As President Obama’s recently-released budget for 2011 reveals, with or without a health care reform bill, Medicaid stands to receive a big, taxpayer-funded bailout. Again. The 2011 Budget includes $25 billion in additional funding for state Medicaid programs as an extension of the bailout that was included in the 2009 economic stimulus bill.
As Heritage analysts Dennis Smith and Nina Owcharenko argued then, depending on federal bailouts to carry Medicaid through economic hardships is bad policy.
The stimulus bill provided increased federal matching rates for Medicaid programs in all fifty states. This splurge in spending was accompanied by no caveats or strings attached to require true Medicaid reform, which is sorely needed. Instead, the federal government succeeded only in propping up the failed policies behind the broken government program, encouraging continued sluggishness in actual improvements to the system.
What is more, federal bailouts of state Medicaid programs set states up for short-term dependency on federal dollars which will lead to long-term budgetary problems when these funds expire. Nothing could make this clearer than the Medicaid bailout extension included in President Obama’s 2011 budget.
In a recent article in the Wall Street Journal, Janet Adamy explains that additional Medicaid funding was included to respond to Congress’ stalled efforts to achieve comprehensive health care reform. Both of the health care bills would have expanded Medicaid and increased federal matching rates. According to Adamy, “Some states were so confident Congress would pass a health bill that they included the extra Medicaid funds in their state budgets.” Thus the need for additional bailout money: state fiscal irresponsibility, encouraged by Washington.
If Congress had structured the previous bailouts correctly in the first place, this additional bailout may not have been necessary. Smith and Owcharenko outline how this should have been done. Of course, the economic stimulus should not have included increased government spending in the first place. Rather, tax cuts should have been used to invigorate the economy.
That aside, a Medicaid bailout should have established criteria to ensure that states accepting more funding took the necessary steps to improve their programs. States should have also been required to submit plans for long-term reform. Medicaid beneficiaries currently suffer from lack of access to care due to outdated reimbursement systems. Addressing this would improve the quality of care for enrollees. Lastly, both state and federal governments should have made a commitment to achieving serious entitlement reform as a part of the bailouts, assuring they would not be needed in the future.
But none of this happened. Instead, once the extra federal funding expires, states will be left to deal with balancing their budgets and footing the bill for the same low-performing Medicaid programs.
