As Congress attempts to reform our health-care system yet again, discussions about how to manage and pay for Medicaid are on the front burner. With one in four Americans enrolled in what’s now the largest “unearned” public-welfare program in history, curbing the program’s growth is a fiscal imperative.
But that doesn’t mean cutting back Medicaid has to hurt the poor as liberals claim; Medicaid spending can go down while patient care improves and the number of patients covered goes up. I know this is true because I helped my state achieve it.
In 2009, as secretary of health and human services for Governor Donald Carcieri of Rhode Island, I was charged with running a novel experiment. With exploding Medicaid costs in our state crowding out education, infrastructure, and other vital needs, we plainly saw what most current governors see today: an out-of-control entitlement growing 7 percent each year and eating 30 percent of our budget, yet frustrating patients with its complexities and subpar outcomes.
We set about revolutionizing the system with great success: Just two years later, an audit by the Lewin Group, a respected health-care-research firm, concluded that our bold reforms had been “highly effective in controlling costs and improving patients’ access to appropriate physician services.” The audit notes that our reforms led to “lower emergency room utilization,” as prevention of chronic conditions like asthma, heart disease, and diabetes became the norm. Home-health utilization, critical to avoiding needless expensive hospitalizations, actually increased by over 20 percent. The report praised Rhode Island for becoming a “smart purchaser” whose citizens received “the right services at the right time and in the right setting.”
So how did we do it? And could President Trump and Republicans replicate our success nationwide?
The answers are found in an incredibly misunderstood concept: “block grants,” which sadly have replaced “death panels” as the new political football standing in the way of a once-in-a-generation opportunity to completely overhaul Medicaid’s archaic, inefficient, and unaffordable design. Some hear the term block grants and think “kicking people off” and “limits to care.” They couldn’t be more mistaken.
First, like Medicare, Medicaid is headed for imposed limits anyway if we do nothing to reform it, because its rapidly rising costs are totally unsustainable. That’s a fact. And second, block grants are indeed a capped budget for states to spend, but in exchange, the federal government removes miles of onerous red tape, allowing governors huge freedom to innovate and apply modern solutions that have proven to deliver the results we all want: better health outcomes at lower prices.
The imaginative remedies we implemented were so responsive and customized to our patients’ needs that their experiences and health improved even as we spent less.
In Rhode Island, we needed budgetary certainty about our Medicaid costs, but we didn’t want to compromise the health of our most vulnerable. So we asked the federal government for a one-of-a-kind “Global Medicaid Waiver,” which works like a block grant. We agreed to a fixed amount of funding from HHS for five years; in return, the Feds agreed to waive the burdensome restrictions that prevented us from instituting imaginative reforms such as shared living for seniors, delivery of specialty care to only the small patient cohort that needed and benefitted from it, and improved reimbursement incentives for home care and prevention. These reforms in turn gave patients greater independence and better outcomes, and their satisfaction soared.
Our single, spending-capped Medicaid system replaced dozens of independent programs that had operated with no spending limits and no coordination. The culture change within our state government was seismic: We were forced to embrace cost containment and disciplined management, and to eliminate the silos between programs. Many feared harm to our Medicaid population, but exactly the opposite happened: The imaginative remedies we implemented were so responsive and customized to our patients’ needs that their experiences and health improved even as we spent less.
In its first three years, our Global Waiver saved Rhode Island approximately $100 million. Our Medicaid spending remained an amazing $3 billion below the $12 billion cap we had agreed to. Even after a Democratic governor took over in 2011, the eye-popping savings continued, and physicians and hospitals continued to support our changes, offering proof that ingenuity knows no party label. The head of our state’s AARP chapter was ecstatic that the elderly could move out of nursing homes and back into their communities, saying that our blueprint offered “the right direction for seniors.” Most astonishingly, in 2013, the Providence Journal reported that Rhode Island’s program had delivered a $28 million surplus.
How many governors would love to have such a Medicaid surplus? How many states would jump at the chance to save more money that could be spent on helping more of their most vulnerable citizens? Our reforms could give them that chance if instituted nationwide. Congress and the Trump administration would be wise to give the Rhode Island model a look.