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States Should Have More Control Over Their Medicaid Programs, Not Washington

As some members of the Congressional GOP are trying to put states back in charge over their private health insurance markets (for the most part), others also have a vision to grant states more flexibility and responsibility over Medicaid, the state-federal program that offers medical assistance to low-income children, parents, pregnant women, elderly, and disabled patients.

A behemoth of a program, Medicaid covers 70 million people nationwide, costing state and federal taxpayers more than half a trillion dollars. In North Carolina alone, one in five people is eligible. Medicaid is a critical safety net. However, numerous studies, including multiple published by MIT economists, indicate that the program’s value it brings to patients doesn’t add up to its nominal price tag.

Below is an assessment on some of the Medicaid transformations that are being discussed within the Senate GOP’s health reform bill, the Better Care Reconciliation Act (BCRA).

Medicaid Per-capita Caps 

Medicaid’s current financial design, the federal medical assistance percentage match rate (FMAP), is why the program has led to unsustainable spending levels since its inception. Because the match rate has the federal government pay for a larger share of states’ Medicaid programs, this has incentivized state officials to expand their program’s optional benefits, services, and eligibility levels. Medicaid’s match rate also serves as a disincentive for states to scale back on optional benefits, services, and eligibility levels because a majority of the savings revert to the federal government.

BCRA puts forth a responsible proposal to slow the growth of our nation’s Medicaid program by changing the way taxpayer’s finance it. Effective in 2020, per-capita funding for medical benefits will be allotted to five categories of patients: low-income children, expansion enrollees, low-income adults, and the elderly and disabled. Such a monumental change will place greater pressure on states to take more ownership on the value their Medicaid programs deliver to beneficiaries.

Work Requirements/Eligibility Checks

BCRA offers states the option to link work requirements with Medicaid benefits. This is an important step for Washington to redefine Medicaid as a temporary (for able-bodied enrollees) welfare safety net, not as dependent and ever-expanding health insurance program. This, combined with more frequent eligibility checks, is a necessary reform to ensure that those who truly need medical assistance have better access to care. BCRA even offers monetary incentives (a temporary 5 percent FMAP increase in covering administrative costs) to states that decide to enforce work requirements and more frequent eligibility checks. States such as Illinois, Arkansas, and Nebraska are examples of successful case studies for administering tighter eligibility standards.

Implications for North Carolina

With the aforementioned Medicaid provisions embedded in BCRA, there are so many avenues North Carolina can take to improve Medicaid’s product design, as well. For example, why not require the North Carolina’s Department of Health and Human Services to offer a Medicaid wraparound health plan (one that excludes preventative health care benefits)? This could work in tandem with the state’s community and rural health centers, many of which operate on limited state funds. For example, free and charitable clinics receive only 13 percent of funding from the state’s General Fund, with remaining revenue coming from hospital investments and private donations from businesses and individuals.

If more Medicaid patients could access basic primary care needs at one of these clinics and use their Medicaid benefits for specialty and hospital services elsewhere, this approach to care could accrue more savings for the Medicaid program and improve access to patient care. No claims submissions at the primary care level allow providers to spend more time treating patients and managing their chronic diseases – similar to the direct primary care model.

It’s been long overdue for states to share more fiscal responsibility for the programs they administer for our nation’s most vulnerable patients. After all, states are closer to the people, not Washington.

Katherine Restrepo / Director Of Healthcare Policy

Katherine Restrepo is the Director of Healthcare policy at the John Locke Foundation. Before joining the John Locke Foundation, she interned at the Cato Institute under the di...

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