Congress to the States: Take Medicaid. Please!
Pretzer, Michael, Medical Economics
Is Vermont's governor, Democrat Howard Dean, being set up? He says he's not certain. But it sure looks like the GOP's quest for a balanced budget, which necessitates a healthy cut in Medicaid, will put Dean and other state leaders in a precarious situation.
To lower Medicaid's cost, congressional Republicans want to transform Medicaid from a federal entitlement program to a system of block grants to the states, with fixed annual increases. The GOP intelligentsia argue that their motives are pure, that by giving grants to the states, along with expanded authority to do such things as restrict Medicaid patients to managed care, they'll help make health-care delivery more efficient and less costly.
Au contraire, say the plan's deriders. The Republicans are just passing the buck--in more ways than one. Their idea of block grants is fashioned mostly to take Congress off the hook while turning governors and state legislators into Medicaid's hit men. As Congress clamps down on Medicaid over the next few years via caps on the grants, Dean and his colleagues will have to make--then take the heat for--cuts in Medicaid fees, services, and enrollment.
One thing that's seldom disputed, however, is that Medicaid, jointly funded by the federal and the state governments to provide acute and long-term care to the poor, is too expensive. According to projections by the Congressional Budget Office, Medicaid will run up a $158 billion bill in fiscal 1995, with the federal government picking up between 50 percent and 79 percent of the tab in each state. (The percentage depends on a state's per capita income.) The Feds' Medicaid share is about half the size of the Medicare budget. But according to CBO, over the next five years Medicaid will grow between 10 percent and 11 percent annually. That's too much, say the Republicans. To get the budget balanced, the increase will have to be cranked down to between 4 percent and 5 percent a year, saving Washington about $180 billion over seven years.
Medicaid's expected growth makes governors and state legislators--Democrats as well as Republicans--nervous, too. Already, states spend more on Medicaid than on any other budget item, save elementary and secondary education. And in recent years, state outlays for education have been creeping downward, while Medicaid expenditures have been rising so fast that state revenues can't keep pace. That trend will continue for at least five more years, predicts the Kaiser Commission on the Future of Medicaid, a Washington, D.C., think tank funded by the Henry J. Kaiser Family Foundation.
Some states have tried to get a handle on their health costs by obtaining federal waivers of Medicaid rules. These have enabled states such as Arizona, Delaware, Hawaii, Kentucky, Ohio, Oregon, Rhode Island, and Tennessee to gain more managerial control of Medicaid and to move some beneficiaries into various managed-care systems. Many other states, including Dean's Vermont, have submitted waiver requests. For better or worse, the Republicans' plan for block grants would speed up the movement, expanding the potential for Medicaid managed care to all 50 states.
At first blush, the block-grant concept seems rather straightforward. Give each state a chunk of money and, within reason, let it devise a Medicaid program that's tailored to its specific circumstances. Inevitably, the current argument goes, a state's ship would be run tighter than the Feds'. Sure, some states may repeat Tennessee's mistake of jamming the Medicaid population into hastily assembled HMOs and PPOs (see the accompanying article). But the wiser states will take their cue from Minnesota, which spent three years planning for the Minnesota Prepaid Demonstration Project. They'll carefully phase in cost-controlled systems.
As with most health-care reform, the questions arise not from the concept, but from the specifics. One simple but potentially perplexing question for Congress: How many grants? …