Medicaid is the rope in the current tug of war between the states and the federal government over health reform. So far, the feds think they are winning. But don't discount the strength and endurance of the states -- and especially the governors.
States are facing severe budget pressures. The 2009 stimulus package provided short-term cash to the states to shore up Medicaid -- the jointly funded federal-state health program for lower-income people. But in exchange, states had to agree to maintain their 2010 Medicaid eligibility levels or risk losing all federal matching funds.
In January, 33 governors and governors-elect wrote to President Barack Obama and congressional leaders requesting "flexibility and relief" from the "excessive constraints placed on us by healthcare-related federal mandates." States say they need to trim their Medicaid rolls now because they already are swimming in red ink and this circumstance will only get worse -- partly because stimulus funding that initially helped many of them pay for the added enrollment ends in June. And, while Health and Human Services Secretary Kathleen Sebelius has responded by sending her agency's Medicaid experts to the states to help them explore options to trim Medicaid spending, she is still urging states to do everything they can to keep Medicaid enrollment at current levels before the health law’s changes take effect in 2014.
These pleas for flexibility are bipartisan. For example, Democratic Gov. Jerry Brown of California is asking for permission to cut $1.7 billion from his state's Medicaid program by limiting most recipients to no more than 10 physician visits a year. Arizona's Republican Gov. Jan Brewer proposed tightening eligibility so the state could cut 280,000 people from its Medicaid rolls. Sebelius told her that Arizona didn't need to ask permission but could reduce its rolls by allowing an existing waiver to expire in September. But few other states have similar options.
Specifically, the new health overhaul law will require states to expand coverage by 2014 to all citizens under 133 percent of poverty -- about $30,000 a year for a family of four. Recent estimates show that this will mean adding an additional 20 million people to the rolls by 2019. Under the new law, the program will grow to 84 million enrollees and will cost nearly $900 billion by 2019. This increasing enrollment will be accompanied by growing cost burdens on the states.
Still, some see these expansions as steps that could transform the program into a means for working people and families to have access to health coverage.
A Kaiser Family Foundation issue paper, for instance, outlines perspectives on "strengthening Medicaid's reach" as a result of the health overhaul law. But these ideas could also backfire if, as Kaiser points out, "Medicaid enrollees cannot find doctors, dentists, specialists, or other providers to see them."
This scenario is already happening in some areas.
And, because Medicaid is an important safety net for many people who have no other options for health coverage, adding millions more recipients to the program without increasing the system's capacity will make it even more difficult for those currently on Medicaid to get the care they need.
Medicaid is arguably the worst health care program in the country. Recipients are promised a long list of benefits, but doctors who participate in the program are paid so little, and the paperwork is so onerous, that many can afford to see only a few Medicaid patients.
As a result, patients flood to hospital emergency rooms where -- if they wait long enough -- they eventually will be seen. Many have only routine health complaints that easily could have been handled in a doctor's office. A study by the National Center for Health Statistics found that Medicaid recipients were more likely to have multiple emergency room visits in a year than those with private insurance and the uninsured. Other studies have shown that Medicaid recipients are less likely to receive adequate care, and they are more likely to have worse outcomes than those with private insurance. They have also been shown to experience higher rates of hospital mortality than even the uninsured.
The program also is rife with fraud. New York State, where almost one in four residents is on Medicaid or its daughter program, the Children's Health Insurance Program, has tried to tackle wasteful spending. A 2005 investigation found that as much as 10 percent of the state's spending on Medicaid was lost to fraud and abuse.
You would have thought that reforming this program would have been Job One with the Congress and President Obama when they drew up their health reform plans. But Medicaid is as bureaucratic and rule-driven as ever. And this is the program that the president relies on to expand coverage to more than half of the newly insured.
Washington clearly is intent on expanding the program to enroll millions more people in this government-run health program while the states plead for more flexibility and relief from Washington.
The governors hold the power cards for health reform over the next two years, and they will continue to demand more flexibility to run the programs themselves. In this tug of war, I'm betting on the governors.
Grace-Marie Turner is president of the Galen Institute and served in 2005-06 on the federal Medicaid Commission to develop recommendations for reform. She's a co-author of the forthcoming book "Why ObamaCare is Wrong for America" (HarperCollins).