Skip to content

Medicaid Needs Welfare-Like Reform

Erainna Johnson, 42, and legally blind from a stroke several years ago, depends on Mississippi’s Medicaid program to pay for the 19 medications she needs to treat her medical conditions. According to a recent story in The New York Times, Mississippi will soon adopt a new policy that will restrict Medicaid beneficiaries like Johnson to no more than five prescriptions per month.

Although Mississippi benefits from the highest percentage of federal Medicaid assistance in the country (76 percent), it’s struggling to meet its share of program costs with more than a quarter of its residents on the Medicaid rolls. “The reality was we had to ratchet it down some or run the risk of losing the whole program because of the spiraling costs,” said Stephen Holland, a Democrat state legislator.

Mississippi is not alone, nor is it the most far-reaching in its efforts to reduce unsustainable Medicaid costs. Missouri is expected to reduce its Medicaid rolls by nearly 100,000 this summer while Tennessee continues to move forward with changes that could result in more than 300,000 recipients losing coverage. Between 2002 and 2004, at least 29 states enacted laws to freeze or limit Medicaid eligibility. In 2004, 48 states implemented new pharmacy cost controls and all 50 states froze or reduced rate increases for at least one group of providers. “What’s happened in Tennessee is a precursor to what is going to happen in every state in the country. It’s just a matter of when,” according to Virginia Gov. Mark Warner (D).

Medicaid is at a crossroads. Created in 1965 as a health care program primarily for poor women and children, it now covers more than 50 million Americans, including seniors and the disabled, at incomes well above poverty in many states. Medicaid is already the biggest item in state budgets, exceeding elementary and secondary education combined. Left unreformed, analysts predict Medicaid will eventually absorb as much as 80 percent to 100 percent of all state revenues. In the last five years alone, the cost of Medicaid has risen 63 percent and is now more than $300 billion a year. “We are on the road to a meltdown,” Warner acknowledged recently.

So how do we avert disaster? We need to reform Medicaid by using the model that led to the successful transformation of welfare almost a decade ago. The key to that transformation was a Congressional effort that empowered governors to develop innovative new reforms, while creating financial incentives for better managing the program. The National Governors Association, of which Warner is chairman, has put forth a bipartisan blueprint for reform that provides a road map for Congressional efforts to strengthen and improve Medicaid.

Key among the governors’ recommendations are ending overpayment for Medicaid prescription drugs, cost sharing for higher income populations to promote cost consciousness and personal responsibility, flexible benefit structures to help states better target scarce resources, and transfer of asset restrictions to ensure program integrity and fiscal accountability. Reforms in these four areas would go a long way to reigning in spending growth and empowering Medicaid to deliver better care to more people.

Medicaid also needs to provide greater incentives for long-term care insurance and home-equity conversion to encourage proactive long-term care planning; an expanded role for “Cash & Counseling”-type programs to empower beneficiaries to manage their own care; and new initiatives to expand private health insurance coverage. All of these efforts highlight another critical aspect of the welfare reform initiative, which was the need to promote greater accountability and personal responsibility for beneficiaries.

Several governors have also expressed strong interest in other reforms, which will help them to transform Medicaid into a program to meet the needs of the 21st century. These include judicial reforms to provide states relief from outdated consent decrees and unending advocate lawsuits; a streamlined waiver approval process so states can implement innovative ideas more quickly; and broad “superwaivers” to open the door to truly bold reform ideas.

Unfortunately, critics of reform suggest any changes to Medicaid will hurt the poor. They conveniently ignore, however, the harms that the current program already does to Medicaid beneficiaries. According to a recent report drafted by the Medicare Payment Advisory Commission, fully 30 percent of all physicians now refuse to accept new Medicaid patients. Another report highlighted that Medicaid patients with chronic diseases had higher rates of adverse outcomes and used fewer preventive services than non-Medicaid patients.

Critics of reform also ignore the reality that Medicaid is already changing as — one-by-one — states try to avoid financial ruin. We need to ask ourselves whether to lead the way with measured reforms at the national level or to simply leave states to fend for themselves. Either way, Medicaid cannot continue on its present course.

We have a historic opportunity to secure Medicaid’s critical role as a safety net for future generations. We can strengthen and improve Medicaid while saving money at both the state and federal levels. So far, this has been a thoughtful, policy-driven process considerate of input from all who approach reform in good faith.

Simply put, we need to act before Erainna Johnson’s experience becomes acceptable to us. Absent reform, we won’t have a choice.

Rep. Nathan Deal (R-Ga.) is the chairman of the Energy and Commerce subcommittee on health.

Recent Stories

Strange things are afoot at the Capitol

Photos of the week ending May 24, 2024

Getting down on the Senate floor — Congressional Hits and Misses

US-China tech race will determine values that shape the future

What’s at stake in Texas runoff elections on Tuesday

Democrats decry ‘very, very harmful’ riders in Legislative Branch bill