Sunday, February 17, 2013

By Refusing to Implement the Medicaid Expansion Republican Governors May Be Making the Republican Block Grant Proposals Impractical

Paul Ryan's Medicaid block grant proposals have always made sense to me. Give the states their Medicaid allotment and real flexibility over how they spend what will inevitably be less federal money.

But as I have thought about the impact of implementing the Medicaid expansion under the Affordable Care Act ("Obamacare"), Medicaid block granting is looking more and more problematic.
Under the new health law, and the resulting Supreme Court decision over the law, states have the option of expanding their Medicaid programs on January 1, 2014. Listening to all of the governors, it looks like about three-fourths of the states will expand their programs and perhaps one-fourth will not. So far nine states are in the no column.

Those governors against the expansion are all conservatives objecting to entitlement expansions when these same entitlements are sinking the national fiscal outlook.

Ryan's Medicaid proposal would set a baseline for federal Medicaid payments to states and limit their increase in future years. His proposals last year were vague on how he would set that baseline but his earlier 2010 proposal, with Alice Rivlin, was more specific:
In exchange for slower growth in the Federal government’s Medicaid payment, states will have more flexibility in how they use Medicaid funds to meet the needs of their low-income populations.

Each state’s initial allotment would be determined by the state’s per capita low-income population based on Federal Poverty Level. The state allotment would grow at GDP +1 percent and would be further adjusted for population growth.
If a fourth of the states did not expand their Medicaid programs under the new health law and three-fourths did, just how would the baseline initial allotment for each state's share of the federal cost of Medicaid be determined?

The states expanding would have a far higher definition of "low income" than those that had not expanded.

Would a new Ryan Medicaid block grant proposal create just one definition for who was eligible? If so would it look more like the states that hadn't expanded or those that did?

If the definition looked like the new health law's Medicaid eligibility levels, then all of the governors who originally passed on the expansion would have done it for nothing and Medicaid block grants would cost the country more because of the need to equalize the states that had originally passed on the expansion.

If the baseline were to reflect the cost for states pre-expansion, then three-fourths of the states would be in for huge Medicaid cuts––hardly politically realistic.

Post January 1, 2014, with three-fourths of the states potentially at one Medicaid spending level and a fourth at a much lower level, just how do you create a fair Medicaid baseline on which block grants could begin?

Ironically, those loyal conservative "red state" governors holding the line on entitlement expansion may well either be setting their own Medicaid reform proposals up for becoming impractical or these same governors will have to eventually accept the new "Obamacare" Medicaid baseline to make the Medicaid block grant idea politically acceptable.


Earlier post: The Medicaid Controversy––The Republican Governors Should Put Up or Shut Up


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