NCPA - National Center for Policy Analysis

States Look for Flexibility in Medicaid

March 4, 2011

Along with the exploding costs of public-sector benefit packages, managing Medicaid is the greatest challenge confronting the nation's governors and state legislative bodies.  About 16 percent of the nation's population is currently enrolled in Medicaid.  State budgets are stressed from explosive Medicaid growth, which has more than quintupled over the past two decades, says Brian Blase, a policy analyst in the Center for Health Policy Studies at the Heritage Foundation.

  • Four months from now, the extra Medicaid money delivered to states from the federal stimulus disappears.
  • The loss of federal money, along with increased enrollment as a result of the recession, exacerbates the state crisis.
  • All 29 Republican governors signed a letter to Congress and the White House asking that the Medicaid maintenance-of-effort requirements for eligibility in the new health care law be repealed.
  • Besides calling for increased flexibility on eligibility, states should also maximize opportunities to better manage their programs, control costs, and put in place fundamental long-term reforms.

An alternative to the government-centric structure of Medicaid is a premium-support model, under which individuals take state vouchers to purchase private health plans, including employer-based coverage, that best suit their needs.  Enrollees would benefit from increased choice and improved access to providers.  States would likely experience budgetary savings from this model.

Benefits will include:

  • Efficiency improvements from covering under a single policy all members of a family who are currently covered separately by different combinations of public or private plans.
  • Administrative savings achieved by significantly reducing the need for the state's Medicaid program to operate systems that directly reimburse providers and verify claims.
  • A more appropriate use of medical care by beneficiaries driven in part by greater care management and continuity of coverage.

Source: Brian Blase, "How States Can Survive the Medicaid Crisis," Heritage Foundation, February 28, 2011

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