Right now, Texas is leading all other states in their assessment of Medicaid spending reform; however, Texas is hardly the only state pursuing this course. Governors across the country are preparing to flood the Department of Health and Human Services with Medicaid waiver requests.
A few months ago, Gov. Rick Perry led a group of Texas lawmakers who were threatening to drop out of Medicaid. After an analysis showed that Texas would lose billions of federal funding, the talk of opting out became a “non-issue”. In Texas, Medicaid covers 3.6 million poor, disabled and elderly people, and costs roughly $20 billion per year, of which the federal government pays 60 percent.
The immediate concern for many states is a so called maintenance of effort provision in the health care law that requires them to maintain current eligibility levels until 2014 or risk losing federal matching money. To further complicate matters, federal stimulus financing for Medicaid runs out at the end of June, further cramping states that face a collective budget shortfall of $175 billion through 2013, according to the National Governors Association.
Now, the debate has shifted, as Texas and other financially struggling states ask Washington for a waiver to operate their Medicaid programs as they see fit. Pressing for a waiver is a far cry from threatening to drop out, but it may have the same end result.
With the state now facing a large budget shortfall, Texas officials want a waiver that gives the state greater flexibility with Medicaid. Texas wants to find savings by curbing mandatory benefits or limiting eligibility among Medicaid populations. The Obama administration, which is intent on expanding Medicaid, not shrinking it, is not likely to grant broad waivers to individual states. However, the Obama administration took a small step toward the states’ position this week when it advised Arizona that it would not need a waiver to exclude about 250,000 adults from its Medicaid program. These people were added under special conditions years ago and are not part of the state’s regularly covered Medicaid group.
If some sort of relief doesn’t come soon, many predict that states will violate the law and cut eligibility levels anyway. That would place the Obama administration in the tough political position of having to decide how to respond, including whether to withhold federal money from the offending state.
ADVOCATE will continue to keep you up to date on this issue as more information becomes available.
With best regards,
Kirk Reinitz, CPA