Funding a problem doesn’t solve a problem. There are ways to make health care more affordable and accessible with less government dependence. For starters, Congress should seriously reconsider the way the program is financially structured so states can be granted more flexibility to devise ways that can improve the value Medicaid brings to its beneficiaries.
The other component involves reducing regulation to make medical care more affordable, like repealing Certificate of Need, permitting mid-level providers to practice within their full scope of authority, exercising right-to-try laws, reducing the number of health insurance benefit mandates, or changing the federal tax code to allow the direct primary care market to expand.
Medicaid’s complex federal-state financing structure has long created perverse incentives that discourage efficient care. Key to the problem is the federal government’s uncapped reimbursement of state Medicaid expenditures, which encourages states to artificially inflate their Medicaid spending. Such schemes have significantly increased over the past several years and they likely add tens of billions in generally low-value Medicaid spending each year.
This study examines states’ use of accounting schemes to inflate federal Medicaid reimbursements. The study focuses on the largest of the current schemes, provider taxes. These are assessments states levy on healthcare providers, often accompanied by the explicit or implicit guarantee of increased Medicaid payments to those same providers, financed from the federal matching funds. The study provides an economic and political analysis of these taxes and other strategies that states have employed to maximize federal Medicaid reimbursements, and recommends reforms. It contains an appendix with a case study of Arizona, which shows how the state imposed provider taxes to pay for Medicaid expansion.
The Obama administration released its proposed budget for 2017 this week. It includes a host of health care-related proposals, including new initiatives to increase access to mental health care, expand opioid abuse treatment, fight antibiotic resistance, address the Zika virus threat, and fund a “cancer moonshot.”
The budget also contains a number of proposals relevant to Affordable Care Act provisions. It proposes providing 100% federal funding for state Medicaid expansions for three years regardless of when the state decides to expand.
It would also modify the high-cost employer health plan (“Cadillac”) tax to take account of geographic differences in health care costs; specifically, it would set the threshold when the tax begins to apply at the greater of the current statutory dollar threshold or a state’s “gold plan average premium.”
The HHS Budget in Brief includes a request for $2.1 billion to fund the federally facilitated marketplaces and oversight of the state marketplaces.
The budget anticipates the collection of $4.335 billion and expenditure of $4.560 billion in 2017 for the transitional reinsurance program.
People are starting to get excited about another ObamaCare work-around: The section 1332 waiver. This refers to a section of ObamaCare that allows states great flexibility in how they deliver ObamaCare within their borders. The curious thing about section 1332 waivers is that they can only be issued as of January 1, 2017.
Why? Why not allow states to get section 1332 waivers as of October 2010, when ObamaCare’s first regulations took effect? Or January 2014, when the gushers of tax credits began to flow through the exchanges? Who knows? Maybe the administration just thought they needed a few years for the cement around ObamaCare to solidify.
Newt Gingrich and Tom Daschle have co-authored a report on how states can use section 1332 waivers to execute policy preferences either to the left or the right of ObamaCare. Anne Phelps of Deloitte & Touche LLP has also written a report describing the benefits of using a section 1332 waiver.
Unfortunately, while many 2016 presidential candidates have backed the “repeal” part of the “repeal and replace” equation, few have addressed how they would start over.
They would do well to follow the advice of The Heritage Foundation. The think tank’s soon-to-be-released policy handbook for candidates, Solutions 2016, lays out the “then what” reforms candidates should be talking about:
- Remove regulatory and policy obstacles that discourage choice and competition.
- Encourage personal ownership of health care by reforming the tax treatment of health care.
- Transform health care coverage for low-income Americans by reforming Medicaid as a true safety net and glide path out of poverty.
- Modernize Medicare program to meet the demographic, fiscal, and structural challenges that threaten to bankrupt the system.
President Obama’s Final Budget Proposal includes:
The budget will include three years of federal funding to 19 state governments that passed up an earlier offer to expand Medicaid coverage for more than 4 million low-income people.
TWEAK TO “CADILLAC TAX”
Obama will ask for tweaks to a tax on certain health insurance plans that is unpopular with labor unions.
Oklahoma declined to set up an insurance exchange or to expand its Medicaid program, which has some of the nation’s most restrictive eligibility criteria. State officials say the number of private insurers participating on the federal insurance exchange here has fallen, and the premiums of the insurance plans on offer have increased.
The public’s attitude can also be an obstacle: Supporters of the Affordable Care Act often encounter stony skepticism here.
“‘Obamacare’ is a cuss word in this state,” said former Gov. David Walters, a Democrat.
Six out of 10 registered voters support “low income subsidies for health insurance.”
A smaller proportion (45%) believe states should expand Medicaid to people who work but are too poor to buy insurance.
Even fewer voters (41%) approve of President Obama’s idea to extend “start-up” benefits to states that haven’t yet expanded Medicaid.
In the wake of Louisiana governor John Bel Edwards’ announcement last week that his state would expand Medicaid under ObamaCare, the White House rolled out a new scheme to persuade the 19 states that are still holding out to fall into line and expand their programs: throw more money at them.
But these state officials should resist the temptation, for at least three reasons:
- First and most obvious is that expansion states have all experienced the same thing: More people signed up than expected, and it blew a hole in the states’ budgets.
- The second reason is that there’s no such thing as “free” federal dollars. The money comes with conditions, which effectively shifts policymaking from the receiving state’s legislature and governor to a distant federal bureaucracy (in this case, the Centers for Medicare & Medicaid Services), which dictates how states must spend federal Medicaid funds.
- The third reason is less abstract: Medicaid will harm those it’s meant to help. Often lost in the expansion debate is that Medicaid is the worst form of health coverage in the country.
The decision states face of whether to expand Medicaid to non-disabled, working-age, childless adults—the Affordable Care Act primary expansion population—involves tradeoffs. These tradeoffs include higher taxes, reduced spending on items like education, transportation, or infrastructure, or reduced spending on other Medicaid populations such as the disabled, children, or the elderly. The ACA funding formula allows states to pass a much greater share of the costs of covering non-disabled childless adults to federal taxpayers, but the tradeoffs still exist.