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AFP-WA State Director has opinion piece in Wall Street Journal on Medicaid Block Grants

June 04, 2011 J

Originally posted in the Wall Street Journal, June 4, 2011.

Read here.

Liberal Washington State Tries to Kiss Medicaid Goodbye

The governor and the legislature unanimously back a block-grant model similar to welfare reforM

By NANSEN MALIN

Medicaid has plunged Washington state into fiscal crisis. This fact was recognized by legislators from both sides of the aisle during a contentious special session that concluded last week. The result was Senate Bill 5596, a Medicaid block-grant bill.

The block-grant concept was remarkably nonpartisan: The bill, requiring the state to apply to the federal Department of Health and Human Services (HHS) for a waiver that would replace its current Medicaid program with a block grant, passed with unanimous support. On Tuesday, Gov. Christine Gregoire, previously an opponent of block grants, signed the bill. Now the waiver request will go to HHS Secretary Kathleen Sebelius.

A block grant would free state and local officials from being de facto appendages of the faraway federal government. Just the latest in the long line of unnecessary federal strings are the costly “maintenance of effort” requirements imposed by the federal stimulus bill and ObamaCare. This requirement will add an estimated 176,000 people to our state’s Medicaid rolls by 2013 and prohibit the state from modifying eligibility rules without risking a loss of all Medicaid funding.

In contrast, SB 5596′s authors explain that the block grant would “allow the state to operate as a laboratory of innovation for bending the cost curve, preserving the safety net, and improving the management of care for low-income populations.” Rhode Island has had success under a similar waiver granted in 2009, saving $100 million within the first 18 months. With a block grant, state legislators will have the ability to alter eligibility and benefits to best serve the unique needs of their constituents without having to opt out of Medicaid entirely.

ASSOCIATED PRESS
Washington Gov. Christine Gregoire (left) with Secretary Kathleen Sebelius

Receiving federal dollars in a lump sum instead of matching funds would also make it easier to find cost-savings in Medicaid. Currently, 1.2 million residents of Washington state are on Medicaid. This costs the state $3.1 billion annually, with the federal government contributing another $3.1 billion. If the state legislature wants to reduce Medicaid spending, it has to find $2 in cuts to realize $1 in savings, creating a perverse incentive to keep spending beyond what the state can afford.

In addition to setting eligibility restrictions, the federal government handicaps states in their ability to set benefits. The only real option available to state legislators to control costs is to further decrease reimbursement payments to already underpaid physicians and hospitals. Block grants give states the freedom to decide—with minimum federal interference—whom to cover, what services to provide, what to pay service-providers, and whether to experiment with other innovative reforms.

In 1996, a Republican Congress and President Bill Clinton transformed the Aid to Families with Dependent Children (i.e., welfare) program into block grants to the states. With finite funding, states were given an incentive to reform programs and reduce costs. Critics argued that the federal government was shifting costs to the states, which would engage in a harmful race to the bottom.

Instead, the new program, Temporary Assistance for Needy Families (TANF), has been a remarkable success. Welfare rolls decreased by two-thirds, and by 2006 total real federal and state spending on TANF had decreased by 31% from 1995 levels. Washington state saw its case load decrease 37%, to 61,200 in March 2003 from 96,000 in September 1996, saving taxpayers $290 million in annual expenditures. Given the right incentives, and freedom to propose changes, states saved taxpayers money while better serving the poor.

Lawmakers in Washington state unanimously acknowledged the advantages and successes of block-granting when they passed SB 5596. Secretary Sebelius should grant the waiver. It’s time for Washington, D.C. to let Washington state run its own Medicaid program.

Ms. Malin is Washington state director for Americans for Prosperity.

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