Abandon Medicaid, All Ye Who Enter Here?

The Wall Street Journal reports on a few of the states publicly weighing the idea of dropping out of Medicaid:

The idea of abandoning Medicaid as a solution is so extreme that even proponents don't expect any state will follow through, but officials are floating the discussions because dire budgetary pressures have forced them to at least look at even the most drastic options.

Medicaid, begun in 1965 and jointly funded by federal and state dollars, is the nexus of care for the neediest Americans, and a huge payer to hospitals, nursing homes and doctors. Medicaid enrollment totaled 62 million nationwide in 2007, the most recent data available.

But Medicaid has become one of the biggest items on state budgets, and states complain they don't have enough flexibility to pare it without losing their federal matching funds. The federal government, on average, covers 57% of the cost of the program for states. In exchange, states must keep Medicaid open to all who qualify.

Some states, in particular those led by Republicans, are calculating whether they'd be better off giving up the federal funding and replacing Medicaid with a narrower program of their own. Texas Gov. Rick Perry has proposed that his state get out of Medicaid in favor of a state-run system unburdened by federal mandates—including the one that prohibits states from reducing eligibility for the program if they want to qualify for the federal matching funds.

"We feel very comfortable that we could come up with a more equitable, a more efficient, and obviously a more cost-effective way to deliver health care," he said.

How to tackle the soaring cost of Medicaid was one of the big topics in the hallways at the Republican Governors Association gathering in San Diego last week. Mr. Perry said that in private discussions, most attendees agreed they wanted more freedom in choosing how to provide health care to the poor.

Washington state has also looked at the idea of dropping out the program, but Democratic Governor Doug Porter tells the Journal that it's not likely.

"It's not a serious consideration, but it's illustrative that people are even thinking about it," Mr. Porter said. "That I'm doing it is stunning."

I suspect Porter is basically right. Of all the states that have floated the idea, only Texas seems to have anything close to serious interest. But the fact that these states are even considering such a radical step suggests the magnitude of the problem, which has frequently been lost amidst concerns about Medicare and other programs. Will all the recent talk about dropping out of Medicaid lead to a slew of states backing out of the program? Probably not. But it does help underline the desperate need for reform.

More on Medicaid's failures and the path to reform here and here.