Beating a Path to Medicaid Reform

by Charles Katebi

Wyoming originally opted into Medicaid to help low-income individuals access medical care. But unless this entitlement undergoes systemic reforms, patients will find it harder than ever to get healthcare.

At Wyoming's Joint Labor, Health, and Social Services Committee meeting in Casper, the Department of Health announced it will cut its budget by up to $200 million to cope with declining tax revenue. These cuts will fall primarily on Medicaid, which comprises 70 percent of all state healthcare spending in Wyoming.

In a rational world, Wyoming would refocus Medicaid's scarce resources on care for the truly needy. We would restrict eligibility to those in poverty, encourage the use of cost-effective medicine, and require patients to pick-up some of their treatments' costs.

Unfortunately, federal mandates prevent Wyoming from taking these common-sense measures. With little state control over this massive entitlement, the Health Department will likely resort to slashing payments to doctors and hospitals. This will discourage providers from treating Medicaid patients and make it harder for them to get the care they need.

Unless we wrestle control of Medicaid away from the federal government, patients' health outcomes will worsen as the program's declining reimbursements drive providers away.

One way Wyoming can take control of Medicaid is by seeking a waiver from the federal Department of Health and Human Services (HHS). A waiver is a tool states can use to modify Medicaid's top-heavy structure to better serve patients.

Rhode Island offers an example of how waivers can successfully reform Medicaid. In early 2009, the federal government granted the state a Global Waiver to restructure Medicaid from the top down.

With its new freedom, Rhode Island quickly began overhauling this entitlement. The state required patients to pay copays and deductibles to incentivize them to seek lower cost treatments. The Ocean State also encouraged elderly patients to receive long-term care at home rather than stay at expensive nursing facilities.

These reforms dramatically reduced Medicaid's mounting fiscal burden. After just 18 months, Rhode Island spent $1.1 billion less on Medicaid than what the waiver originally allotted. In fact, per-patient costs fell from $813 per month in 2010 to just $770 per month by 2012. Can you imagine the last time a government program became less expensive over time?

While a similar waiver would undoubtedly benefit Wyoming, HHS ultimately decides who gets them. Obama's former HHS director, Kathleen Sibelius, consistently weakened promising state waiver proposals, making their changes largely fruitless and ineffective. Sibelius' successor Sylvia Burwell, has proven to be just as hostile to state Medicaid reform.

What Wyoming and other states need is the freedom to reform Medicaid without permission from the federal government. Congress can grant Wyoming this freedom by transforming Medicaid from an open-ended entitlement into a Block Grant. Under a block grant, the federal government would allocate Medicaid funding to states in the form of a lump-sum payment. Wyoming would then be free to tailor the program to more effectively address its unique healthcare challenges.

Block granting Medicaid would also benefit taxpayers. The Congressional Budget Office estimates that block grant legislation proposed by then-House Budget Committee Chairmen, Paul Ryan, would save federal taxpayers $1 trillion over ten years. A similar bill, the State Health Flexibility Act, offers states even greater flexibility and would save almost $2 trillion over a decade.

Although Medicaid is in dire need of these reforms, liberals have obstructed them for decades. In 1981, President Ronald Reagan first proposed lump-summing the program and was subsequently defeated by House Democrats. Then in 1996, Republicans led by Speaker of the House, Newt Gingrich, passed block grant legislation through the House and Senate. Unfortunately, President Bill Clinton vetoed this legislation.

Things may be about to change, however. Republicans are now firmly in control of both chambers of Congress for the first time in years. In addition, the presumptive Republican presidential nominee, Donald Trump, supports block granting Medicaid back to the states, saying:

"State governments know their people best and can manage the administration of Medicaid far better without federal overhead. States will have the incentives to seek out and eliminate fraud, waste and abuse to preserve our precious resources."

Once Wyoming is free from Medicaid's federal dictates, we can finally have a discussion over how best to serve indigent patients. But until then, taxpayers will keep paying for a bloated program that delivers substandard healthcare.