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Why Paul Ryan’s Medicaid Reform Works

August 23, 2012, 9:39 AM

The selection of Congressman Paul Ryan as the vice presidential nominee for the Republican ticket has brought the issue of Medicare reform to the forefront of people’s minds. But Medicaid is next up, according to the Wall Street Journal:

Medicaid provides health insurance to more than 50 million poor Americans and nursing home coverage to six million seniors and Democrats will portray any “cuts” as heartless. The Agenda Project Action Fund, which ran the infamous tv ad showing Paul Ryan shoving an elderly woman over a cliff, is now running ads in up-for-grab states like Wisconsin. The spots warn of Medicaid cuts that would adversely affect hundreds of thousands of seniors in the state and claim that Madison “will lose $14 billion in funding.”

Earlier this year, Barack Obama berated the Ryan Medicaid cuts as well. Among the victims, he says, are “someone’s grandparents who, without Medicaid, won’t be able to afford nursing home care. … Many are poor children. Some are middle-class families who have children with autism or Downs syndrome. Some are kids with disabilities so severe that they require 24-hour care. These are the people who count on Medicaid.”

The Ryan budget is hardly radical: it would block grant Medicaid to states much like the successful welfare reforms in the 1990s. States would get less federal money, and no more dollar-for-dollar match on wasteful expenditures. In exchange, they would get far more flexibility in how that money is spent. So far 29 Republican governors have sought that deal – fewer dollars for less Washington rules. Rhode Island, a state that received a waiver from federal Medicaid rules, has saved millions of dollars and improved care to seniors. “Medicaid is by far our biggest cost driver in our budget,” complains Florida’s Republican Governor Rick Scott. “We can improve services and run the program easily with billions in cost savings here in Florida if the feds let us.”

The truth is that most Democrat and Republican governors alike would be willing to trade less federal funding in return for more freedom and flexibility for their Medicaid programs. One of the reasons for that bipartisan undercurrent of agreement on the need for flexibility, rather than just throwing money at an already broken entitlement system, is that we now have examples of policy approaches beyond simply managed care to lower Medicaid costs and increase the quality of care. Chief among these examples is Florida’s pilot program, which you can read about here.

Here’s the story, in brief: A little more than six years ago, then Gov. Jeb Bush established a pilot program in five big counties in Florida with a total overhaul of Medicaid. (This plan has actually been endorsed by some key Obama administration HHS officials, so it’s not some instance of right-wing extremism.) The population involved is quite large, roughly 300k people on Medicaid – bigger than the total programs in 17 states. The program has received a wealth of attention from policy wonks but little mainstream coverage, in part because Gov. Crist never touted it, as it wasn’t his program. Thankfully, that’s beginning to change, and the Foundation for Government Accountability is beginning to highlight the successes of the program.

Under the pilot program, Medicaid recipients are given the choice of a wide variety of plans created by multiple insurers. The insurers are allowed to escape the vast majority of mandates on coverage, and instead just have to meet an actuarial value for the plan. This allows the state to keep costs flat while giving the insurers an incentive to create more tailored plans depending on need. You also have risk-adjusted capitated rates – or in non-insurer speak, you allow for better matching of payment to risk – so this doesn’t warp the incentives for insurers to make them avoid sick people. Instead, they’re rewarded for making sick people well.

Medicaid recipients get to choose among a dozen different plans with different offerings: one hospital, multiple, HIV-positive, etc. The plans are competing on benefits, copays, and provider networks, even above traditional Medicaid FFS. There’s a default plan, but the engagement is huge: 70 percent of recipients in the pilot choose a plan other than the default. (This is because, as Jeb was fond of saying, they’re poor, not stupid.) Early engagement in this form has a side benefit, too: It makes them more likely to seek care earlier, as opposed to waiting ‘til they need to go to the emergency room. Patients also get access to seven extra services not covered by any other Medicaid program (over-the-counter medication, dental, vision, etc.) They also have a cash incentive for healthy behavior, including quitting smoking, of up to $125 per person/per year – 64 percent of people in the program do it.

