WHAT does Medicaid have in common with “I Dream of Jeannie,” “Lost in Space” and “Get Smart”? They all made their debut in 1965. Although we enjoy watching reruns of these classics, the television networks have updated their programming. The federal government should do the same.
In recent years Washington has taken an obsolete program, which covers health care for low-income Americans, and made it worse through restrictive rule-making that defies common sense. It is biased toward caring for people in nursing homes rather than in their own homes and neighborhoods. It lacks the flexibility to help patients who require some nursing services, but not round-the-clock care.
If we were designing a health insurance program for low-income families today, we would use a much different model to drive efficiency and innovation — one that recognizes that the delivery of health care is fundamentally personal and local.
Time and again states like Wisconsin have blazed the path in Medicaid — from giving individuals greater control over their care to expanding the use of electronic medical records — while the federal bureaucracy has lagged behind. Just now Washington is discovering accountable care organizations (networks of doctors and hospitals that share responsibility for caring for patients and receive incentives to keep costs down) and “medical homes” (a model in which one primary-care doctor takes the main responsibility for a patient).
Wisconsin has created a database of claims and payments that gathers information from all insurers, including private companies and the state Medicaid program. It allows people to compare cost and quality across providers. We have asked Washington to add its data to our database, but it has not done so.
We need to modernize not only Medicaid’s benefits and service delivery, but also its financing. In good times, the open-ended federal Medicaid match encourages states to overspend. Amazingly, the program is now viewed by some states as a form of economic development because each state can at least double its money for each dollar spent. That matching feature penalizes efficiency and thrift, since a reduction of $1 in state spending also means forfeiting at least one federal dollar, often more.
Medicaid in its present, outdated form is unsustainable. Without serious reform, it is unthinkable to add 16 million more people, as President Obama’s health care legislation would do. The White House budget would temporarily pay 100 percent of the costs of new Medicaid enrollees. As a result, many states would expand enrollment, deferring the hard decisions until the federal money goes away.
An alternative approach is to offer block grants for Medicaid, as my fellow Wisconsinite, Representative Paul D. Ryan, the chairman of the House Budget Committee, has urged. Why now support a block grant for Medicaid when similar proposals have failed?
First, we know from more than a decade of experience with welfare reform that switching from open-ended entitlements to block grants pushes both individuals and states to behave more responsibly.
Second, more than a decade of experience with the State Children’s Health Insurance Program, which has vastly expanded coverage for children while being more flexible than Medicaid, shows the success of the block-grant model.
Third, there are already caps within Medicaid through so-called Section 1115 demonstration projects. It is through such projects, known as waivers, that innovative programs like BadgerCare in Wisconsin and MassHealth in Massachusetts (which President Obama says was his model for reform) were built. States from Arizona to Washington have also had waivers that capped federal liability for Medicaid. Their success shows that we can move beyond demonstration projects and let the federal government relinquish control over Medicaid.
Finally, some state officials oppose block grants because capped financing would bring the fiscal discipline they try desperately to avoid. But this discipline is precisely what is necessary to slow the rate of growth in health care costs. It is unlikely that doctors and hospitals will support authentic cost-saving measures as long as they believe there is more money coming from somewhere.
States are not merely “laboratories of democracy,” but also sovereign governments under our system of federalism. Unfortunately, the encroachment of the federal government in Medicaid threatens to reduce states to mere agents.
Block grants would bring a truce to the tug-of-wars between Washington and the states. This is the best option for Medicaid, facing a midlife crisis, to survive.
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