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Many other cost-saving approaches are possible as well. For example, Medicaid nursing-home coverage is easy to attain. There is no stringent income test for eligibility, and individuals may keep a small fortune in assets (such as home equity of $500,000) and still qualify. On a recent trip to New York, a Medicaid eligibility case worker told me that they occasionally still get poor people on Medicaid for long-term care services.

States can start right now to embrace these changes. However, under the current structure, they can go only so far. States need additional federal flexibility to make these policies work better. Perhaps most important, in exchange for more flexibility, the current open-ended federal reimbursement of state Medicaid spending should be replaced with fixed state allotments. This would discourage states from overspending on Medicaid.

Fiscal reality means that states must rein in soaring Medicaid spending. States will do all they can within the confines of existing federal restrictions. But given greater flexibility from the feds, states could enact bolder reforms that promise not just to reduce Medicaid spending, but simultaneously to improve patient access to care and the quality of care delivered.

The question is: Will Washington give up power and allow states to reform the broken Medicaid program from the bottom up?

Brian Blase is a policy analyst in the Heritage Foundation’s Center for Health Policy Studies.