It is an honor to have my op-ed published in the Wall Street Journal. It is also true that editors 3,000 miles away have the power to edit my words with abandon and select a title that frankly isn’t what I would have chosen.  They are intent on selling papers; I worry about frustrating any effort to reward our politicians for governing responsibly.  The benefit of a blog post such as this is that I can flesh out my thoughts and tell the full back story in a more familiar setting. ~Nansen

Let Washington State Run Our Own Medicaid Program

Washington State faces a fiscal crisis in paying for Medicaid.  This simple fact was recognized by legislators from both sides of the aisle during the contentious special session that just concluded.  The result was SB 5596, a Medicaid block-grant bill – similar to the reform proposed for all 50 states in U.S. Rep Paul Ryan’s budget.  Here in Washington State, the block grant concept was remarkably non-partisan: the bill, requiring the state to apply the U.S. Department of Health and Human Services (HHS) for a waiver that would replace its Medicaid program with an indexed, eligibility-driven block grant, passed both houses with unanimous support.

On Tuesday, Governor Christine Gregoire, previously an opponent of block grants, signed the bill.  Now it’s in the hands of HHS Secretary Kathleen Sebelius, who is expected to meet with Gregoire Monday. Sebelius should move swiftly to approve this approach.

The modified block grant would free Washington State officials from being reduced to de facto appendages to the far-away federal government, implementing rules and restrictions from bureaucrats on the other side of the country.  Worse, new requirements imposed by the federal stimulus bill and ObamaCare will add hundreds of thousands of  people to our state’s Medicaid rolls, and prohibit the state from modifying eligibility rules without risking a loss of all Medicaid funding.

Receiving federal dollars in a lump sum instead of matching funds would make it much easier to find cost-savings in Medicaid.  Currently, 1.2 million residents of Washington State receive health-care benefits through Medicaid at a cost of $3.1 billion annually with the federal government matching dollar-for-dollar, contributing another $3.1 billion.  But if the Washington State legislature wants to reduce Medicaid spending, they have to find two dollars in cuts to realize one dollar in savings, creating a perverse incentive to keep spending unsustainably.

As State Senator Linda Evens Parlette, one of the bill’s chief senate sponsors, observed, the state will be hamstrung if this waiver is not approved.  “One of the few choices to reduce Medicaid spending that states have is to eliminate adult prescription drug coverage.” Parlette said.  “As a registered pharmacist, I can tell you that is not a good option!”

Washington’s State Medicaid Director Doug Porter went even further, saying that without the waiver, “even if we eliminated every single optional benefit, we still don’t get there.”  That leaves only the disastrous option of slashing reimbursement rates to already underpaid physicians and hospitals.

In contrast, SB 5596’s authors explain that the block grant would “allow the state to operate as a laboratory of innovation for bending the cost curve, preserving the safety net, and improving the management of care for low-income populations.”  Rhode Island has had success under a similar waiver granted in 2009, saving $100 million within the past eighteen months.  With a block grant, state legislators will have the ability to alter eligibility and benefits to best serve the unique needs and priorities of their constituents without having to eliminate programs such as Basic Health Program or Disability Lifeline.

State legislators in Washington State unanimously acknowledged the advantages and successes of indexed block-granting when they passed SB 5596.  As State Senator Joseph Zarelli, another key sponsor of the bill, said “This bipartisan solution gives Washington State the tools needed to find the best solution for our citizens. We can bring private sector model successes to solve the budget crisis while still providing protection for the most needy in society.”

In 1996, a Republican Congress and President Bill Clinton transformed the Aid to Families with Dependent Children (AFDC) program into block grants to the states.  With finite funding, states were given an incentive to reform programs and reduce costs as additional costs are borne solely by the state.  Critics argued that costs were being shifted from the federal government to the states and a race to the bottom would occur.

Instead, the new program Temporary Assistance for Needy Families (TANF) has been a remarkable success.  Welfare rolls decreased by two-thirds, and by 2006 total real federal and state spending on TANF has decreased by 31% from 1995 AFDC levels. Washington State saw our caseload decrease 37% from 96,000 in September 1996 to 61,200 in March 2003, saving taxpayers $290 million in annual expenditures.  Given the right incentives, and freedom to propose changes, states saved taxpayer’s money while better serving the poor.

Governor Gregoire deserves credit for putting politics aside, changing her position and signing SB 5596.  Gregoire was one of 17 Democratic governors who signed a letter to Congress in April opposing Paul Ryan’s budget plan to block grant Medicaid. She made the right choice putting the state’s fiscal health ahead of partisan politics.  While the legislative language is not finalized for the Medicaid block grants in the Ryan plan, it is assumed that they are pure block grants, with no strings attached.  The waiver requested by the Legislature, however, is for an indexed type block grant, which ties the federal payments to the number of eligible participants. It does retain the perverse incentive not to cut eligibility, but it also eases the fears of some who worry that the federal government will be tempted to reduce support absent a requirement to cover a portion of each health care service. Says Rep. Cathy McMorris Rodgers (WA-05) in regards to SS 5596: “It’s a positive step in the right direction which underscores the urgency of the Medicaid reform issue and the need for Congress to address it at the national level”

Now, the decision is up to Secretary Sebelius.  While the waiver formally requires approval from the Center for Medicare and Medicaid Services and the Office of Management and Budget as well as HHS, Sebelius is the administration’s decision-maker on Medicaid waivers.  She should act swiftly to fast track this waiver, which has the unanimous approval of the state’s elected officials.  It’s time for Washington, D.C. to let Washington State run our own Medicaid program.

To that end I’m asking everyone to click to link below to sign a petition asking Secretary Sebelius to approve Washington State’s waiver as soon as possible. Thank you.