $7,000 per person in 2028.” These costs could soon overwhelm federal and state budgets.

Policy Solution

Fortunately, state policymakers can propose their own reforms through the Section 1115 and Section 1332 waiver processes. The Trump administration has encouraged states to submit such waivers to reform their Medicaid and ACA health insurance exchange programs. Moreover, the Department of Health and Human Services (HHS) has also offered guidance to help states looking to create these important waivers.

Section 1115 waiver reform proposals could include Medicaid work requirements; cost-sharing reforms like co-pays; incentives for enrollees to engage in healthy behaviors; time limits on coverage; monthly income verification and eligibility renewals; payment and eligibility changes; and the incorporation of numerous health care innovations, such as direct primary care.

States can also submit proposals to HHS to reform their Obamacare markets via 1332 waivers. This could include expanding the use of cost-sharing mechanisms, such as co-pays, premiums, or health savings accounts; and redefining which services are considered “essential health benefits”—benefits all plans must cover under the ACA.

Over the past three years, CMS has been more than willing to give states the flexibility they need to reform their Medicaid programs. State policymakers should take advantage of this important opportunity, rather than wait for Congress to address these problems.

Policy Message

Point 1: Medicaid is an expensive program that provides low-quality coverage and is on the road to bankruptcy.

Point 2: Obamacare has increased health insurance premiums by an average of 25 percent, which has made health care insurance unaffordable for millions.

Point 4: A study in Oregon shows Medicaid does not improve health outcomes.

Point 5: States should move forward on free-market solutions to lower health care costs while increasing competition and consumer choices.

Point 6: States should apply for waivers from HHS to bring consumer choice and competition into their Medicaid programs.

Point 7: States should not wait for Congress to act.