Medicaid, the nation’s health care safety-net program providing health coverage for more than 70 million Americans, is on track to spend $560 billion this year. It is jointly funded by federal and state governments, but administered by states under broad federal standards.
Medicaid funds close to 50% of all births and is the primary payer of long-term care in this country. Medicaid also provides most of the nation’s funding for HIV/AIDS-related treatments and mental health services, among other forms of health care. More than 40% of Medicaid spending is aimed at addressing the shortfalls of the Medicare program for individuals dually eligible for both.
To believe its critics, Medicaid must be either broken or overrun with fraud, waste and abuse. These charges are short sighted, lack context and fail to understand that it is in fact the broader U.S. health care system that needs significant improvement. The U.S. health care system faces many challenges: cost inflation, sub-optimal health care outcomes, and — due to decades of both proactive as well as passive policies — a tectonic shift of responsibility for the sickest, frailest and most complex patients directly to Medicaid.
The good news is that Medicaid is taking this challenge head-on. There is a widespread desire amongst Medicaid directors to reorient the health care system to achieve better care, better health and lower costs. To successfully achieve this vision, because it is responsible for the oldest, sickest, frailest and most complex and costly patients in the country, Medicaid programs must serve as a platform for innovation and system-wide care improvement.
The challenge, however, is that the underlying Medicaid statute is not structured to meet this need. The statute is now 50 years old, and often reflects a health care reality that no longer exists. States must seek federal approval to waive portions of the statute that would otherwise prevent such mainstream approaches as managed care or home- and community-based alternatives to nursing home care. Every single state operates multiple waivers, representing a growing majority of the entire program under a variety of poorly aligned authorities.
While states, in partnership with the federal government, have used these waiver authorities to drive transformational improvement in the health care system, it remains a sub-optimal way to administer the program, and changes are necessary to ensure the continued success of state reform efforts.
States have for decades successfully leveraged the flexibility associated with the 1115 research and demonstration waiver process to achieve many different and critical goals for Medicaid. This authority allowed the state of Arizona to initially adopt Medicaid in 1982 with a revolutionary approach of managed care for the majority of its beneficiaries, a process made complete when it expanded managed care to elderly and disabled populations later that decade.
This authority allowed numerous states in the 1990s to both expand coverage while at the same time expanding the use of private managed-care organizations to improve beneficiary health care. Tennessee, Oregon, Hawaii, Massachusetts and many other states blazed new trails in these areas.
More recently, several states have utilized the 1115 waiver approach to craft alternative approaches to the Medicaid expansion envisioned in the Affordable Care Act.
Still other states have pursued the 1115 waiver model to craft Delivery System Reform Incentive Payment models. States as varied politically and geographically as Texas, California and New York are all hard at work transforming the health care culture through these approaches right now.
While all states are different, politically, geographically and culturally, they are all working towards a shared goal of providing better health care to the populations they serve, and doing so in a cost-effective way that is responsive to their role as the stewards of taxpayer dollars.