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Factsheet #42 on Health Care Reform

October 16, 2009

The End of Federalism: How Obamacare Will Impact States

More Medicaid

  • Mandated Expansions: All the health bills before Congress depend on a massive Medicaid expansion to expand coverage. If Congress raises eligibility to 133% of the federal poverty level, 33 states would see their Medicaid populations increase by 30%, and 10 states would see their Medicaid populations jump by 50%. Of course, this scenario is far worse if Congress moves eligibility to 150% FPL, as proposed by the Senate HELP Committee.
  • Less Flexibility: The Obama Administration and Congress have already taken numerous steps to roll back many of the flexibilities extended to the state Medicaid and SCHIP programs. The health care proposals would further restrict states ability to manage and stabilize their own programs.
  • Health bills creat Medicaid monstersUnknown Costs: State Medicaid spending is already outpacing projections. Recent surveys found that states saw an 8% increase in spending during Fiscal Year 2009. Governors and state officials should be skeptical of any promise from Washington that these reforms will not add additional costs to the states. Governor Bredesen (D-TN) warns that the costs to his state alone could be over $3 billion.

Gutting State Authority

  • Transferring State Power to Federal Regulators: The bills before Congress would place an unprecedented amount of power in the hands of the federal government, especially the Secretary of Health and Human Services, to determine health insurance rules and benefits. These powers have traditionally been held by state officials.
  • Minions to a Federal Bureaucrat: In place of its traditional role of regulating health insurance markets, the states would become merely an administrative arm of the federal government. State action on health care would be based on dictates and memoranda passed down from Washington.
  • Flexibility in Name Only: The federal one-size-fits-all approach of the bills before Congress would undermine state reform and innovation. Each state has its own demographic and political challenges, and no one federal solution can address the unique needs of each state.

A Better Approach to Health Care Reform

  • Promote True Federal-State Partnerships: Instead of the top-down approach of a federal health care reform, federal policymakers should embrace the principles of federalism and allow states to develop innovative ways to address their unique challenges to health care reform.
  • Preserve State Flexibility: Ease the burden on states by giving them greater flexibility to modernize and manage the Medicaid and SCHIP programs. This includes preventing the weakening of existing state flexibilities.
  • Tackle Fundamental Medicaid Reform: Expanding Medicaid is neither new nor innovative nor reform. Rather than expanding Medicaid, there should be a serious effort to reform it. Such policies would include moving healthy moms and kids into private health insurance through tax credits, premium assistance, and vouchers and adopting a "money follows the person" model for self-directing long-term care.

For more information, please visit: http://fixhealthcarepolicy.com

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