- - Sunday, April 2, 2017


You’d be hard-pressed to find a more poorly designed program in the federal budget than Medicaid — the federal health insurance program for the poor. The costs are shared between the states and the feds, which means that the more money a state wastes under Medicaid, the bigger the check that Washington writes to the state. No wonder the program costs keep spiraling out of control.

Obamacare added nearly 20 million people to the Medicaid rolls and that is considered by the left to be a policy victory. It is swelling the federal and state budgets. Oh for the days, when taking people off of welfare was the goal, not putting them on the dole.

Conservatives have argued that Medicaid’s management should be turned over to the states through a block grant allotment of funds. When the Republicans proposed this in their Obamacare replacement bill, liberals blew a gasket. They hate the idea of allowing the governors to run the program in their states as they see fit free of the thicket of cumbersome federal rules. This idea was portrayed as heartless and a scheme to rip a hole in the safety net.

In reality, block granting Medicaid to the states would likely add a new incentive structure to control costs while holding state lawmakers accountable for delivering quality care. Medicaid doesn’t do that right now. It delivers poor quality care with many top hospitals and treatment centers, like Mayo Clinic, refusing to take Medicaid patients.

We already have a wonderful case study of a state running its own Medicaid program and Congress and the White House should duplicate this success story.

I am referring to the under-publicized Rhode Island experiment of a few years ago. In 2009 Rhode Island received a waiver from federal Medicaid rules in exchange for a cap on federal costs.

It worked like a charm. A 2013 analysis by Gary Alexander, the former secretary of Rhode Island’s health and human services, found that in the first four years the state’s annual cost increases dropped to less than half of the national pace.

When Rhode Island received its Medicaid waiver one of every five residents was enrolled and costs were growing by 7.5 percent annually. Under the waiver, the state’s official Medicaid documents show that costs rose an average of only 1.3 percent a year from 2009-2012 — far below the 4.6 percent rate in the other 49 states.

Rhode Island saved money by reducing costly emergency room visits by Medicaid recipients for routine medical needs. The state saved even more by shifting the elderly out of expensive nursing homes by offering home-care subsidies and promoting assisted living arrangements. Seniors often would rather avoid institutionalization.

An independent assessment by the economic consulting firm Lewin Group concluded that reforms allowed under the waiver were “highly effective in controlling Medicaid costs.” The program was found to have “improved access to more appropriate services.”

Mr. Alexander has become the Pied Piper for Medicaid waivers. “This is such a terrific solution because in Rhode Island we reduced costs and provided better care. When the state had an incentive to save money rather than spend it, this changed everything.” He adds, “State waivers are the way out of the Medicaid crisis.”

But the left and the Washington bureaucrats don’t want to surrender control of the program. They want a universal, one-size fits all solution. We know from welfare reform in the mid-1990s with work requirements, time limits and training programs that turning control over to the states will lead to innovative solutions that improve people’s lives — and save money. Why can’t that success happen with health care?

Republicans should continue to insist on solutions to Medicaid that provide some federal funding but allow states maximum flexibility. The Republican block grant makes financial sense and will help ensure that Medicaid doesn’t bankrupt Washington and the 50 states.

But the Trump administration doesn’t need to wait. It can start this program tomorrow. It should put out word to the governors that it will issue Rhode Island-style global waivers for Medicaid if they apply for one. The White House has full authority to do this and many states will line up for the offer.

One big advocate for this is Mike Pence. The then-Indiana governor once told me: “If Washington would give me 80 percent of the Medicaid money they now send Indiana, but got rid of the red tape and regulations, I would take that deal in a minute.” Mr. Trump should listen to his vice president and let the Rhode Island miracle take hold in every state in the nation.

• Stephen Moore is an economic consultant at Freedom Works and a CNN senior economic analyst.

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