If Only Medicaid Had Some Flexibility

A colleague sent me a paper from 2008. It’s titled, “State Responses to New Flexibility in Medicaid.” Get a load of this (emphasis mine):

Context: States have long lobbied to be given more flexibility in designing their Medicaid programs, the nation’s health insurance program for the low-income, the elderly, and individuals with disabilities. The Bush Administration and the Deficit Reduction Act of 2005 have put in place policies to make it easier to grant states this flexibility.

Methods: This article explores trends in states’ Medicaid flexibility and discusses some of the implications for the program and its beneficiaries. The article uses government databases to identify the policy changes that have been implemented through waivers and state plan amendments.

Findings: Since 2001, more than half the states have changed their Medicaid programs, through either Medicaid waivers or provisions in the Deficit Reduction Act of 2005. These changes are in benefit flexibility, cost sharing, enrollment expansions and caps, privatization, and program financing.

Conclusions:With a few important exceptions, these changes have been fairly circumscribed, but despite their expressed interest, states have not yet fully used this flexibility for their Medicaid programs. However, states may exercise this newly available flexibility if, for example, the nation’s health care system is not reformed or an economic downturn creates fiscal pressures on states that must be addressed. If this happens, the policies implemented during the Bush administration could lead to profound changes in Medicaid and could be carried out relatively easily.

As a reminder, this paper is discussing “The Deficit Reduction Act of 2005″, which the Republican House and the Republican Senate passed in 2005. When President Bush signed it, it became law. Here is his administration’s description of its effect (emphasis mine):

The Deficit Reduction Act Will Also Reduce The Growth In Medicaid By Nearly $5 Billion Over The Next Five Years. The Deficit Reduction Act helps restrain Medicaid spending by reducing Federal overpayment for prescription drugs so that taxpayers do not have to pay inflated markups. The bill also gives governors more flexibility to design Medicaid benefits that efficiently and affordably meet their states’ needs, and tightens the loopholes that allowed people to game the system by transferring assets to their children so they can qualify for Medicaid benefits.

I’ve been hearing a lot of talk about how what we really need to do is give states more flexibility. Then they can “innovate” and solve the problems we have with Medicaid. I know we sometimes have a short memory in policy, but for anyone who can think back all the way to 6 or 7 years ago, how’d that plan work out?

[Cross-posted at The Incidental Economist]