SMITH: Using troops to block Medicaid reform

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COMMENTARY:

What does Medicaid have to do with funding our troops? Nothing, of course. So why have congressional leaders taken the latest defense spending bill and attached a moratorium on seven Bush administration rules to curb funding abuses in the program?

Perhaps they're hoping to avoid an honest debate about the way Medicaid is being abused.

State officials have been exploiting loopholes in the program, using federal taxpayer dollars to pay for a variety of their activities, ranging from school construction to juvenile justice camps. That's why the Department of Health and Human Services (HHS) issued the rules to end such abuse. So state officials began working with special-interest and advocacy groups to stop the rules and keep $15 billion (over five years) in federal dollars flowing into their coffers.

These rules hardly portend a major overhaul: The federal government is projected to spend $1.2 trillion over the next five years. The rules represent a savings of about 1 percent and a modest attempt at entitlement reform by requiring some long-overdue accountability. Yet even that has proven to be too much for green-eyed state officials.

Opponents of the proposed rules are distorting the facts. Why? To scare citizens into believing, for example, that their schools would no longer provide medically necessary services to disabled children. Not true; the proposed rules address only administrative overhead costs, not actual services that the schools are required to provide. Medicaid would continue to pay for these services.

Opponents also claim the rules would threaten "safety net" hospitals. That's hard to imagine: The rules affecting hospitals represent only about 33 hours of Medicaid spending each year by the federal government. Some also speculate that the nation's hospital emergency rooms would close. In fact, the rules are designed to ensure that hospitals get to keep the money they're paid, rather than being coerced into paying the states' share of these emergency-room costs.

Lawmakers aren't disputing the mountains of evidence of abuse found over the past decade by the Government Accountability Office and the Office of the Inspector General at HHS. They're simply ignoring these watchdog agencies. State Medicaid directors, concerned about the lack of accountability when taxpayers' dollars flow through separate state and local agencies, privately concede the need for federal action. But too many state officials want to get as many federal dollars as possible. So they don't question, for example, whether something called "Milieu therapy" is a wise expenditure, or whether small-engine repair or tracking down juveniles with outstanding warrants should be billed to Medicaid.

If Congress stops the Medicaid rules by amending the defense spending bill, it will have demonstrated its inability to control unnecessary spending - and abdicated its role to set sound policy. Congress shouldn't surrender policy decisions to consultants who dream up new schemes that designate as "Medicaid" any state or local problem in search of funding, or to high-priced lawyers paid to draft ambiguous amendments for state bureaucrats who rely upon the lack of clarity in federal rules as their defense.

By blocking these rules, Congress also would be sending taxpayers an unmistakable signal: that lawmakers have no interest in standing up to special interests, particularly the unions in hospitals and schools, and tackling the desperate need to reform entitlement programs, including Medicaid.

Finally, by blocking these rules, Congress would undermine the federal-state partnership in Medicaid. The federal government would be reduced to a mere revenue collector for state officials and their special-interest allies, who are limited only by their own creativity for burying any activity within the $350 billion Medicaid program. Don't be surprised when the next state budget crisis comes along to find Medicaid paying for elderly prisoners moved into nursing homes.

State officials are supposed to pay their fair share of Medicaid. It's easy for them to expand eligibility, provide more benefits, or increase payments to providers if they can get someone else to pay the bill.

It speaks poorly of Congress that it cannot conduct its business through regular order and process. Medicaid is to a war supplemental bill as a basketball is to a buffalo. What need is there for committees of jurisdiction, or for Congress to even meet, except to vote on a single omnibus appropriations bill that is fully loaded? Transparency should be a key feature of a highly performing health-care system.

Yet special interests are intent on distorting the debate - while their allies in Congress hide important Medicaid policy decisions in a special funding bill for our troops.

Dennis G. Smith, former director of the federal Center for Medicaid and State Operations, is a senior fellow in health-care reform at the Heritage Foundation's Center for Health Policy Studies.