- The Washington Times - Thursday, July 7, 2011


Already a burden on the states, Medicaid is set for skyrocketing enrollment as the Obama health care law moves forward. Texas legislators recently took a bold step to stop out-of-control Medicaid spending before it breaks the state budget.

Texas Senate Bill 7 (S.B. 7), the omnibus health care reform law passed during a special session, contains a provision for the state to formally request a Medicaid block-grant waiver similar to the reform proposed for all 50 states by U.S. Rep. Paul Ryan in his budget plan. Washington state, with a Democratic Legislature and governor, passed similar legislation last month, making this a nonpartisan good-government movement.

State Sen. Jane Nelson (Flower Mount Republican) and Rep. John Zerwas (Simonton Republican), a medical doctor, sponsored the Texas legislation. Rep. Lois W. Kolkhorst (Brenham Republican) fought hard for the Medicaid waiver and for an S.B.7 provision that allows Texas to band together with other states in interstate health care compacts to create more health care options for patients.

The waiver would “provide flexibility to determine Medicaid eligibility categories and income levels” and further “design Medicaid benefits that meet the demographic, public health, clinical, and cultural needs of this state.” Rhode Island already has had success with a similar waiver issued in January 2009, saving more than $100 million within the first 18 months.

Medicaid covers more than 4 million persons in Texas, which cost $24.5 billion in fiscal 2009, representing 28.2 percent of the Texas budget for the 2008-09 biennium. As the Medicaid expansion required by President Obama’s new health care law moves forward in 2014, Medicaid’s share of the biennial budget for 2014 and 2015 is expected to jump to a crippling 46.6 percent, according to an analysis by the Texas Public Policy Foundation. Texas simply cannot afford to spend that much of its budget on a program largely subject to federal control.

Yet these dramatic numbers quite possibly underestimate Medicaid’s true cost starting in 2014. Last month, Medicare and Medicaid’s chief actuary, Richard S. Foster, told the Associated Press that a costly mistake was made in Mr. Obama’s health care law that will result in middle-class seniors who earn $64,000 a year qualifying for Medicaid in 2014.

Receiving federal funds as a lump sum instead of a matching grant that rewards higher spending with more federal dollars will enable Texas to find cost savings within Medicaid. Currently, if the Texas Legislature wants to reform Medicaid to save money, it has to find more than $2 dollars in cuts to save $1 for state taxpayers. Under a block grant, every dollar saved is saved in full.

Even if Texas cut all Medicaid programs that are not federally maintained, it would save the state just $67 million annually. Slashing physician and hospital reimbursements, risking health outcomes, would save another $46 million annually. Combined, those two cost-saving options would save Texas less than 5 percent a year. Any more significant spending would require the waiver.

Block grants are a proven approach. In 1996, a Republican Congress and President Clinton transformed the Aid to Families With Dependent Children (AFDC) into block grants to the states. With finite funding, states had new incentives to control costs and reform programs, as additional costs would be borne solely by each state. Critics argued that states would not be successful and thousands of families would be harmed. The new program, Temporary Assistance to Needy Families (TANF), was an overwhelming success. Welfare rolls decreased by two-thirds, and by 2006, total real federal and state spending on TANF had decreased by 31 percent from 1995 AFDC levels. Texas saw its caseload fall from 662,000 persons in 1996 to 115,100 in 2010.

What worked for AFDC will work for Medicaid. State legislators from both sides of the aisle are demanding the ability to make important health care decisions themselves and not be subject to unelected bureaucrats in Washington, D.C.

Texas, like Washington state, awaits the decision of Secretary of Health and Human Services Kathleen Sebelius. She should approve the waiver and give Texas the opportunity to run its own Medicaid program, tailored to the unique needs and priorities of Texans. Congress should then go further and adopt a block-grant reform for all 50 states, getting Washington politicians and bureaucrats completely out of the Medicaid business.

Peggy Venable is the Texas state director for Americans for Prosperity.

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