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Gov. Kasich Should Lead On Medicaid Reform

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Gov. John Kasich has largely been a conservative success story.  He became the Governor of the great state of Ohio with an $8 billion deficit and lagging economy.  Today, Ohio has a surplus, is adding jobs monthly, and is considering significant across the board tax cuts to stimulate the economy more.

But on health care, John Kasich is so far failing.

Last month, Kasich announced that he would opt in to the Medicaid program in the Affordable Care Act.  Long thought of as the leading edge of federal encroachment under the ACA, the Supreme Court in a 7-2 decision last summer provided states with the choice of opting out without repercussions from the Federal government.  Yet, Kasich, along with several of his GOP gubernatorial brethren like Chris Christie of New Jersey and Rick Scott of Florida, made the calculation that the dangling carrot of addition Federal funding was too good to pass up.

For these states, this is a short term benefit with a long term lagging cost.  The Federal funding for Medicaid expansion is only funded for the next three years, after which funding slows.  The below graph, which is specific to Virginia but similar for all states facing this conundrum, shows that once the funding tapers off, the cost to state taxpayers will skyrocket.

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Furthermore, as it stands, hospitals in Ohio lose more money on Medicaid patients than they lose on patients without any insurance, and under this expansion, that would worsen. Furthermore, studies have shown that as Medicaid coverage expands, what really happens is that the costs are displaced to those with insurance, thus increasing their costs.

Maybe the worst fact in this whole debate is that Medicaid is broken.  Patients covered under Medicaid have worse outcomes than those without insurance at all.  There is an immense amount of data demonstrating this.  And yet, GOP Governors want to expand this failed program?

These issues are just the tip of the iceberg.  But how does Gov. Kasich deal with these facts?  Simply put, he hasn’t.

Kasich and the other GOP Governors have missed a golden opportunity.  In its frantic effort to try to expand Medicaid, the Obama Administration as well as Secretary of Health and Human Services Kathleen Sibelius have been willing to bend over backwards to make deals to states.  They have virtually opened up the playbook, allowing for massive experimentation.  The most extreme example is Arkansas, where Democrat Gov. Mike Beebe asked the Federal government to allow Arkansas to use the federal money from the Medicaid expansion to purchase private insurance for those who would otherwise have qualified for Medicaid.  This was virtually unprecedented, but the Department of Health and Human Services gave the go ahead.

With this kind of leverage, you would think the answer to their problem would be simple.  James Capretta of the National Review and Charles Blahous of the Mercatur Center at George Mason University have both suggested similar paths.  The governors of all these states should band together and form a coalition to reform Medicaid.  The White House would be hard pressed to challenge the states of Ohio, Florida, Pennsylvania, Virginia, Michigan, and others if they made demands together.

The Governors should focus on several key tenets:

1.  Federal funding, at a level to be determined, should not be temporary but should be considered permanent until changed by Congress.  Furthermore, they should ask the Federal government for funding based on a per capita calculation (a specific amount for every person eligible) instead of a block grant; such a funding measure would provide a more accurate way of providing services to individuals.

2. All programs now created should not be created under temporary waivers, but permanent Federal grants, with the states having the choice of reforming the systems at a later date.

3.  With this control, then states, and states alone, should be held accountable for the Medicaid services provided.

4.  States then should promote a more free market approach, using a combination of insurers, health savings accounts, and other methods to lower overall cost for consumers.

This is the moment for true conservatives like Gov. Kasich and others to lead on this.  Yes, the path I have illuminated, along with other health experts, will be difficult, will have political costs both to them and the Obama Administration, and ultimately will likely cost the Federal Government more money.

However, in the long run, maintaining the current Medicaid program, which is fundamentally broken, is ill-advised.  If Governors go ahead with this approach, it is unlikely we will see tangible reform for many years.  However, banding together and using the leverage of the moment can provide long term sustainable reform that will provide better results in the long run.

This was cross posted at Neoavatara

 

http://mercatus.org/publication/affordable-care-acts-optional-medicaid-expansion-considerations-facing-state-governments

http://www.nationalreview.com/corner/340204/kasichs-misleading-medicaid-expansion-avik-roy

http://www.forbes.com/sites/aroy/2013/02/08/how-ohios-medicaid-expansion-will-increase-health-insurance-premiums-for-everyone-else/

http://www.nationalreview.com/articles/341306/twelve-reasons-say-no-avik-roy

http://www.manhattan-institute.org/html/ir_8.htm

http://www.finance.senate.gov/newsroom/ranking/release/?id=b9f2e6eb-658a-4014-8a18-5c93d995e60e

http://www.nationalreview.com/corner/341853/arkansas-consequential-medicaid-deal-avik-roy

http://blogs.reuters.com/great-debate/2013/02/20/the-future-of-free-market-healthcare/

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