States Fixing Medicaid When President, Congress Won't

By Thomas J. Smith

This piece first ran in Investor's Business Daily.

The Affordable Care Act may not yet be fully implemented, but its negative effects and exorbitant price tag are already being felt in statehouses, hospitals, and homes across the country.

Yet in the face of the President’s and the Senate’s unwillingness to address the law’s many issues, some states—including my home state of Pennsylvania—are taking proactive steps to help protect taxpayers and families from the ACA’s burdensome costs by refusing to expand Medicaid programs that fail to serve the poor.

Fifteen states have so far announced their intention not to participate in the ACA’s Medicaid expansion program.

The President may not like this development, but it’s a decision that makes sense—both fiscally and morally.

Consider Medicaid’s current bill of health. Medicaid has a poor record of serving the people who need it the most. The program’s broken system of doctor reimbursements and its reams of red tape mean that many doctors have to choose between accepting Medicaid patients and staying in business. As a result, Medicaid recipients have fewer options, spend more time in the waiting room, and ultimately don’t get the care they need.

The 48-year old program is bleeding red ink. It is already the single largest item in most state budgets, accounting for roughly 23 percent of state spending on average. Pennsylvania alone expects to spend more than $9 billion in state funds on Medicaid over the next year.

The national numbers are even more enormous. Medicaid spending ballooned from $73.7 billion in 1990 to an estimated $450 billion last year. And the GAO predicts Medicaid costs will continue to grow faster than taxpayers’ ability to pay and consume a larger share of state and federal spending.

These numbers—already at mind-boggling levels—are expected to accelerate under the Affordable Care Act. Rather than rein in the runaway cost of Medicaid, the ACA urges states to expand the program using an unfortunate “carrot and stick” approach.

The “carrot” is that the federal government has promised to shoulder the additional costs at first, but its payments will trickle off after three years. The “stick” is 20 new federal taxes that residents will still pay for Medicaid expansion in other states, even if their state refuses to participate. It’s nothing more than financial extortion by another name.

Pennsylvania has seen through this ruse, as have 14 other states, with ten more still weighing the offer. Past experience has taught these governors that Washington politicians will renege on their promises—President Obama has already suggested cutting the federal matching rate. Even if the federal government keeps its end of the deal, states will be forced raise taxes to pay for a program they have little control over.

That’s why Governor Corbett should also be praised for requesting an “innovation waiver” for the program. Unlike the fake flexibility pursued by Arkansas, these waivers offer states wider latitude and have a good track record in the states where they exist.

With flexibility to fix Medicaid, states have saved money, improved patient care, and produced more satisfied participants. In the face of the ACA’s crippling uniformity, such waivers are the best means for states to improve the health care of their neediest citizens while balancing their budgets.

The ACA’s problems are obvious, whether you’re sitting in Washington, Harrisburg, or anywhere in between. That’s why leaders in statehouses across the country should do the right thing and follow Pennsylvania’s lead. Instead of waiting for dollars and dictates from D.C. to expand a broken program, our states can save our ailing health care system by fixing Medicaid themselves.

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Thomas J. Smith was Pennsylvania's 2012 Republican candidate for U.S. Senate and is a member of the Board of Directors for the Commonwealth Foundation for Public Policy Alternatives, (www.CommonwealthFoundation.org) Pennsylvania's free-market think tank.

 

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