The State Flexibility Act: Moving Closer to Successful Medicaid Reform

Kathryn Nix / May 04, 2011

Spending on the two big health entitlement programs—Medicare and Medicaid—poses the threat of a fiscal meltdown if Washington does not act to contain their costs. Medicaid, the federal-state partnership to provide health care for the poor and disabled, is also a main driver of growing state budget shortfalls. According to the National Governors Association, the states collectively face $175 billion in deficits through 2013. Meanwhile, the program presents severe access barriers to care for its beneficiaries, resulting in low-quality coverage.

If successful Medicaid reform is to occur, the first thing Washington must do is get out of the way so that states can manage their respective programs for the beneficiaries they serve and the taxpayers who fund them. In recent years, Congress has done the opposite, enacting policies that further tie the hands of state legislatures. To reverse this trend, members from both houses of Congress yesterday introduced the 2011 State Flexibility Act.

The State Flexibility Act would repeal the maintenance of effort requirements barring states from innovating within Medicaid. Under the 2009 stimulus bill, states are required to maintain eligibility standards, methodologies, and procedures through the end of June 2011. Obamacare extended this, requiring states to maintain Medicaid as is through 2013. Under Washington’s requirements, states would lose federal Medicaid funding completely if they restricted eligibility, regardless of the effects on state budgets. (more…)