The outcome, according to the Florida Agency for Health Care Administration, is 64 percent better health vs. managed care, with 83 percent higher satisfaction from those in the program. And they’ve saved money, too: Florida is currently saving roughly $118 million a year on Medicaid in the five counties, with better outcomes for the people in it. The state will be approved soon for a statewide expansion of the program, and it expects to save almost a billion dollars per year.

The problem, of course, is that the pilot exists only thanks to the whim of HHS. States currently have to go back and beg every five years for an extension of their waivers. Massachusetts Gov. Deval Patrick, for instance, did this for Romneycare – he was overbudget, so he extracted another $4.3 billion from you the taxpayer for it, thanks to Sens. Kennedy and Kerry and then-HHS Sec. Mike Leavitt. States will always have an incentive to expand coverage and socialize costs until we reorder the system into one where they have to choose. Block grants – either the pure or partial variety – would allow for massive improvements in this broken program. Here’s the Republican Study Committee’s plan on that score. But what states do with that money and freedom is what really matters.

In sum: Florida is the best example we have, and perhaps the most replicable, for how statewide reforms should look going forward. Throwing money at the problem won’t fix it. Medicaid needs reform. It needs to return to its original purpose: covering the poorest of the poor, the sickest of the sick. That’s a true safety net.

Is Your State Expanding Medicaid?

August 09, 2012, 1:33 PM

Above is an updated version of our map outlining which states are leaning toward, or leaning away from, expanding Medicaid under PPACA.

Below the fold, the following list was provided by the fine folks at FreedomWorks.

State Status State Status Alabama Leaning toward not participating Montana Leaning toward not participating Alaska Undecided Nebraska Leaning toward not participating Arizona Undecided Nevada Leaning toward not participating Arkansas Leaning toward participating New Hampshire Undecided California Participating New Jersey Leaning toward not participating Colorado Undecided New Mexico Undecided Connecticut Participating New York Leaning toward participating Delaware Participating North Carolina Undecided Florida Will not participate North Dakota Undecided Georgia Leaning toward not participating Ohio Undecided Hawaii Participating Oklahoma Undecided Idaho Undecided Oregon Leaning toward participating Illinois Participating Pennsylvania Undecided Indiana Leaning toward not participating Rhode Island Leaning toward participating Iowa Leaning toward not participating South Carolina Will not participate Kansas Will not participate South Dakota Undecided Kentucky Undecided Tennessee Undecided Louisiana Will not participate Texas Will not participate Maine Leaning toward not participating Utah Undecided Maryland Participating Vermont Participating Massachusetts Participating Virginia Leaning toward not participating Michigan Undecided Washington Participating Minnesota Participating West Virginia Undecided Mississippi Will not participate Wisconsin Leaning toward not participating Missouri Leaning toward not participating Wyoming Undecided

Maine Clashes with Feds Over Medicaid

August 01, 2012, 2:27 PM

This may very well end up being litigated:

The LePage administration Wednesday laid out what it says is a clear-cut legal argument for allowing Maine to make cuts to its Medicaid program despite a provision in the Obama administration’s health care reform law that prohibits states from scaling back existing Medicaid services.

Maine’s Department of Health and Human Services on Wednesday filed paperwork with the federal Centers for Medicare and Medicaid Services requesting approval for Medicaid cuts that Republican lawmakers approved this spring and Gov. Paul LePage signed into law as part of a supplemental budget package.

“We fundamentally believe this is a very straightforward request that is absolutely within the state’s prerogative to make,” Health and Human Services Commissioner Mary Mayhew told reporters at a news conference.

Meanwhile, Democrats repeated Wednesday that they thought the cuts violated federal law, and a Health and Human Services official from former President George W. Bush’s administration said he thought it’s unlikely the Obama administration will allow Maine to make its desired cuts.

