Next Political Battle Brewing on Medicaid Messaging

by Dan Diamond, California Healthline Contributing Editor
Next Political Battle Brewing on Medicaid Messaging

Democrats have seized on Republicans' planned reforms to Medicare, using the issue to frame their deficit reduction talks and as a starting point for political campaigns. While the GOP's Medicaid proposal has drawn less scrutiny, advocates are expected to focus on threats to the program's funding in the coming weeks.

Political messaging campaigns sometimes feel like Hollywood blockbusters: they’re dramatic, heavily produced and end up playing at a town hall near you.

During the health reform debate, “Sarah Palin and the Deathly Panels” was a surprise hit in the summer of 2009. This year, Democrats’ version of “MediScare” opened to a limited engagement in a New York county. And by every indication, the party plans to take its winning message to a national audience.

But can a sequel of sorts — “MediScare II: Medicaid Block Grants” — be far behind?

Democrats are marshalling a national effort to warn that Medicaid is imperiled. Yet Republicans say the real concern is out-of-control health spending and states lack sufficient tools to rein in the program’s costs.

Medicaid Emerging as Concern

The GOP House budget blueprint — offered by Committee Chair Paul Ryan (R-Wis.) — has become a touchstone for its proposal to repeal last year’s health reform law and transform Medicare into a voucher program. Democrats have used the plan to stump for support; Republican presidential candidates are routinely quizzed on whether they would back Ryan’s changes.

But the plan’s brash Medicaid reforms, while starting conversation in policy circles, generally have been overlooked on the national stage. Under the proposal, the federal government would end its open-ended funding of the safety-net program. States instead would receive fixed annual block grants of $11,000 per Medicaid beneficiary to use as they see fit.

Those Medicaid changes may not be low-profile for long.

Democrats and advocates are pointing to a flurry of reports showing the state-by-state impact; one Kaiser Family Foundation study projected that California would be forced to cut health coverage for up to 8.8 million residents, and the state would take a $78 billion hit in federal funds over the next decade.

Meanwhile, Democrats convened a session with Medicaid advocates on Tuesday to plot “a concerted attack” against Republicans’ plan, setting up a new messaging campaign — and ensuring that we’ll be hearing lots more about block grants in the weeks to come.

How Block Grants Work

Federal officials first deployed block grants forty-five years ago, as part of Democrats’ Partnership for Health program. But in subsequent years, the model has been rarely used for health care funding and became associated with Republican leadership. A 2004 Urban Institute study notes three major periods when block grant use soared: Under Presidents Nixon and Reagan, and when Republicans controlled Congress in the mid-1990s.

Entitlement funding tends to be open-ended, whereas block grants are intended to give Congress more control over — and ultimately rein in — federal spending. In theory, Medicaid block grants would apportion a fixed chunk of federal funds to states, which could allow for more experimentation than the current model, where the federal government’s contribution to state programs rises or falls based on the state’s Medicaid spending.

However, the history of block grants suggests that using them means federal funding tends to drop off, in terms of real dollars, creating new shortfalls as programs age. One study found that real federal funding fell by an average of 11% across eleven block grants.

Rhode Island as Test Case for Block Grant Plan

Republicans have floated block grants as a Medicaid reform across the last five presidential administrations, and the proposal had gained traction again even before Ryan’s proposal; attendees at a National Governors Association meeting in February heavily lobbied for the shift. Their contention: The move would set up 50 new laboratories of health care innovation.

Let’s look at the one lab already at work: Rhode Island.

The state received approval from the George W. Bush administration to use a Global Consumer Choice Compact Waiver, which resembles Republicans’ block grant proposal. The State Health Access Data Assistance Center notes that Rhode Island’s Medicaid program now operates with a capped federal contribution, like a block grant, and has some increased flexibility under the waiver. However, the state still draws down funds through a federal matching program rather than as a lump-sum.

Many conservative thinkers have hailed Rhode Island’s example. Gary Alexander, who was Rhode Island’s Secretary of Health and Human Services through January 2011, contended that the program saved the state $100 million in its first 18 months. Galen Institute President Grace-Marie Turner told Inside Health Policy late last year that a move like Rhode Island’s would let states gain additional flexibility and free themselves from “federal micromanagement.”

But the state’s Medicaid spending grew at roughly the same rate, absent federal stimulus funds, as before the reforms took effect. Democrats in Rhode Island now say they can’t substantiate Alexander’s savings.

Meanwhile, writing on the Incidental Economist, Austin Carroll cautions against drawing national lessons from the Ocean State. Carroll notes that one “key difference between the Rhode Island deal and Rep. Ryan’s budget … [is that the] money promised to the state in the form of a block grant was huge, not reduced” — in theory, the state was never forced to make the trade-offs that Republicans’ proposed block grants would require.

California at Center of Potential Medicaid Changes

The House budget is unlikely to be adopted, given Democrats’ control of the Senate. But there are other efforts in play that could reshape Medicaid — and the Golden State sits at the center of one of them.

The effort revolves around empowering states to more aggressively trim provider pay. A lawsuit headed to the Supreme Court this fall focuses on California’s 2008 and 2009 cuts to Medi-Cal reimbursement, with providers and beneficiaries arguing that the payment cuts violated federal Medicaid law.

According to federal law, Medicaid rates must be “sufficient to enlist enough providers” so that beneficiaries can access care to the same extent as the general population in a particular area. The Obama administration last week filed a friend-of-the-court brief endorsing California’s decision.

Meanwhile, congressional Republicans this month introduced legislation that would allow states to change Medicaid eligibility requirements; Rep. Cathy McMorris Rodgers (R-Wash.) has said she considers Rhode Island’s experiment as a model for other lawmakers.

Democrats Prepare To Fight for Medicaid

Many legislators appear to view changing Medicaid as more viable than overhauling Medicare. The program covers constituencies like the poor and less politically active elderly, such as those who live in nursing homes. Some Democrats may be inclined to broker a deal “in an effort to look tough on deficit reduction,” The Hill notes.

Yet Medicaid advocates can summon two arguments to sway wary lawmakers: the power of polls and President Obama.

Sixty percent of U.S. residents want Medicaid to remain unchanged and just 13% prefer major cuts to the program as part of congressional efforts to address the federal deficit, according to a Kaiser Family Foundation tracking poll. And the White House is girding to take on a prominent role in the messaging battle, as the health law’s national health coverage expansions hinge on a healthy Medicaid program, the Washington Post‘s Ezra Klein notes.

Here’s a look at what else is making news around the nation.

Rolling Out Reform

On the Hill

In the Courts

In the States

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