June 6 2011

Apply the Success of Welfare Reform to Medicaid

Hadley Heath

The state of Washington is sending a waiver request to DHHS Secretary Kathleen Sebelius that would allow the state to convert their current Medicaid program to a block-grant program.

The block-grant approach would allow the state to determine eligibility requirements and benefits, with minimal influence from the federal government.  This approach goes in the opposite direction of the Patient Protection and Affordable Care Act, or ObamaCare, that will require states to significantly expand eligibility for Medicaid or opt out of the program altogether.

Democrats hold the majority in both houses of Washington's legislature, and the governor is a Democrat as well.  Nansen Malin wrote about the bill in the Wall Street Journal this weekend, calling it "remarkably nonpartisan."

This is hopeful news, as it indicates that state-level leaders in Washington recognize the success of the mid-1990's welfare reforms that put states in charge.  It also means that they are aware of the huge burden Medicaid spending is to their state.  Like many states, Washington's spending on this entitlement was driving the state into a fiscal crisis.

Paul Ryan's budget proposal, titled the "Path to Prosperity," would convert all federal spending on Medicaid into a block grant program.  The budget summary says the change would be:

"...tailored to meet each state's needs, indexed for inflation and population growth.  This reform ends the misguided one-size-fits-all approach that has tied the hands of so many state governments.  States will no longer be shackled by federally determined program requirements and enrollment criteria.  Instead, they will have the freedom and flexibility to tailor a Medicaid program that fits the needs of their unique populations."

Indeed, Medicaid is the most expensive item on most state budgets, accounting for 22 percent of all state spending in 2010.  I hope the waiver request from Washington state will send a message to DHHS: States want the freedom to save taxpayer money and better serve the poor, now with Medicaid (like they did with welfare in the 1990's).  It's time to get the federal government and its perverse incentives out of the way.

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