The LePage administration is requesting what is known as an amendment to its Medicaid State Plan that makes about $20 million in Medicaid cuts to balance the state budget. The cuts, planned for Oct. 1, would eliminate coverage for 19- and 20-year-olds, tighten income eligibility requirements for low-income parents and scale back Medicaid access for elderly residents who also qualify for Medicare benefits.

This would have a significant impact on other states should Maine prove successful. More information is here.

How Medicaid Works, According to Utah’s Gov. Herbert

August 01, 2012, 2:20 PM

Legislators frequently ask me what I mean when I write that implementation of a PPACA exchange means ceding control to Washington, DC along the lines of what they experience with Medicaid. Here’s an amusing story from Utah Gov. Gary Herbert to illustrate what that’s like.

So Herbert’s administration serves a Utah population which is both much younger and much more technologically adept than the average Medicaid population. Herbert decides that one way to achieve some minor but easily accessed savings is to shift to a paperless Medicaid system – to use email instead of mail. They commission a study and find that savings would run around $7 million a year – not huge, but probably worth doing. But even to do something this minor, Herbert has to receive approval from HHS and Kathleen Sebelius.

Herbert and his staffers begin the begging process, which all states must do in this situation, heading to DC on bended knee to request this small degree of flexibility.  Utah even extrapolates the study out to the national scale, finding that if applied across the states, going paperless could save around $1 billion a year, which is approaching real money in Washington. They wait for an answer.

A couple of months later, Sebelius writes to tell Herbert that no, he may not go paperless, no permission is granted.

She wrote him via email.

The Medicaid Albatross

July 24, 2012, 2:21 PM

Paul Volcker and Richard Ravitch report on the fiscal crisis facing the states, with a familiar culprit involved. From the WSJ:

This state-federal program that increasingly pays for middle-class health care is the major albatross. Spending has grown faster than the economy every year since the 1960s, 7.2% annually over the last decade. It is now the largest part of state budgets—24% on average—and “the imbalance (or structural budget gap) can no longer be absorbed without significant cuts to other essential state programs like education or unpopular tax increases or both.”

The panel also found that these costs are driven by states choosing to increase enrollment and create new benefits, rather than by rising underlying medical costs. One of four New Yorkers is on Medicaid, and 70% of the coverage is not required by federal law.

Some 29% of California’s population is in Medicaid, though it only accounts for 11.8% of the Golden State budget, well below the national average of 15.8%. But that share is so low only because California spends so much on other things too. New York spends more on Medicaid than Florida, Texas and Pennsylvania—combined.

Medicaid costs over the decade are due to jump 8.1% annually, as required by the Affordable Care Act’s expansion. Without ObamaCare, the yearly rise would still be 6.6%.

Keying off the Volcker-Ravitch report, Robert Samuelson writes on the challenge facing the states:

Created by Congress in 1965, Medicaid is hijacking state politics. Although the federal government covers a majority of costs (typically, 57 percent), the rapid rise in the states’ share compels cuts in other programs or steeper taxes. In the last decade, Medicaid spending has increased at nearly twice the rate of states’ tax revenues, notes the Volcker-Ravitch report. The pressures will only intensify as America ages. Although Medicaid serves primarily a younger population (half are children), two-thirds of its costs stem from the 25 percent of much sicker beneficiaries who are elderly and disabled, reports the Kaiser Family Foundation. An older America will raise these costs and squeeze states’ other services.

This makes no sense. It expands the bias — already entrenched at the federal level — to favor the old over the young, the past over the future. And it underlines the need to control health spending, which increasingly is the crux of the national and state budget problems. In 2011, health spending represented 27 percent of the federal budget, up from 14 percent in 1990. For states, Medicaid spending was 24 percent of spending if all state funds, including federal grants, are counted, and 17 percent if only funds from state taxes are measured.

