Governors, state legislators, and budget officials across
the country are reaching the same conclusion about the Patient Protection and
Affordable Care Act (PPACA): it creates massive problems for state budgets almost
immediately. Medicaid expansion in 2014 may well bankrupt states, but the loss
of federal stimulus dollars combined with federal limits on how states can cut
Medicaid spending is a clear and present danger to budgets and taxpayers.
States can either play chicken with the federal government or give up and look
for other places to cut.
Health and Human Services (HHS) Secretary Kathleen Sebelius,
who as a former governor should have more understanding of the dilemma facing
states, has raised objections instead of supporting innovation. The frustration
led Washington Medicaid Director Doug Porter to tell Health
Care News, "I cannot see how [the
state of] Washington can afford to support both the Medicaid program and our
state-only programs."
North Carolina’s budget conditions require a return to
General Fund spending last seen in 2006. The state was still a great place to
live that year, but state appropriations for Medicaid were $2.5 billion that
year, nearly $900 million less than the combined $3.4 billion in state and
stimulus dollars appropriated this fiscal year.
States can save money on Medicaid by tightening eligibility,
limiting services, or cutting payments to providers. But the health reform law,
which Democratic governors supported before they read it, requires maintenance
of effort for eligibility. The law also severely restricts the ability of
states to reduce what they pay doctors if the payment reductions could reduce
access to care. That leaves cuts in services, but the most expensive optional
service is prescription drug coverage, which can prevent more expensive
procedures and save more money than is spent.
States are at the mercy of Sebelius to approve whatever
steps they try to take to address the problem. The review process could easily
extend past the July 1 start of the next fiscal year even if approved. If this
is not an example of the federal government commandeering states, it will be
impossible to find one.
So we have a game of chicken.
Will states blink and find other places to cut? Will they
stand firm in their plans to drop
Medicaid, possibly before 2014, with no federal safety net? Or will the
administration admit that the law is fundamentally flawed and waive
requirements for states as it has for a growing list of large companies?
