On Tuesday, OMB Director Mick Mulvaney unveiled President Trump’s latest budget proposal. While it includes cuts across a variety of discretionary programs, it also reforms one of the largest healthcare entitlements: Medicaid.
The budget, officially titled “A New Foundation for American Greatness,” would offer states the choice to cap Medicaid funding through a per-capita spending allotment or a block grant for the entire program. In addition, states will receive “more flexibility to control costs and design individual, State-based solutions to provide better care to Medicaid beneficiaries.”
These changes mark a stark departure from Medicaid’s status-quo. Since 1965, Medicaid has operated as an open-ended “partnership” with the states. The more states spend on the program, the more the federal government reimburses them. On average, the federal government reimburses states $1.33 for every dollar they spend on the program. However, states receive extra-preferential funding if they expand Medicaid to able-bodied adults through Obamacare.
While Medicaid’s framework is certainly costly for taxpayers, it’s downright disastrous for patients. Since states receive more funding for healthy, working-age adults, they have an enormous incentive to allocate fewer resources towards healthcare for the truly needy.
Nearly 600,000 individuals with mental illnesses, developmental disabilities, and traumatic brain injuries currently sit on Medicaid’s waiting lists for long-term care services. Yet despite these vulnerable patients’ critical needs, many die while non-disabled individuals receive free healthcare.
Trump’s budget blueprint would refocus Medicaid’s resources towards truly needy patients by capping federal reimbursements and offering states greater flexibility to streamline and modernize the program.
Mainstream media outlets predictably worry that states will use their new freedom to deny essential services to the needy. However, states routinely provide better services with greater flexibility from Washington.
When President Bill Clinton converted the welfare program formerly known as Aid to Families with Dependent Children into a block grant, states responded by transitioning welfare recipients out of the program and into productive work. States introduced work requirements, time limits on benefits, and even offered day care services so single mothers could seek gainful employment. According to one study by the Manhattan Institute, these reforms reduced the child poverty rate by two-thirds.
Block grants also work in healthcare. In early 2009, the Bush Administration granted Rhode Island permission to transform its Medicaid program through a block grant called a “Consumer Choice Compact Waiver.” The state enrolled beneficiaries in private, managed care plans to improve primary care access and reduce emergency room visits. They also shifted elderly enrollees out of traditional nursing homes and into more affordable home-and-community-based facilities.
In just two years, a report by the healthcare research firm, the Lewin Group, concluded that Rhode Island’s block grant was “highly effective in controlling costs and improving patients’ access to appropriate physician services.” Their analysis showed Medicaid enrollees with chronic conditions like asthma, diabetes, cardiac conditions and mental health disorders received “the right services at the right time and in the right setting.”
After seeing these reforms in action, even the head of Rhode Island’s AARP, Kathleen Connell, said “Seniors [on Medicaid] have absolutely benefited from being moved out of nursing homes into home and community-based care. The program is moving in the right direction for seniors.”
The Ocean State is just the latest example of what states can accomplish when they have the flexibility to govern as they see fit. It’s time Trump and Republicans in Congress apply these lessons and let states overhaul Medicaid on behalf of patients and taxpayers alike.
Charlie Katebi is a contributor to the Washington Examiner’s Beltway Confidential blog. He is an advocate at Young Voices and a policy fellow at the Millennial Policy Center.
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