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Colorado Medicaid: replace matching funds with block grants

Thomas Molitor makes some great points about Medicaid block grants:

State governments administer Medicaid, but they receive an open-ended funding match from the federal government. The federal government pays nearly 70 percent of the cost of the program in New Mexico. …

From a budget perspective, an effective way for the federal government to reform Medicaid would be to turn it into a block grant.

… A block grant would provide a strong incentive for our state to trim its Medicaid program, combat fraud and abuse, and pursue more innovative and cost-effective health care solutions.

The federal government would give each state a lump-sum grant amount each year, allowing federal taxpayer costs to be directly controlled. Federal aid to the states could be ratcheted down over time, but the states would have greater flexibility to design more cost-effective health care programs. …

The open-ended federal match under Medicaid has prompted our state government to continuously expand health care benefits and the number of eligible beneficiaries. New Mexico has designed a complex scheme (like other states*) to artificially raise federally matching payments under Medicaid, and it has come back to bite us in our budget.

In the long run, federal Medicaid spending should be phased out completely. After all, funding for the program comes from taxpayers in the 50 states, so we may as well keep the money in the states and allow each state government to determine what sort of health care policy it wishes to pursue.

Read the whole article: Time to grab the third rail, Madame Governor.

* The hospital provider fee tax (HB 09-1293) is one of these schemes to increase the federal match for Medicaid funds, as Linda Gorman has noted (page 4). Rep. Janak Joshi, R-Colorado Springs seeks to repeal this fee via House Bill 1025.

(Via State House Call)