The Obama administration’s effort to expand Medicaid has further focused attention on states’ fears. Under the Affordable Care Act, Medicaid coverage would be extended to an estimated 17 million Americans. But the Supreme Court ruled that states can’t be forced to join. Some states — headed so far by Republican governors — have indicated they won’t, fearing the added costs. Although the federal government will initially cover those costs, it’s reasonable to worry that some future deficit-reduction package might shift more spending to states.

RGA Chair Sends Thirty Questions on Implementation to HHS

July 11, 2012, 9:54 AM

You should read this letter from Virginia Gov. Bob McDonnell which lays out a litany of questions from the states to U.S. HHS Sec. Kathleen Sebelius on exchange implementation and Medicaid.  There are seventeen questions about exchanges, and another thirteen about Medicaid, and a healthy skepticism about the workability of the current plan:

“We also believe that it is unlikely that the federal government will have fully functional exchanges in place by the fall of 2013 in order for millions of Americans to be able to purchase coverage beginning January 2014. We respectfully request the Administration provide the detailed work plan that demonstrates these deadlines will be met. If they cannot be met, the responsible course would be for HHS to level with us and the American people.”

Virginia had estimated that it would cost the state $2.2 billion to expand Medicaid back in 2010, but McDonnell says they’re working on an updated estimate. The 13 questions are below the fold:

1.)     When can we expect to receive updated guidance on Medicaid expansion and related topics?

2.)     Is there a deadline for letting the federal government know if a state will be participating in the Medicaid expansion? How does that relate to the exchange declaration deadline? The two programs are currently scheduled to be implemented simultaneously in January 2014.

3.)     Will states that expand Medicaid coverage up to a level below 138% of the federal poverty level (FPL), for example up to 100% of FPL, still receive the enhanced federal medical assistance percentage (FMAP) available for “newly covered” populations?

4.)     Will states be allowed to phase in Medicaid coverage up to 138% of FPL (or 100% FPL) years after 2013 and still receive the enhanced FMAP?

5.)     Does the MOE requirement apply to the expansion population or does it apply only to the current Medicaid population? If a state accepts the expansion, but the federal match goes away, can we drop out of the expansion program?  Will you waive the MOE under your 1115 waiver authority? What will be the penalties for failure to comply with MOE requirements? Since the MOE was a direct result of the expansion funding, if a state chooses not to expand is the MOE no longer effective?

6.)     Regarding the two year increase in Medicaid reimbursement for primary care codes, are you going to extend it? If so, how are you going to pay for it? Congressional Republicans have expressed opposition to any funded for PPACA.

7.)     Will states still be required to convert their income counting methodology to MAGI for purposes of determining eligibility regardless of whether they expand to the optional adult group?  If so, how do states link the categorical eligibility criteria to the MAGI? How will the federal exchanges utilize the state’s criteria?

8.)     If a state expanded Medicaid through a waiver prior to enactment of the PPACA, but then chooses not to expand coverage further, are they still eligible for the 75% to 90% enhanced FMAP for the previously expanded population?

9.)     Will the federal government support options for the Medicaid expansion population that encourage personal responsibility – cost sharing or accountability provisions, the use of high deductible plans such as Health Savings Accounts, and other options at the state’s choice?

10.)  What specific plans and timeline do you have for enacting the reforms and flexibility options for Medicaid that you spoke of in 2009?  When can states give further input on the needed reforms?

11.)  You have stated that you will not deport undocumented aliens who have not committed a crime. You have also said that these undocumented aliens will be exempt from the individual mandate. How will the state be reimbursed for medical services given to these individuals?

12.)  Will CMS approve global waivers with an aggregate allotment, state flexibility, and accountability if states are willing to initiate a portion of the expansion?

13.)   The Disproportionate Share allotments will be reduced every year with a methodology based in the reduction in the number of uninsured.  One, when will HHS issue the regulations and methodology for this reduction? Two, for a state that does not see a decrease in its uninsured population will the remaining state absorb the full reduction?  In addition, can a state implement a new DSH Diversion program as part of the optional expansion?  Can a state implement new DSH Diversion programs for services to the uninsured/uncompensated care services?

