On Tuesday, the House Energy and Commerce Committee held a hearing to explore the impact of Obamacare on the states and the federal roadblocks to state-based reforms.

Front and center at the hearing was Medicaid. Obamacare puts an additional 18 million people in this federal–state health care program for the poor. According to a report from the Senate Finance and House Energy and Commerce Committees, this will burden states with at least $118 billion in additional costs through 2023.

Medicaid is already on track to put state budgets deep in the red, leading to greater deficits, higher taxes, or neglect of other state priorities, like education. At the same time, beneficiaries face huge obstacles to receiving quality care. Instead of adding millions to this broken program, as done under Obamacare, Congress and the states must work together to reform the program.

At the hearing, Mississippi Governor Haley Barbour (R) outlined ways in which his state could improve Medicaid and create savings. One small change—requiring beneficiaries to obtain annual physicals—would advance preventive care and also reduce costs. But, said Barbour, federal law prohibits this.

Barbour also emphasized the need for reform of long-term care coverage. It costs Mississippi five times more to provide nursing home care than home- or community-based care, yet federal mandates encourage use of the more expensive option. By encouraging the less expensive option except in the cases of greatest need, Medicaid would see savings and allow patients to receive care in a more comfortable setting.

States could further benefit by offering its healthy beneficiaries the chance to purchase private insurance and by applying co-payments to create incentives for beneficiaries to spend their health dollars wisely. But, as Utah Governor Gary Herbert (R) reiterated, the Centers for Medicare and Medicaid Services make it almost impossible for states to innovate. The result, according to Barbour, is that “states are often forced to arbitrarily limit services or cut provider reimbursement rates to control costs. These approaches are not ideal, but they are often the only path the federal government allows.”

The creation of new exchanges under Obamacare will tie states’ hands even tighter. The states must set up exchanges or have Washington do it, but they have little say in how the exchanges will operate. Instead, they are held to strict federal rules and regulations.

While Massachusetts Governor Deval Patrick (D) defended the direction taken in the Obamacare exchanges, Herbert pointed out that Utah’s exchange was designed to meet the unique meets of his state: “Unlike many other states,” he said, “a majority of Utah’s uninsured population are employed. Most work for small businesses which do not offer health insurance benefits.” Moreover, Utah has the youngest population in the country. It is thus no wonder that Utah’s exchange differs greatly from Massachusetts’s Connector. So it should be with all state exchanges—and that’s if states even consider it necessary to have one as part of reform.

Since before passage of Obamacare, it has been clear that the law’s proponents do not consider state flexibility and innovation as imperative to successful reform. According to Herbert, governors “were never invited to the table when it was being proposed by the Obama Administration or debated in Congress.”

Nevertheless, the White House continues to insist that states will have flexibility under the new law. But like Herbert said, “Just as Henry Ford offered his customers a choice of any color car they wanted as long as that color was black, [Obamacare] allows states flexibility in constructing their exchanges as long as they do it the way Washington tells them.” This is not the way to achieve reform that best meets the varied needs of Americans across the country.

Amanda Rae Kronquist contributed to this post.