States Should Have Greater Flexibility To Control Spending, GOP Governors Say

BNA’s Health Care Daily Report™ sets the standard for reliable, high-intensity coverage of breaking health care news, covering all major legal, policy, industry, and consumer developments in a...

States should have greater control over Medicaid program design and spending, the Republican governors of 31 states and territories said in an Aug. 30 report.

The officials said that increasing Medicaid costs threaten to overwhelm state budgets and that states are not free to modify their programs in ways that best meet their needs.

“Medicaid is a severe budgetary threat to states and a barrier to quality care for the neediest Americans,” the report by the health care task force of the Republican Governors Public Policy Committee said. “Washington is passing the buck on budget leadership and entitlement reform without giving states the freedom to design a program that works best for their citizens.”

The debate over how best to reform Medicaid is likely to be a major topic of discussion for the joint committee on deficit reduction. House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) sits on the committee and said the GOP governors' report “will help inform our efforts to reform Medicaid for the future.”

“Policies handed down from Washington have significant consequences for states and local governments,” he said in a statement. “Rather than imposing new federal mandates, we are building a new partnership with governors to listen to their concerns and solicit their input on how to protect taxpayers and improve essential programs.”

Under the federal health reform law, 16 million people are expected to join the Medicaid rolls—a fact the governors said makes the need for reform increasingly important. The program had 54 million beneficiaries in 2010 at a cost of $273 million to the federal government, according to the Office of the Actuary at the Centers for Medicare & Medicaid Services. The federal government pays about 57 percent of total Medicaid costs.

The report said that the first step in overhauling the health care system should be repeal of the Patient Protection and Affordable Care Act. If the law stands, however, Medicaid still “must be transformed—not just reformed around the edges or managed through the cumbersome and outdated waiver process,” the report said.

Richard Sorian, assistant secretary for public affairs at the Health and Human Services Department, said that repealing PPACA would “increase health care costs for middle class Americans and reinstate a broken system that holds our economy back and allows health care costs to skyrocket.”

“We remain committed to working with governors of both parties to provide as much flexibility in Medicaid as possible while protecting the people it serves,” he said in a statement.

Policy Options for Reform

The report, A New Medicaid: A Flexible, Innovative and Accountable Future, identifies 31 policy options for reforming Medicaid, which fall under seven principles that GOP governors first outlined in June (115 HCDR, 6/15/11). For example, one of the principles is that states “should have the opportunity to innovate by using flexible, accountable financing mechanisms that are transparent and hold states accountable for efficiency and quality health care,” such as a block grant or a capped allotment outside of a waiver.

As cash-strapped states grapple with budget shortfalls, many governors have spoken about the need for additional flexibility in Medicaid, but Republicans and Democrats have offered differing perspectives on how far those reforms should go. For example, Republican governors generally have favored implementing Medicaid block grants, while Democrats want to maintain a system of federal matching payments to states.

The Obama administration does not support turning Medicaid into a block grant program and has urged states to look at existing flexibility in Medicaid law in order to rein in costs.

The report also recommends lifting the maintenance-of-effort provision of PPACA, which requires states to maintain the Medicaid eligibility rules that were in place when the law passed until 2014 for adults and until 2019 for children.

In addition, the report calls for giving states greater flexibility to make use of managed care, eliminating the mandatory benefit structure so that states can design their own benefits, and requiring greater beneficiary cost sharing.

Although some of the options in the report, such as experimenting with innovative ways to treat chronic disease, are popular across the political spectrum, recommendations that roll back benefits or protections for beneficiaries are likely to encounter strong resistance from Democrats.

The report is at .