— Jessica Kahn (@JessPKahn) April 1, 2016
And another story from Oklahoma:
Facing a $1.3 billion budget hole, the Oklahoma House has passed legislation that would cut 111,000 Oklahomans from Medicaid.
House members on Wednesday passed the bill 65-34 mostly along partisan lines and sent it to the state Senate for action.
The measure would instruct the Oklahoma Health Care Authority to seek a federal waiver allowing the state to exclude from Medicaid all able-bodied adults under 65 with dependents.
That bill failed in the Oklahoma Senate.
Oklahoma is heavily dependent on oil revenue to make their budget work. Oil prices have cratered so state revenues have crashed. At the same time as oil prices have collapsed, economic activity in the state is decreasing which means more people don’t have jobs, more people don’t have employer sponsored insurance, and more people have become Medicaid eligible. The Medicaid eligible pool is counter-cyclical. As the economy does well, the eligible pool shrinks, and as the economy does poorly, the pool grows. So the number of people who are eligible for Legacy Medicaid grows just as the state revenue needed to pay for Medicaid services drops. This is a problem.
Legacy Medicaid is financed by the state and the Feds splitting the bill. Oklahoma pays 41% of the cost of the medical services component of the program. The Feds pick up 59% of the medical side and a bit more on the administrative side. Oklahoma has a balanced budget constraint. the Federal government does not. That means the Feds are willing and able to spend money to meet increased Legacy Medicaid demand in a downturn but the state can not. Instead, the state needs to cut expenses to meet its balanced budget constraint and Medicaid is a very large line item in every state budget, so that means Medicaid is often one of the major areas of cut-backs in either eligibility, services allowed or provider payments.
So what is the solution?
The long term solution is that the Federal government should take on more and more of the cost of Legacy Medicaid. The Feds can spend in a downturn when the states have to be 50 mini-Hoovers who have to cut during a recession. This does three things. The first it makes sure that people can get the medical care that they need and that the continuity of care is maintained. Continuous care is usually better and cheaper than people getting dropped and then added back to insurance months or years later. Secondly, it transforms Medicaid financing from a pro-cyclical activity into a counter-cyclical macro-economic stability policy. One of the major components of the stimulus in 2009 was a Federal Match rate bump. This moved $87 billion in Medicaid expenses from the states’ books to the Federal books.
The Stimulus bump was a short term solution that required massive supermajorities from a party that believes that the federal government faces a different budget constraint than a typical household. The long term solution is to have the Feds continually increase their share of the costs until Legacy Medicaid is funded on the same bases as Medicaid Expansion. The Feds pick up 90% of the tab and the states pay 10%. This will still allow for state control which allows Massachusetts to cover different services than Mississippi but it allows for a much stronger counter-cyclical automatic stabilizer to be in place.
The attraction this should have to a significant number of Republican state level elites is that by taking Medicaid off of their books, it frees up a lot of money for easy to justify tax cuts.