Ten Miles Square


May 24, 2012 11:58 AM If Only Medicaid Had Some Flexibility

By Aaron Carroll

A colleague sent me a paper from 2008. It’s titled, “State Responses to New Flexibility in Medicaid.” Get a load of this (emphasis mine):

Context: States have long lobbied to be given more flexibility in designing their Medicaid programs, the nation’s health insurance program for the low-income, the elderly, and individuals with disabilities. The Bush Administration and the Deficit Reduction Act of 2005 have put in place policies to make it easier to grant states this flexibility.
Methods: This article explores trends in states’ Medicaid flexibility and discusses some of the implications for the program and its beneficiaries. The article uses government databases to identify the policy changes that have been implemented through waivers and state plan amendments.
Findings: Since 2001, more than half the states have changed their Medicaid programs, through either Medicaid waivers or provisions in the Deficit Reduction Act of 2005. These changes are in benefit flexibility, cost sharing, enrollment expansions and caps, privatization, and program financing.
Conclusions:With a few important exceptions, these changes have been fairly circumscribed, but despite their expressed interest, states have not yet fully used this flexibility for their Medicaid programs. However, states may exercise this newly available flexibility if, for example, the nation’s health care system is not reformed or an economic downturn creates fiscal pressures on states that must be addressed. If this happens, the policies implemented during the Bush administration could lead to profound changes in Medicaid and could be carried out relatively easily.

As a reminder, this paper is discussing “The Deficit Reduction Act of 2005″, which the Republican House and the Republican Senate passed in 2005. When President Bush signed it, it became law. Here is his administration’s description of its effect (emphasis mine):

The Deficit Reduction Act Will Also Reduce The Growth In Medicaid By Nearly $5 Billion Over The Next Five Years. The Deficit Reduction Act helps restrain Medicaid spending by reducing Federal overpayment for prescription drugs so that taxpayers do not have to pay inflated markups. The bill also gives governors more flexibility to design Medicaid benefits that efficiently and affordably meet their states’ needs, and tightens the loopholes that allowed people to game the system by transferring assets to their children so they can qualify for Medicaid benefits.

I’ve been hearing a lot of talk about how what we really need to do is give states more flexibility. Then they can “innovate” and solve the problems we have with Medicaid. I know we sometimes have a short memory in policy, but for anyone who can think back all the way to 6 or 7 years ago, how’d that plan work out?

[Cross-posted at The Incidental Economist]

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Aaron Carroll ,MD, is an associate professor of Pediatrics and the associate director of Children’s Health Services Research at Indiana University School of Medicine.


  • Carly EngageAmerica on May 29, 2012 2:55 PM:

    Medicaid is in need of major structural reform. Not only is it stretching limited financial resources at the federal and state levels, but it also falls far short in delivering quality care and services for those in need. Obamacare only makes matters worse by adding millions of people to this already strained and unreformed program.
    The House Republican budget took important steps with regard to Medicaid by calling for the repeal of Obamacare and putting Medicaid on a budget. However, this is just a down payment on what needs to be done. The next step is to put policies in place that restructure the Medicaid program so that low-income individuals and families are mainstreamed out of Medicaid and into the private health insurance market. In this way, Congress can expand the private insurance market, ensure more robust competition, and secure the kind of care that the vast majority of working Americans have today. At the same time, Congress needs to restore Medicaid to a true safety net program for the most vulnerable in society.