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State should mark ObamaCare anniversary by pursuing Medicaid reform

New JLF report highlights need for waiver, greater funding flexibility

Contact: Joseph Coletti
919-828-3876
jcoletti@johnlocke.org

March 23, 2011

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Click here to view and here to listen to Joseph Coletti discussing this Spotlight report.

RALEIGH -- North Carolina needs relief from a year-old federal health care reform law that will strain the state's budget, divert resources to Medicaid from other critical needs, and lead to worse health care in the state. A new John Locke Foundation Spotlight report reaches those conclusions.

Today marks the anniversary of President Obama signing the Patient Protection and Affordable Care Act -- ObamaCare -- into law.

"Due to the overwhelming burden ObamaCare places on the state of North Carolina's budget, alternatives to the current legislation must be explored," said report co-author Joseph Coletti, JLF Director of Health and Fiscal Policy Studies. "North Carolina cannot afford current Medicaid costs, but ObamaCare limits the ways to get costs under control. ObamaCare also imposes additional, harmful expansions in 2014 and beyond."

Coletti and JLF Health Policy Fellow Nicole Fisher focus their attention on reforming Medicaid. State funding for the joint federal-state health insurance program targeting the poor and disabled will exceed $3 billion in 2011-12. Medicaid takes up the second-largest portion of the state's budget, trailing only education.

"State Medicaid appropriations for the next budget year will have grown about $700 million a year since 2007 without changes," Coletti said. "The year-old federal law will make it difficult to pay for this program and other core functions of the state, such as education. In fact, ObamaCare will make as many as 888,000 more people eligible for North Carolina Medicaid in 2014."

By any measure, North Carolina already spends more on Medicaid than almost any other state in the Southeast, Coletti said. "With reform, there is a chance to restrain this drag on state finances and to improve access and care for those enrolled."

Reform requires action from state leaders, Coletti added. "Gov. Beverly Perdue and the General Assembly need to make the case to Congress and the Obama administration about the need for greater flexibility that allows for reform," he said. "Without reform, Medicaid will provide worse care for everyone enrolled."

Cost containment strategies for Medicaid have become important to control budgets while still encouraging health care improvements, Coletti said. "These goals are proving extremely difficult to meet due to ObamaCare rules that forbid changes that tighten eligibility standards for all Medicaid populations," he said. "In addition, costly new provisions begin in 2014."

Coletti and Fisher identify "limited" options available to save the state money while encouraging Medicaid recipients to regain power over their health care options.

The most feasible possibility for reform involves immediate changes to funding for long-term care, Coletti said. "Long-term care such as nursing, adult, and home care has been the largest portion of North Carolina's Medicaid budget for many years," he said. "But less than one out of every nine dollars spent on home health care comes out of patients' pockets."

"Immediate remedies include encouraging private long-term care insurance and reducing the number of people and services eligible for Medicaid payment," Coletti said. "Florida's fixed-payment system also offers a good example for North Carolina to follow."

Another reform involves reducing the number of optional services Medicaid covers. "This approach has been successful in other states, such as Arizona and Oregon," Coletti said. "Services that are not required by the federal government are an obvious place to save state funds," he said. "North Carolina policymakers could determine that optional services such as end-of-life care, risky operations, and transplants are 'optional' or 'experimental,' thereby requiring private insurance coverage."

The reform with the greatest potential would require a change in the way the federal government provides Medicaid dollars to North Carolina, Coletti said.

"North Carolina could attempt to secure Medicaid funding in the form of a federal block grant," he said. "Under the current system, the federal government contributes $2 for every $1 in state funds spent on Medicaid. A block grant would allow the federal government instead to commit a certain amount of funding, no matter what the state spends."

"This form of cost-sharing enables states to know exactly how much funding will be provided and for how long, removing an incentive to expand coverage," Coletti added. "This approach has worked in Rhode Island, and other states are exploring block grants now to regain flexibility and control over state health spending."

State lawmakers already have shown an interest in addressing the potential harm linked to ObamaCare, Coletti said. "The introduction and passage of House Bill 2 showed that taking a stand against ObamaCare must be pursued without hesitiation," he said. "The most effective way to improve the state's budget and promote individual rights would be to repeal ObamaCare. In the absence of that action at the federal level, state policymakers should seek an immediate waiver from ObamaCare's Medicaid provisions that destroy North Carolina's freedom to innovate."

Joseph Coletti and Nicole Fisher's Spotlight report, "Repair and Reform Medicaid: Even more essential under ObamaCare," is available at the JLF Web site. For more information, please contact Coletti at (919) 828-3876 or jcoletti@johnlocke.org. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or mkokai@johnlocke.org.

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