The press is already framing this as McDonnell, who’s the chair of the Republican Governors Association, expressing willingness to implement. But I don’t believe that was his goal here and probably stems from a lack of understanding of the issues – which is fine, giving how surprising this decision was even for experts.  But this is all leading up to what’s likely going to be a hash-it-out meeting of the NGA in Williamsburg this weekend.

The Reasons States Are Rejecting Obama’s Medicaid Expansion

July 09, 2012, 5:25 PM

Over the past week, we’ve heard from a wide variety of liberal sources amazed at the idea that states would reject the billions in “free money” from the federal government to expand their Medicaid programs under President Barack Obama’s health care law. Indeed, the federal matching rate for the expansion – which covers people at 100 to 138 percent of the federal poverty level (FPL) – is quite generous, set at 100 percent federal tax money for 2014–2016, 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and beyond.

Seems pretty tempting, doesn’t it? Former head of Medicare and Medicaid Don Berwick found the idea any state would turn it down inconceivable. Of course, this inconceivable possibility has now become inevitable, with many states already announcing they will not accept the Medicaid dollars, including seven states which have said a flat “no”. The map above shows you which direction your state is leaning.

Why would a state reject this money? One reason is that the current estimates, which the New York Times recently highlighted, don’t pass muster with the states. These numbers are derived from Kaiser’s initial May 2010 report on the expansion, which went through state by state results. You’ll notice they cut off the assessment at 2019, not 2020, coincidentally the year before the total state responsibility hits 10 percent, as it would be in out years. But these figures are in conflict with many of the calculations arrived at by state officials – an update of this 2011 report is in order summarizing their views. And states are inclined to trust their own estimates.

Consider the case of Texas for one example of why states are pausing. As Ezra Klein points out , “Texas covers only working adults up to 26 percent of the poverty line.” Texas, along with about half the country, has a Medicaid program that is minimal compared to states like New York and others. You can see the rankings of income eligibility for low-income adults here (it’s more generous to kids, but you’ll note you have to go through 26 – mostly red – states to get above 70 percent of FPL).

And this is a key problem for the states. While the federal money is indeed generous for the newly eligible population, it is less so for the rest. For your currently eligible population, you only have the regular Medicaid matching rate, which ranges from 50 to 76 percent. For Texas, it’s around 60 percent. Kaiser calculates that over the first five years of the program, 95.7 percent of the funding will come from the federal government, and not the state. But the state doesn’t agree – they understand that one of every four Texans currently eligible for the program isn’t signed up, and that for this population, they’ll only have a match of around 60 percent. As the report linked above notes, “The Texas Health and Human Services Commission estimated that Texas alone will be forced to spend $27 billion – more than the program’s entire annual budget today.”

That’s one reason Texas Gov. Rick Perry is rejecting the expansion, with gusto. So are Florida’s Rick Scott, Wisconsin’s Scott Walker, Louisiana’s Bobby Jindal, Kansas’ Sam Brownback, South Carolina’s Nikki Haley. It may also include Missouri’s Jay Nixon – one of several Democrat governors currently shaky on the issue.

In sum: the Medicaid expansion is far less attractive to those states with minimal programs, where already eligible people will likely come out of the woodwork to sign on to the system, driving up the costs for the state itself. This has already been proven true in Minnesota, which expanded its program early. The same is expected to be true in numerous other states, adding up to a huge chunk of change for states that already have Medicaid programs overburdened thanks to the recession and doctors who cannot see all the patients.

