States Need Congress to Break Obamacare’s Medicaid Gridlock

COMMENTARY Medicaid

States Need Congress to Break Obamacare’s Medicaid Gridlock

Jul 13th, 2018 4 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.
Congress must act to give states meaningful flexibility and relief from Obamacare and its Medicaid straightjacket. Nathaniel Fruchter/Getty Images

Key Takeaways

The Obamacare Medicaid expansion remains a challenge for the states.

Obamacare has wreaked havoc on the individual and small group insurance markets by replacing state oversight of insurance markets with federal regulatory overreach.

States can’t resolve the fallout from Obamacare alone.

Recent attention to a court decision against a waiver granted to Kentucky to make work requirements part of its Medicaid program should spur congressional action on Obamacare to give states greater flexibility to help those in need.

Under the current Obamacare structure, states that want to help low-income people get care and coverage are pushed into a Medicaid expansion and hamstrung by its federal rules and requirements. This proposition is a bad deal for the states and vulnerable Americans who need access to care.

Obamacare has wreaked havoc on the individual and small group insurance markets by replacing state oversight of insurance markets with federal regulatory overreach. This has meant fewer people purchasing coverage in these markets, higher premiums for those who do, and fewer choices across the board.

But the individual market is only half the problem. The Obamacare Medicaid expansion remains a challenge for the states. Rather than offering states meaningful solutions and reforms to the Medicaid program, Obamacare simply asked states to do more, enticing them with more money. Some states accepted the proposition, but others have rejected it.

Now, as reality sets in for those states that have accepted the expansions, some states, such as Kentucky, are looking for flexibility and have asked the federal government to waive certain federal requirements allowing them to modify their Medicaid programs. Gov. Matt Bevin even signed an executive order stating that without these adjustments the state will be unable to maintain the expansion and will have to back out.

As administrators of Medicaid, states constantly look for ways to better manage their programs. In some cases, states use the Medicaid waiver process to test new ideas. Waivers have been used to move enrollees into managed care plans and to allow more home-based care rather than institutional care. It also has been a pathway for states to experiment with new benefit designs, including private coverage options.

Right now, a number of states (some that have expanded Medicaid and some that have not) are looking to use the waiver process to test the viability and feasibility of several innovative initiatives, including adding a community engagement/work requirement as a condition of eligibility for some groups. They also are looking to modify premiums and cost-sharing requirements based on income, as well as put in place other limitations to reduce fraud, waste, and abuse.

Medicaid waivers offer states some flexibility, but they are not always predictable or guaranteed. Kentucky received approval from the secretary of health and human services and was scheduled to roll out changes in July, but the lawsuit and recent court ruling prohibited the waiver from moving forward as scheduled.

In Arkansas, the federal government approved many elements of its waiver proposal but denied its request to lower its eligibility threshold for the expansion population. In states such as Virginia, legislators are banking on a waiver as part of their agreement to expand. Still others, including several nonexpansion states that want to use waivers to reform their traditional programs, are still waiting to see if they receive federal approval for their waiver requests. It is this uncertainty and unpredictability that makes the waiver process an imperfect solution for the states.

So far, most efforts by Congress to help stop the damage done by Obamacare have focused on bailing out insurance companies offering Obamacare coverage or replacing Obamacare and private insurance with government-run health care for all. These proceed in exactly the wrong direction and do nothing to help the states with the Medicaid dilemma.

Thankfully, there is a better path forward. Conservatives have offered a consensus plan—the Health Care Choice Plan—to provide states and people real choices.

Under this plan, the current funding streams—for subsidies to insurers and for the Medicaid expansion—would be converted to block grants to the states. States would be able to use these funds to develop their own programs to help low-income people without the complicated federal constraints of the Medicaid program.

It would end the funding imbalance between expansion and nonexpansion states and would stop the gaming and manipulation of Obamacare funding that inappropriately shifts costs to federal taxpayers.

Importantly, it also would enable low-income people locked in the Medicaid program to opt out for private health insurance, which would give patients the final say in the choice of care and coverage.

States can’t resolve the fallout from Obamacare alone. Congress must act to give states meaningful flexibility and relief from Obamacare and its Medicaid straightjacket.

This piece originally appeared in The Daily Signal

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