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Misguided on Medicaid May 11, 2011

One of the major innovations in the House 2012 Budget Resolution is a plan to give states much greater flexibility in running their Medicaid programs through block grants.

Yet today, a new study was released by the Kaiser Family Foundation, with researchers from the Urban Institute, that is highly critical of the plan. The study concludes that if Obamacare were repealed and states were given block grants for Medicaid, state spending would increase between 45 and 71 percent to offset the loss of federal dollars or 44 million people would be without coverage as a result of the changes.

Nonsense.

Rhode Island has proven that block grants can work to protect enrollment and to save taxpayers money. Giving states greater flexibility is the key to greater efficiency in Medicaid spending so states can modernize their programs to fit the needs of their citizens and match the resources available in the individual states.

States are currently ensnared in federal red tape and must go through time-consuming and bureaucratic appeals to Washington to get permission to make changes. This leads to waste, inefficiency, and a program that relies on the crude tools of price controls to try to rein in spending. Obamacare did little or nothing to reform what is arguably the worst health care program in the country — and the largest, with more than 50 million people enrolled. It pays doctors so little that Medicaid’s rich benefit package is little more than a paper promise for care.

Rhode Island received an early block-grant waiver in January of 2009. In exchange for significantly more flexibility in managing its Medicaid program, it received an aggregate budget of $12.075 billion dollars through 2013. The state had — and has — the latitude to preserve coverage and services for those with the greatest need and to re-tool benefit packages to ensure coverage for the maximum number of beneficiaries within established budget constraints.

State officials were confident that with the ability to operate the program with less onerous federal rules, they would not exceed the cap.

They were right. The rate of growth in Medicaid spending was cut in half from over 8 percent to 3 percent in the first 18 months the program was in operation. At its current expenditure rate, Rhode Island is on track to only spend approximately $9.3 billion of the allotted $12.075 billion.

“Rhode Island shows that more money is not the solution,” according to former Rhode Island health and human services secretary Gary Alexander. “The answers are comprehensive reform and freedom from onerous federal mandates.”

The Kaiser report gives virtually no consideration to the important efficiencies that could be gained by better managing and coordinating care for the 20 percent of patients who consume 80 percent or more of Medicaid’s resources. States closer to their citizens have demonstrated in Rhode Island, Vermont, and elsewhere that significant improvements in care are possible while saving taxpayers money if the federal government will allow them the freedom to make their programs more efficient.

The Kaiser report assumes that spending for Medicaid continues to rise at the rate of 8.2 percent a year. And it assumes that nearly 76 million people will be on Medicaid under current law. We cannot afford this rate of spending for a program that is going to swell to 76 million or more.

At some point, we must recognize the reality that change is not only inevitable but essential. The question is whether or not the political leaders closest to the people will be able to make finely tuned changes or whether the program remains rigid and inflexible, requiring more and more cuts to provider payments as fewer and fewer Medicaid recipients are able to find physicians to see them.

Posted on National Review Online: Critical Condition, May 10, 2011.