Non-Expansion States Deserve the Same Flexibility as Expansion States in Medicaid

COMMENTARY Health Care Reform

Non-Expansion States Deserve the Same Flexibility as Expansion States in Medicaid

Jun 22nd, 2020 2 min read
COMMENTARY BY
Nina Owcharenko Schaefer

Senior Research Fellow, Health Policy

Nina Owcharenko Schaefer is well known as a champion of patient choice and robust competition in America’s health insurance markets.
Medicaid faces growing demographic, structural and fiscal challenges that threaten both its effectiveness and its sustainability. emptyclouds / Getty Images

Key Takeaways

Waivers allow the states to request that the federal government waive certain requirements so that the state can modify their programs.

This waiver, however, is limited only to those states that opt to expand their Medicaid programs as outlined under Obamacare.

To ensure this new waiver option does not go unused, the administration should go back and expand the scope so that all states have the chance to benefit from it.

For over three years, the Trump administration—and most specifically, the CMS Administrator—have actively pursued much needed reforms to the Medicaid program. Recently, Oklahoma Gov. (and fellow Republican) Kevin Stitt withdrew his state’s request for a Medicaid waiver. That action should spur the administration to reevaluate the scope of these waivers and to expand its Medicaid reform efforts.

Originally created to help certain poor and vulnerable people get access to needed health care services, the Medicaid program is unique in that it is a joint federal-state program. The federal government sets basic requirements, while states design their individual programs based on these federal standards.

The federal government also shares in the financing of the program with the states. The federal share varies by state and, overall, has inched higher over time. The average federal share was 57 percent in 1990. It reached a high of 67 percent in 2010 and is projected to settle in at 62 percent moving forward.

Now more than a half-century old, Medicaid faces growing demographic, structural and fiscal challenges that threaten both its effectiveness and its sustainability. Absent legislative change, efforts to reform the Medicaid program have been done primarily through waivers. These waivers allow the states to request that the federal government waive certain requirements so that the state can modify their programs beyond the current restrictions.

Earlier this year, the administration released a new Medicaid waiver that would give states a simplified process to experiment with the design and financing of their Medicaid programs. The Healthy Adult Opportunity waiver gives states new program flexibilities in exchange for states replacing the current financing structure with a more manageable and equitable arrangement for state and federal taxpayers.

This waiver, however, is limited only to those states that opt to expand their Medicaid programs as outlined under Obamacare. The unintended consequences of this narrow approach is that it furthers the inequities between expansion states (that were enticed to expand Medicaid eligibility by the federal government’s promise to shoulder a greater share of the costs) and non-expansion states (that recognized that, eventually, there are limits to the amount of so-called “free money” Washington can dole out). 

The state of Oklahoma was first to apply for this new waiver. Facing a ballot initiative to expand the program, the governor used the waiver as a way to soften opposition to expansion. Yet, the expansion plan later fell through when the governor vetoed legislation that would have raised taxes to finance the state’s share of the expansion—a scheme he deemed unsustainable. [Tax gimmicks like the one vetoed in Oklahoma, which proposed paying for the expansion by raising taxes on the health providers who would ultimately gain under the expansion, are a great example of how the current financing structure of Medicaid is broken.]

The policies underpinning the Healthy Adult Opportunity waiver are worthwhile. All states are trying to balance delivering better care and services to Medicaid enrollees while keeping their fiscal books in order. To ensure this new waiver option does not go unused, the administration should go back and expand the scope so that all states, not just those embracing the Obamacare Medicaid expansion, have the chance to benefit from it.

These types of waivers give states the opportunity to demonstrate how more flexibility and new financing arrangements can work for the benefit of Medicaid patients and practitioners. This, in turn, may prompt Congress to make much needed reforms to the program permanent.

This piece originally appeared in RealClear Health

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