April 20, 2011

Medicaid Restraints Hurting Those Most in Need

Matthew D. Mitchell

Senior Affiliated Scholar

A new Washington Post—ABC News poll shows that 69 percent of Americans oppose cutting spending on Medicaid. Many people see funding Medicaid as an issue with only two options: support the program as-is, or cut benefits for all enrollees and have an inferior program, says Matt Mitchell, a research fellow at the Mercatus Center at George Mason University. But this is not actually the case, he explains:

“Ideally, Medicaid reform would be about expanded flexibility so that states can cut costs for people who are less-needy, while improving the services for those who need it the most,” Mitchell said. “Right now, the program’s unsustainable promises threaten the financial viability of the entire program. And if states continue down this path, they will have to make dramatic and draconian cuts which will benefit no one, least of all those that have come to rely on the unsustainable promises.”

Mitchell says there are already precedents for this. Tennessee’s Medicaid program was on an unsustainable growth path in the early part of this decade.  “They expanded eligibility rules so much that more than a third of the state was eligible for the program. When they realized that the program was going to bankrupt the state, they had to cut 200,000 people from the roles in one fell swoop,” he said. 

Federal rules make it difficult for states to tailor their programs, often putting states in a position where they have to cut back everyone’s services, Mitchell says. 
 


“Arizona recently stopped covering organ transplants for their Medicaid enrollees.  If the federal government were to give them more flexibility, it’s possible they would have decided to reduce benefits for the relatively better-off enrollees, so that they could continue to care for the truly needy.  Instead, the one-size-fits all mandates forced them to cut everyone’s benefits,” he said.