Think-tank offers blueprint for Medicaid reform

Governors in most states, including ours, are quick to point out that they are constitutionally required to balance the state budget, every year.

They do have a point; they routinely make tough decisions and make difficult compromises to ensure that the state books balance.

They often overlook the fact, however, that states balance their books with the help of federal funds that are provided only by adding to the national debt.

A new study by the Platte Institute, a conservative Nebraska think-tank, points out one of the ways that happens, and offers some solutions.

Nebraskans pay for about 40 percent of the state's Medicaid spending, with the federal government paying the remainder, or about $1.50 in federal funding for every $1 Nebraskans spend.

The Platte Institute contends that the "open-ended federal reimbursement of state Medicaid spending encourages states to grow inefficiently large programs because of the ability to pass costs to federal taxpayers."

And, the study contends, when state budgets get into trouble, the federal government has responded by bailing them out, enabling states to avoid dealing with "irresponsible program growth."

In addition, Medicaid crowds out private coverage and, as budgets get tight, providers receive less reimbursement and are less likely to take Medicaid patients, forcing those patients to use emergency rooms and throwing the expense over on the hospitals that provide them, and eventually, to private-pay patients and insurance companies.

"Obamacare" will only make the situation worse, the study concludes, adding nearly 100,000 Nebraskans to Medicaid at an annual cost of $500 million, and forcing states to cut provider payments and benefits even more.

A federal court decision against Obamacare's mandatory insurance requirement has put the whole program in question, but the Platte study calls for the Medicaid expansion's repeal.

Other recommendations:

* Replace the open-ended reimbursement with fixed allotments to give states incentives to reform programs and stop "developing schemes" to leverage additional federal dollars. After the allotments were used up, a state would absorb the full cost of additional spending.

* Consider a premium assistance model, giving some low-income clients a voucher to buy private policies.

* Structure vouchers on a sliding scale so those with lower incomes pay less.

* Control eligibility by limiting the program to those who genuinely need public assistance.

* Allow states to impose meaningful income and asset tests for long-term care.

* Give states flexibility to experiment with programs to find out what works and what doesn't.

Not all will agree with the Platte Institute recommendations, and not all are politically possible -- for now, although the federal budget crisis makes them more likely. But true reform is needed to ensure the long-term viability of the program for those who truly need it.