As Dennis Smith, head of Wisconsin’s Medicaid program, writes here:

Those who support expanding Medicaid insist that a state cannot pass up “free” federal money or that if we don’t expand, the money will go to another state. This is the kind of thinking that got us into the deficit and debt troubles we are in. First, there is no such thing as “free” federal money. The federal government has no money of its own and it gets the money it spends from the same people the state government does. Regardless of who the tax collector is, the impact on the taxpayer is the same. Second, Wisconsin won’t “lose” Medicaid dollars to other states as some argue because each state gets its share of federal Medicaid funding regardless of what happens in another state. Finally, hospitals, doctors, and other health care professionals would receive higher payments under the new tax credits that will be used to purchase private insurance rather than under Medicaid.

The administration should expect states to continue to reject this expansion for this reason, and one more too: because smart governors understand that by rejecting, they obtain leverage over Washington in negotiations, far more than if they had accepted the money with the strings attached. And these governors know that once you add new people to the system, you will never get them out of it.

Is the Medicaid Expansion Fool’s Gold?

July 03, 2012, 6:38 PM

As you’ve probably heard by now, at least fifteen governors are leaning toward rejecting the Medicaid expansion as allowed by the Supreme Court:

“Seven states with Republican governors have given a flat “no” to the Medicaid expansion since the Supreme Court ruling, according to reports and press statements. States that will decline to participate include Florida, where Gov. Rick Scott (R) turned his opposition to the law into a political career, and Louisiana, where Gov. Bobby Jindal (R) has vowed to help elect Mitt Romney as president in order to repeal it. In eight other states — seven with GOP governors — the Medicaid expansion seems unlikely, given comments from governors and their offices.”

Ezra Klein maintains, along with just about every other liberal commentator and former CMS head Donald Berwick, that the deal governors are being offered is too good for them to pass up.  Indeed, the federal matching rate for the expansion – which covers people at 100-138 percent of the federal poverty level (FPL) – is set at 100 percent federal tax money for 2014-2016, 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and beyond. Seems pretty tempting, doesn’t it?

But consider Klein’s own examples to see why the states are balking for reasons beyond just partisan politics. He writes: “Texas covers only working adults up to 26 percent of the poverty line.” Texas, along with about half the country, has a Medicaid program that is minimal compared to states like New York and others.  You can see the rankings of income eligibility for low-income adults here (it’s more generous to kids, but you’ll note you have to go through 26 – mostly red – states to get above 70 percent of FPL). While the federal money is indeed generous for the newly eligible population, it is less so for the rest. For your currently eligible population, you only have the regular Medicaid matching rate, which ranges from 50 to 76 percent. This adds up to a huge chunk of change for a lot of these states, many of which already have Medicaid programs overburdened thanks to the recession.

This also makes the expansion more appealing to states with generous Medicaid programs (which can now cut back and shift the costs for everyone else to the federal taxpayers), and less attractive to those states with minimal programs, where already eligible people come out of the woodwork to sign on to the system. And then of course there’s the argument that many of these states don’t want more people on Medicaid anyway, considering the sheer amount of population increase you’re looking at.

All in all, this is less of the carrot-only approach commentators are framing it as, and states are loathe to embark on an approach like this when the possibility of just waiting for an election, or playing a brinksmanship game and getting a block grant is in the cards.

The Provider Push for Medicaid Expansion

July 03, 2012, 5:39 AM

The primary push for states to accept the Medicaid expansion isn’t going to come from legislators, but from hospitals. You can probably guess why.

Hospitals and providers were expecting millions of low-income and disabled patients to join Medicaid’s ranks under health reform, but the court ruled that the federal government couldn’t withhold all Medicaid funds to states that opt out of expanding coverage, potentially inhibiting participation.

“They will scream for this money because they would rather see more people covered under Obama’s signature initiative than have bad debt,” healthcare consultant and former lobbyist John Gorman said of state-level lobbying by hospitals and physicians, noted the WSJ.

Analysts are expecting hospitals and health centers to target ramped-up lobbying efforts to their states’ Republican lawmakers, reported Kaiser Health News.

Hospitals are calling for increased Medicaid coverage to ensure affordable and accessible healthcare for their most vulnerable patient populations.

