Turn Medicaid hot potato into a block grant


Source: Governor's Budget Recommendations, FY 2011

Despite the ongoing debt and deficit battles in Washington, our national leaders need to work together to address a political hot potato – Medicaid – to help get the nation’s fiscal house in order. For Utah, implementing a block grant to fund Medicaid is the way to go.

[pullquote]Block grants provide more flexibility to states in structuring Medicaid programs to match the unique needs of their residents. [/pullquote]Let me explain why.

Growing at 7 percent annually, Medicaid is the health care system for the country’s poor and disabled. In 2009, the federal government paid 66 percent of the $380 billion total outlay for Medicaid – which is now the single largest source of federal funding to the states. In turn, the states typically spent 16 percent of their general funds for Medicaid, second only to K-12 education.

Since Obamacare is expected to add 15 million more individuals to the currently enrolled 55 million Medicaid beneficiaries, costs could balloon in coming years. The program is projected to consume $840 billion in federal and state spending annually by 2019.

Currently, federal funding for Medicaid is guaranteed to states on an as-needed basis, with no specified ceiling on funds. Therefore, matching dollars provide incentives for states to maintain higher levels of Medicaid coverage, even when budgets are tight. Consequently, when states do cut services, the reduction in both state and federal funding means even deeper cuts – a double whammy.

To complicate matters, high-income states receive a $1 match for each state dollar spent, whereas low-income states get as much as $4. Therefore, when a low-income state expands its Medicaid program, those costs are shifted to taxpayers in other states. Every taxpayer in the nation foots the bill of more generous states or those with shoddy fraud oversight.

Block grants – pre-defined budget allocations that are constrained by a funding cap – would alleviate these issues. Block grants provide more flexibility to states in structuring Medicaid programs to match the unique needs of their residents. And Utah is unique from a demographic, political and lifestyle perspective.

Let’s take a look at the medical and demographic profile of Utah’s 2.8 million residents. One-third of Utahns are children age 18 or younger, compared with just 26 percent in the U.S. overall. In addition, we have a smaller percentage of elderly. In Utah, we celebrate 20.3 births per 1,000 people, compared with only 14 births per 1,000 nationwide.

Utahenjoys lower infant mortality, teen death rates, AIDS diagnoses, and a higher life expectancy than the U.S. as a whole. The percent of overweight and obese children and adults is significantly lower than the U.S. average. Cancer and heart disease are less common here and the rate of smoking among adults is an impressively low 9.1 percent, less than half the national average.

And equally impressive, per capita health care spending in Utah – including prescription drugs, insurance premiums, hospital expenses, and state spending – is 33 percent less than the national average.

But why does this matter? First, if it ain’t broke, don’t fix it! Areas of health care that are targets for some states, or the nation as a whole, are not key issues for Utahns.

However, there are areas of health care where the data show that Utah is weaker. Utah has higher rates of mental health issues and suicide. Fewer mothers are obtaining pre-natal care compared with the national average.

With a block grant program, Utah could target these areas of health care that need attention instead of spending Medicaid dollars on blanket programs mandated by the federal government. A block grant program would also provide both Utah and the federal government with budgetary consistency.

Not only would the federal government cease to be a bailout vehicle for states that waste Medicaid dollars, but states would be motivated to create better programs and serve their enrollees more efficiently, effectively and equitably.

A proposal by Rep. Paul Ryan (R-Wis.) and Dr. Alice Rivlin, former director of the CBO and the OMB, would convert the federal share of Medicaid payments into block grants starting in 2013, reducing the federal deficit by $180 billion over 10 years.

It is time to give this plan serious consideration. In addition, state officials should do whatever they can to opt out of burdensome federal requirements so that Utah can tailor Medicaid services to the unique needs of Utah residents.