There's A Reason "Bend It Like Sebelius" Never Became A Catchphrase

Looking to fix the state budget mess? Medicaid is a good place to start. Enrollment in the joint federal-state program, which is designed to serve low-income individuals, is way up, and as a result, so are expenses. Even Obama's Health and Human Services Secretary Kathleen Sebelius has noted that states across the country are facing "extraordinary budget challenges" and has implicitly acknowledged the big budget crunch that has implications for Medicaid. But the suggestions offered so far by Sebelius about how to increase efficiency don't amount to much. According to Indiana Gov. Mitch Daniels, they're effectively "meaningless."

As I wrote last week, one of the biggest hurdles to reform right now is that states don't have the flexibility to make changes they might want to make—like, for example, this proposal to shift millions of Texas Medicaid recipients into private insurance. The Dallas Morning News reports:

Texas should shift many of its 3.3 million Medicaid recipients into private health insurance to avert a fiscal meltdown, a conservative group is urging.

Medicaid recipients who are not disabled should be given subsidies to buy private plans, and the state should ask to be freed from federal rules setting minimum coverage levels, the Texas Public Policy Foundation says in a report scheduled for release Tuesday.

The arrangement would let people in the state-federal program "make their own decisions," and all but the most abject of the poor should be forced to use some of their own money so they become more aware of health care's cost, the foundation urged.

"We would make shoppers out of our Medicaid recipients so they are making value decisions," the foundation's executive director, former Rep. Arlene Wohlgemuth, said in an interview.

…"We're going to allow the marketplace to work," Wohlgemuth said. To avoid "frightening" some 820,000 elderly and disabled people now on the program, she said, the plan would keep current benefits and eligibility. But it would slash how much future applicants seeking long-term care could make in income by nearly 40 percent and clamp down on their ability to keep what can be quite valuable homes. And that program also would shift eventually to a market-oriented look, Wohlgemuth said.

But as the article notes, it's not clear that the Obama administration would approve an overhaul of this sort. Certainly, the administration has failed—despite repeated requests—to approve Gov. Daniels' request to use his state's Healthy Indiana Program, a Medicaid waiver program that expands coverage through high-deductible plans, as the vehicle for Indiana's Medicaid expansion as expected under last year's health care overhaul.

It's true that last week the Department of Health and Human Services told officials in Arizona that the state could drop about 250,000 individuals from its Medicaid rolls. But as an article in The Hill pointed out this morning, that was a special circumstance.

The Arizona case is unique, however, and it's not clear if other states will be able to replicate it. For one thing, it operates its Medicaid program under a temporary waiver that expires before 2014, and it's not clear how many other states are in the same boat; in addition, states must meet federal minimum levels regardless of waivers.

So HHS didn't actually issue Arizona a waiver to reduce enrollment. Instead, HHS simply said that, under the existing rules, they couldn't do anything to prevent Arizona from shrinking its program. For all the states that do need waivers in order to make their programs work, this is hardly a promising sign—which may help explain why legislators in Florida are now threatening to pull the state out of the program entirely. I wouldn't necessarily bet that Florida follows through on the threat. Texas made similar noises about dropping out last year and has since backed off somewhat. But it's still notable that it's being talked about as a viable option at all.