Medicaid Decision Gives States a Bargaining Chip With Feds

As the most recent in a string of states making decisions about their Medicaid programs, Missouri has tabled the Obamacare expansion of its Medicaid program for at least a year.

Four other states -- Florida, Montana, Idaho and South Dakota -- have taken a similar "wait-and-see" approach. Meanwhile, Arkansas and Louisiana are bucking the trend -- using federal Medicaid dollars promised under Obamacare to enroll newly eligible residents in private health insurance through Obamacare’s exchanges.

Tennessee has asked the U.S. Department of Health and Human Services for permission to take a similar approach. All in all, it is likely that roughly half of all states will not expand their Medicaid programs, and at least a handful of states that do expand may do so through the exchanges.

Given the recently released results of Oregon’s Medicaid study, which showed few statistically significant improvements in health outcomes over two years, states have much to think about when it comes to their Medicaid programs.

States that take a wait-and-see approach, holding off for at least a year, should pay close attention to how new approaches -- like what Arkansas is pioneering -- play out.

Certainly, expanding Medicaid will cost states money. The federal government covers 100 percent of the costs of new enrollees initially, but this falls to 90 percent by 2020, so for states that are cash-strapped, expanding Medicaid one way or another may be a no-go.

But if a "private Medicaid" expansion (which would have higher reimbursement rates than basic Medicaid) can deliver better outcomes, then for states choosing not to expand now, a future "private expansion" may be in the cards.

Nevertheless, the private expansion isn’t a panacea -- it may end up costing more money for states and the feds, and, as my colleague Avik Roy put it, "the [Arkansas] deal applies a kind of private-sector window dressing on the dysfunctional Medicaid program."

A silver lining, however, is that the Medicaid expansion may even help put states in a better position to become laboratories of innovation. States that have yet to finalize a decision, but are considering expanding Medicaid, should use this as an opportunistic bargaining chip with HHS.

While HHS would certainly like as much control in the Medicaid program as possible (given its centrality to Obamacare’s success or failure), because expansion is ultimately a state decision, states have a good deal of bargaining power.

States should use this bargaining power to request waivers implementing innovative, targeted Medicaid programs in their states -- Indiana, for instance, has seen success with its Healthy Indiana Plan.

Indiana’s approach provides beneficiaries with a Health Savings Account, partly funded by the state, to encourage more judicious use of health care dollars. This wouldn’t work for all states, but it’s a great example of what states can do, given the opportunity. Use of managed care for broader populations may also offer modest savings for states.

Nevertheless, it’s perfectly reasonable for states to not expand Medicaid. Despite clamoring the Left, the evidence on whether health insurance definitively improves health is mixed.

Access to health insurance can improve access to care (although with Medicaid, access to specialists can still be problematic), but many of those that would be eligible for Medicaid under Obamacare would be young, healthy adults -- those who probably don’t need comprehensive access to care.

States that choose not to expand Medicaid should focus on improving existing public health programs -- for instance, by setting a global cap on Medicaid spending (like New York has done successfully) and by working with HHS on better managing the care of the sickest and most needy population -- those eligible for both Medicare and Medicaid.

Regardless of a state’s expansion decision, smart, targeted reforms can begin to fix the Medicaid program.

This piece originally appeared in Washington Examiner

This piece originally appeared in Washington Examiner