Monday, January 26, 2009

Top Ten Reasons NOT To Support a Medicaid Bailout

This week, the House is expected to consider “stimulus” legislation spending $100 billion on Medicaid—more than $87 billion for an increase in the federal Medicaid match, and nearly $11 billion to extend Medicaid benefits (fully paid by the federal government) to unemployed workers, among other spending provisions.  Below are a list of possible reasons to oppose these provisions which Members may wish to consider in advance of the vote.

  1. Provides $100 Billion in New Spending—with No Accountability.  In November, Speaker Pelosi conditioned Congressional approval of $25 billion in aid to automakers on the “Big Three” providing plans to show their long-term viability.  The Democrat “stimulus” package would give states four times as much money—without requiring states to take any steps to demonstrate or improve the sustainability of their Medicaid programs.
  2. Makes Disgraced Former CEOs Eligible for Free Government Health Care.  Under the Democrat legislation, workers receiving unemployment compensation are automatically eligible for Medicaid, regardless of their former salary level or other income sources.
  3. Does Not Reform Fraudulent and Improper Payments in a “High-Risk” Program.  In 2003, the Government Accountability Office (GAO) classified the Medicaid program as “high-risk” due to high incidence of fraud—and recently cited $32.7 billion in improper payments made during 2007 alone.  Additional federal funding will not resolve the “significant challenges to address the program’s vulnerabilities” which GAO identified and may provide a perverse disincentive for states not to recoup Medicaid dollars by pursuing anti-fraud cases vigorously.
  4. Unprecedented Expansion of Federal Medicaid Role. The Democrat plan could result in the federal government would be paying nearly all of a state’s Medicaid expenses—and will result in the federal government paying all state costs to cover unemployed workers.  This significant alteration of the state-federal Medicaid partnership would discourage states from fighting fraud and could give states a strong incentive to shift additional costs (whether directly health related or not) on to the federal government’s books.
  5. Significantly Larger than Past Medicaid Bailouts.  When compared to a 2003 increase in the federal Medicaid match to help states recovering from the last recession, the Democrat language spends nearly nine times as much money ($87.7 billion vs. $10 billion) and provides a significantly higher increase in the Medicaid match (a minimum of 4.9% and a maximum of 18.9%, vs. 2.95%) for a longer period of time (nine fiscal quarters vs. five).
  6. Provides No Stimulus.  Because increasing the federal Medicaid match only substitutes federal spending for state dollars, many may find it difficult to justify such a measure as providing economic “stimulus.”
  7. Medicaid Increases Private Insurance Costs.  A recent study from actuaries at the consulting firm Milliman found that low reimbursement rates for public programs including Medicare and Medicaid resulted in a 12% increase in private insurance costs.  Some may therefore view an increase in Medicaid enrollment as potentially placing additional strain on the private insurance system due to sizable cost shifting from public to private plans.
  8. Flawed FMAP Formula Encourages States to Overspend.  While the Federal Medical Assistance Percentage (FMAP) matching formula was originally designed to provide greater assistance to poorer states, an independent analysis of CMS data indicates that states with higher concentrations of poverty actually have lower per-capita Medicaid spending—exactly the opposite result of FMAP’s intended goal.  Some Members may therefore be concerned that an additional FMAP bailout will do nothing to reverse this disparity, and may exacerbate it.
  9. States Increase Medicaid Spending in Good Economic Times and Bad.  An American Enterprise Institute study found that during the 1994-2000 boom years, Medicaid spending grew faster than both GDP and state revenues.  Some Members may therefore question whether states acted responsibly in expanding their Medicaid programs during flush economic times, and whether the federal government should reward such behavior.
  10. Exacerbates Entitlement Shortfalls.  At a time when unfunded obligations for Medicare and Social Security exceed $53 trillion, some Members may be concerned by the impact of increasing Medicaid spending—and the federal deficit—on our ability to respond to this crisis with reforms to slow the growth of health care costs.