TCS Daily

The Little Act That Could

By Charles Matthew Rousseaux - May 23, 2007 12:00 AM

"Give me Steam"

-- Peter Gabriel

"Medicaid waivers." Like "Deficit Reduction Act," it's a phrase that goes right near the top of the doze-o-meter. Combine the two and you've got the equivalent of literary Lunesta.

But push the pillow aside for a moment, since the two-phrase combo is also a catalyst for a whole lot of bubbling and boiling among the states, providing more people more treatment options and giving states hot new ways to deal with the huge pressures of entitlement spending.

Medicaid is a mountain, albeit a compassionate one. The joint federal and state government program which began in 1965 now pays for the healthcare of roughly 50 million people - largely the frail aged, disabled and impecunious. Medicaid spending already consumes more than 2.5 percent of the nation's entire gross domestic product, consumes one quarter of all state expenditures, and could cost taxpayers more than $5 trillion over the next decade, according to the splendid guide, "Making Medicaid Work" released earlier this year by SHPS and Newt Gingrich's Center for Health Transformation.

The General Accountability Office (which presumably leaves specific accountability up to others) estimates that if nothing is done, then Americans will be about $50 trillion in the red in fifty years thanks mostly to the Big Three - Social Security, Medicare and Medicaid.

States are already getting steamed at Medicaid spending, and with good reason. Last year, Medicaid chugged by elementary and secondary education as the largest line in most state budgets. By the time the next President is sworn in, Medicaid will account for more than one half of every new tax dollar in 21 states.

Yet steamy pressures have a way of reaching serious solutions. Get your mind out of the gutter and instead ask the Little Engine That Could. In Medicaid's case, it's the little act that could - the Deficit Reduction Act.

The Act gives states new flexibilities that a yoga master - at least a mountainous middle aged one - would envy. Instead of the one-size-almost-never-fits-all that is often the staple of such large-scale situations the act allows states to better tailor benefits to Medicaid's distinct populations and makes federal permitting itself less painful and more permanent.

For instance, last month Iowa received federal permission to make home and community-based services a permanent part of its Medicaid plan. The provision itself will help Iowans delay or even avoid stays in institutions, and the permanent part of it means that the state government won't have to go trough the gobbledygook of getting a new approval every few years.

Iowans ain't the only ones with more options.

Idahoans can now pick from four different benefit plans, including standard Medicaid coverage. Healthy children and adults have access to a basic coverage plan while the elderly and disabled have access to an enhanced plan. Many Idahoans on Medicaid can also get preventive and nutrition services too.

West Virginians now have access to two different benefits packages under Medicaid. Those who select the enhanced plan receive richer benefits like chiropractic and emergency dental services (no, that's not a joke). But they also receive more responsibilities, like having to show up on time for check-ups and using the hospital emergency room for emergencies only. (This sounds somewhat straightforward, but when you don't have insurance, the emergency room is a place to go for routine care.)

That gets to the nub of the new flexibilities. States aren't offering them just for the health of it. They're hoping to save a few bucks. For instance, healthy people may not use medical services as much as sick ones, so prevention benefits makes sense - and dollars. And better tailoring often means that something gets trimmed. That doesn't mean people receive less care, although that's an easy line for critics to take.

Yet something has to give. The costs of Medicaid are mounting steeply. So are those of its sisters, Medicare and Social Security. Needs are continuing to bubble and fiscal pressures are continuing to build.

Making it over the mountains of spending ahead will take a whole lot more than a single act or even a set of measures. It will require many small pushes over a long period of time. The direction is critical too: Up or down; toward greater government control or toward more individual choice.

That states are now making small but permanent pushes in the right direction is thanks to the Deficit Reduction Act. Expect additional states to start pushing as well. It's an uphill climb, but small measures persistently applied may mount mountains. As the Little Engine puffed, "I - think - I - can, I - think - I - can."

Charles Rousseaux works in the Bush administration. The views expressed are his own.

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