Another Missed Opportunity on Entitlement Reform
Today the Government Accountability Office released an update on its high-risk list – highlighting programs within the federal government that have “greater vulnerabilities to fraud, waste, abuse, and mismanagement.” Among the programs listed was the Medicaid program, first added to the high-risk list in 2003.* The Medicaid program remains on the high-risk list because of its high rate of improper payments – 9.4 percent – and also because of inappropriate financing arrangements “that inappropriately increase federal Medicaid matching payments.”
One of the Medicaid funding mechanisms that GAO has criticized over many years are Medicaid provider taxes. Under this scheme, states impose taxes on medical providers, and use the provider tax revenues to obtain additional federal Medicaid matching funds, thereby increasing the federal share of expenses paid while decreasing the state share of expenses. Even the liberal Center for Budget and Policy Priorities previously wrote that provider taxes and other related methods to maximize federal matching funds constitute “Rube Goldberg-like accounting arrangements” that “do not improve the quality of health care provided” and “frequently operate in a manner that siphons extra federal money to state coffers without affecting the provision of health care.” Likewise, the fiscal commission’s report recommended that Congress enact legislation “restricting and eventually eliminating” provider taxes, which it criticized as “state gaming” and a “tax gimmick.”
The Administration’s budget, released on Monday, proposed reducing Medicaid provider taxes by beginning in 2015, as a way to generate $18 billion in funding for a two year Medicare “doc fix” while also bolstering the Medicaid program’s fiscal integrity. However, on Tuesday – the day after the budget proposal was released – HHS Secretary Sebelius wrote a letter to Arizona’s Governor outlining ways in which that state could solve its Medicaid-related budget shortfall, which included this paragraph:
We are also available to work with you on the possibility of adopting a provider fee, as we have done with several states. I am aware that the Arizona Hospital and Healthcare Association has recently come forward with a proposal to help the state finance at least some of its shortfall through such a fee.
In other words, Secretary Sebelius on Tuesday suggested that Arizona adopt a Medicaid funding mechanism that the HHS budget she released on Monday promised to curtail as abusive.
Over and above the cognitive dissonance these contradictory actions create are the larger issues of entitlement reform – slowing the growth of Medicare and Medicaid spending – that the Administration’s budget failed to address. While the President claims to support broader changes to Medicare, Medicaid, and Social Security, one must ask the question: If the Administration couldn’t go more than 24 hours without apparently reversing its support for a minor, $18 billion entitlement “tweak,” how exactly will President Obama achieve the trillions of dollars in long-term savings necessary to keep our nation from fiscal bankruptcy?
* The Medicare program also retained its position on the high-risk list, which it has held since the list was established in 1990, due in part to a lack of sustained improvement in the program’s rate of improper payments, calculated at 10.5 percent in 2010. Details on the Medicare program can be found on pages 154-60 of the report, and in a New York Times op-ed by the Comptroller General.