If Texas dropped out of Medicaid, ctd.
Reihan Salam responds to my post on Texas Medicaid, arguing that conservative states that ditched the program wouldn't just leave poor Texans to fend for themselves in emergency rooms. Rather, he writes, "states that opt out of Medicaid could, and presumably would, create new programs, perhaps modeled on Indiana’s subsidized HSA program. Indeed, experimenting with new models for providing the poor with cost-effective insurance coverage has been a subject of great interest in right-of-center policy circles for some time."
Salam is correct that states that completely withdrew from Medicaid could conceivably set up their own state-based programs to cover the poor. But state governments would be stretching their resources awfully thin if they branched out on their own, as they'd be forgoing federal matching funds. The federal government currently covers 56 percent of states' Medicaid costs, on average — and 60 percent of coverage in Texas. States could design the programs however they'd like, but without the federal matching funds, even the most innovative, cost-effective coverage could go only so far.
"It's hard to do anything with less than half the money. You do less with less," says Anthony Wright, executive director of Health Access, a Sacramento-based advocacy group that has supported the Medicaid expansion. In fact, California had been struggling to fund its own
county-based health-care program for poor residents not covered by Medicaid — prompting the state to embrace the federal health law's expansion as soon as possible, as I explained on Thursday.
States could certainly try using their own money to fill in the gaps if they opted out of Medicaid entirely. But the massive loss of federal matching funds would almost certainly result in scaled-back coverage, which is why I argued that hospital ERs "would likely become the de facto safety net" under such a reality. And some of the Texas lawmakers who've been clamoring for the state to ditch Medicaid have acknowledged that they want to pare back coverage as well. "If people are in superbad poverty, that’s one thing,” GOP State Rep. Warren Chisum tells Texas Tribune/Kaiser Health News. “It breaks my heart when there’s someone who smokes, and who stays drunk half the time, and we’re supposed to provide their health care.”
The Tribune/Kaiser story lays out other reasons why total Medicaid withdrawal would be undesirable and politically unlikely, as it would deal a huge blow to hospitals, providers and other major recipients of the program's funds. The other, more feasible option would be for states to persuade the federal government to grant them a Medicaid waiver that would allow them to revamp the program in their own states. Salam argues that such flexibility could end up helping the poor, while being more fiscally sane for state governments: by giving states more autonomy, he writes, "finding new ways to deliver quality coverage to poor people at low cost would be easier."
Some states have already tried going this route: As my fellow blogger Dylan Matthews points out, Oregon's returning governor, John Kitzhaber, received such a Medicaid waiver to craft a celebrated state-based alternative that was still supported by federal funds. But, Matthews adds, the Affordable Care Act doesn't preclude some of these reforms from happening. States can still apply for a state innovation waiver, provided that their coverage and out-of-pocket spending rules match what's in the federal law. So if state governments truly wanted to come up with a more cost-effective Medicaid alternative, they have some leeway to do so under the federal health law.
That being said, there's no denying that federal money comes with major strings attached: States can't scale back Medicaid eligibility, which will be majorly expanded under the law, and they'll be partly responsible for shouldering the cost. I do believe there are reformers who genuinely want state governments to find more cost-effective means of covering the poor — and who think the federal law is getting in the way of that effort. But others, like Texas Rep. Chisum, maintain that the government simply shouldn't be responsible for finding ways to insure certain segments of the population. With more a dozen states are now considering a Medicaid opt-out, critics should be pressed to explain whether they intend to revamp the program to better serve a similar population or whether they want to scale back coverage altogether.
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