“If a state chose not to participate in the expansion, the poorest of the poor would be impacted,” Grady Health System CEO John M. Haupert told KHN.

Similarly, San Antonio’s University Health System was looking for Medicaid expansion to cover many of its 54,000 uninsured residents, the Houston Chronicle noted. But if Texas opts out, UHS President George B. Hernández Jr. wants state lawmakers to at least give counties a local alternative expand the program themselves.

The Supreme Court’s Surprise Medicaid Ruling

July 02, 2012, 6:24 PM

The Supreme Court’s decision on the constitutionality of PPACA included a shocking 7-2 ruling on the Medicaid expansion, which had been widely viewed on the right as the weakest argument advanced before the Court, but nonetheless resulted in a victory for federalism. States can now reject the Medicaid expansion mandated under Obamacare while retaining their original funding stream. Dan McLaughlin:

“The Court has warned for years that, while Congress could attach strings to federal spending, it could not simply coerce states into doing its bidding. Chief Justice Roberts, joined by Justices Breyer and Kagan and with the agreement of the four Republican-appointed Justices, finally put some teeth in this warning, holding that the size of Congress’ threat amounted to “a gun to the head” of the states that Congress could not be permitted to use. But Roberts, joined by Breyer and Kagan, concluded that Congress could reasonably threaten to withhold only the funding for the expansion of Medicaid and not pre-existing funding for the entire program. That split decision may allow some governors the wiggle room, if they want it, to say no to Congress, but it allows the budget-busting expansion of Medicaid to go forward in any state that accepts the new rules.”

The effect will likely massively increase the deficit, as it will allow states which pass on the implementation of an exchange (as many as 30 states as of this writing) to shift people in the 100-138 FPL category onto the federal docket. Avik Roy explains:

“Democrats structured the law this way because Medicaid is much less expensive, on a per-person basis, than are the subsidized exchange plans. In addition, Medicaid is partially funded by the states. However, now that states can opt out of the law’s Medicaid expansion, states that currently cover people above 100 percent of FPL with Medicaid now have a significant financial incentive to shrink Medicaid eligibility down to 100 percent of FPL, and let the federal government (read: taxpayers in other states) pay for the rest. This, again, will lead to substantially higher costs for the federal government, because exchange subsidies are much more generous than Medicaid is.”

This now combines with the exchange implementation discussion, and it will be the number one issue debated among state legislators in the next few months. Already fifteen states have suggested they will pass on the Medicaid expansion.

Medicaid Plays Havoc With State Budgets

June 28, 2012, 4:29 PM

The Wall Street Journal on the burden of Medicaid:

The 26 states that led the Supreme Court challenge against the law argue that expansion unfairly burdens them by putting them on the hook for higher Medicaid costs down the line. But states say that, even if the court strikes down the Medicaid expansion, the program will still be unmanageable, because the weak economy has caused the number of residents who rely on it to mushroom.

In Colorado, about 615,000 residents were on Medicaid by late last year, a record high for the state and a 57.7% increase from January 2007. The state cites hard economic times, coupled with its own eligibility expansion, for the uptick.

In Texas, the Medicaid program currently faces an approximately $4 billion budget shortfall, even after recent cuts to services. The number of residents who qualified for the program doubled from 2000 to 2011. Texas officials say the federal law would leave it in even worse shape because it would have to cover another 1.8 million low-income Texans.

A handful of states are striking out on their own to come up with a solution to high costs and the uninsured. Vermont is setting up its own plan that would go much further than the federal health law, and by 2017 give the state a Canadian-style, single-payer system.

A new state entity, Green Mountain Care Board, is crafting a plan to replace Vermont’s traditional insurance model with the state acting as a publicly funded and managed insurer that would pay health-care providers and set reimbursement rates.

Vermont hasn’t figured out how to pay for the system. Critics say the plan could impose burdensome new taxes and restrict residents’ health-care choices, while supporters say it would improve care and lower overall costs.