End Medicaid’s Crony Federalism
GOP governors should refuse the White House’s deals and fight for Medicaid reform.

New Jersey governor Chris Christie at a press conference, Jan. 24, 2013


James C. Capretta

Instead, GOP governors should withdraw from this White House game of “let’s make a deal” and instead decide, as a group, what kind of Medicaid reform to demand in return for considering broader insurance coverage. Importantly, the reforms they seekshould be in the form of legislative revisions of Medicaid, not temporary “waivers.” By pursuing a legislative approach, the GOP governors could join forces with House speaker John Boehner and Energy and Commerce Committee chairman Fred Upton, who have made serious Medicaid reform one of their top priorities this year.

The right principles for such a reform are clear. The federal government should move toward a fixed and predictable level of support for Medicaid insurance coverage, and states should be given near-total authority to manage their Medicaid budgets without federal interference. States can and should be held accountable for how well they provide safety-net insurance protection and for the quality of the health services they deliver to the program’s participants, but there’s no need for the countless federal mandates and restrictions. It is especially important that states be allowed to convert their Medicaid programs into a version of “premium support” through which the program’s enrollees would choose their insurance plans from competing offerings.

This vision for Medicaid could be achieved by providing federal block grants to the states. But it could also be achieved by converting a portion of Medicaid funding into a “per capita” program (Senator Orrin Hatch has proposed per capita caps for all of Medicaid). Under this reform, the Medicaid program would provide to the states a fixed amount of funding for each person who falls within certain income categories that make them eligible for Medicaid. Unlike a block grant, this approach would allow the federal contribution to Medicaid to adjust with changes in the eligible population due to recessions or other factors.

Even though some GOP governors have already announced their Medicaid intentions, it is still not too late for the broader group to adjust their tactics and use effectively the leverage the Supreme Court handed to them. In criticizing Obamacare, Republicans often say that it makes no sense to add 15 million people to an unreformed and unstable Medicaid program. They are right, and they should take the opportunity that now presents itself to secure permanent, statutory reform of Medicaid, not special side deals.

— James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.


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