The last man to pull out of the Republican race against Donald Trump was John Kasich, the Ohio governor, a long-shot contender for the presidential nomination whose chances had long since faded. But he has returned to the role of thorn in Mr Trump’s side as Republicans in Washington struggle to reform Obamacare, leading a group of governors trashing their own party’s plan.

The intra-party revolt is rooted in Republican proposals to gut Medicaid, a programme for the poor that provides insurance to 69m Americans. Republicans have long seen it as an emblem of mismanaged welfare programmes that distend government and discourage people from working. But Mr Kasich is showing change is afoot.

He was one of 16 governors from Republican-led states that took an option to expand Medicaid offered by Obamacare, adding 700,000 Ohioans to the programme, despite the broad distaste for Barack Obama’s reforms in his party. In recent weeks he has stressed its vital role in treating people ravaged by opioids and other drugs, which killedan average of 11 Ohioans each day last year, and those suffering from schizophrenia, bipolar disorder and other mental illnesses.

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Republican efforts to pass health-care legislation are in jeopardy again, in part because of controversy over its potential impact on Medicaid. But the Republican reforms are more moderate, and more worthwhile, than they are getting credit for.

The CBO is exaggerating the effects of the Republican legislation on Medicaid enrollment, it’s worth putting Medicaid on a firmer footing, and any additional resources for health insurance for low earners should be directed toward enabling them to buy private coverage rather than pumped into Medicaid. On Medicaid, in short, the Republicans are on the right track.

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The Senate proposal wouldn’t cut Medicaid spending in real dollars — spending would continue to grow — but it would slow the rate of spending for the program, phase out extra money the federal government has given to states that expanded Medicaid under the Affordable Care Act (also known as Obamacare) and leave states to pick up more of the tab.

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If we want to make headway on improving public policy discourse, a good place to start might be with how we’re debating Medicaid policy, in particular how it might be affected by pending legislation to repeal and replace the Affordable Care Act (ACA), including legislation presented on Thursday by Senate Republicans.

Medicaid has long been on an unsustainable cost growth trajectory. This was true long before the ACA was passed in 2010, though the ACA exacerbated the problem. Annual federal Medicaid spending is currently projected to grow from $389 billion in 2017 to $650 billion in 2027. The biggest problem with that growth rate is that it’s faster than what’s projected for our economy as a whole. As with Social Security and Medicare, Medicaid costs are growing faster than our ability to finance them.

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The House-passed bill left large numbers of Americans uninsured, in part because very low-income households could not afford to enroll in private coverage even with the House’s tax credits. Medicaid is the nation’s safety net insurance program. In practical terms, there is no real alternative to Medicaid for a person below the poverty line. Under the approach recommended here, federal Medicaid funding would be dispensed to the states to strengthen the safety net for the poor, even as there would be less support for expanding the program to persons with higher incomes.

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Much of the public discussion about health care and health insurance reform abounds with misinformation. Medicaid, in particular, has become a political tool, with daily posts and articles about reforms to the program that distort the record for political gain. But there is little mention of the need to empower governors to take ownership of the program.

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Obamacare’s second biggest flaw is that even as it upended the half-century long consensus over who should be in Medicaid, the law inexplicably left intact a feature of Medicaid that we have known for decades fuels excess spending: its open-ended matching rate.

So long as states put up a dollar to fund Medicaid, Uncle Sam is obliged to match it with anywhere from $1 to $3 federal dollars depending on that state’s unique matching rate. It has been proven empirically that this formula fuels higher spending. An analysis by Thad Kousser at UC Berkeley showed that all other things being equal, shifting a state from the lowest to highest federal matching rate increases discretionary Medicaid expenditures by 22 percent.

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It’s been just over seven years since President Obama declared: “It is not sufficient for us simply to add more people to Medicare or Medicaid to increase the rolls, to increase coverage in the absence of cost controls and reform. Another way of putting it is we can’t simply put more people into a broken system that doesn’t work” [emphasis added].

Regrettably, the law he signed less than 10 months later fell far short of the president’s own benchmark as it relates to Medicaid. Not only did the ACA fail to impose any cost controls on Medicaid, it likewise contained no reforms to reverse or even corral the perverse incentives that for decades had simultaneously led to indefensible levels of Medicaid overspending even while creating enormous problems of access to the very people the program aimed to help. Instead, it amplified those incentives, making an already-bad situation even worse.

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Section 1332 of the ACA permits states to submit simultaneous and combined “superwaivers” for Medicaid and for provisions of the ACA itself. These superwaivers could make it easier for states proposing plausible ways to allow states that serve Medicaid beneficiaries more efficiently to reprogram federal and state savings into health programs for non-Medicaid eligible households. For households with working, nondisabled adults, it should also be made easier for states to pool their federal and state funds for Medicaid, the Children’s Health Insurance Program (CHIP), the ACA, and other programs to deliver coverage through private plans in the ACA exchanges. It is also time to allow states more flexibility in using Medicaid and other health care funds to invest in the social determinants of health—items such as adequate housing, school-based social services, improved lifestyles, and safer household environments, which can contribute to improved health and reduced medical costs.

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Reforming Medicaid does not have to be an all-or-nothing approach, where millions of people are thrown off of the program to reduce the budget. The states, which administer Medicaid, are closest to the problem and also are in the best position to develop solutions for Medicaid. With leeway to innovate and the pressure to achieve savings, the circumstances are ideal for change.

Since the program’s inception, the federal government has had regulations in place that mandate certain services be provided and that also set rules around eligibility. Those states seeking to innovate have had to secure a waiver from those rules.

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