Vice President for Health Policy
A few states have begun discussing “a once-unthinkable scenario” — dropping out of the federal-state Medicaid program — in an attempt to save money, the Wall Street Journal reported today. Under one proposal, instead of expanding its Medicaid program in 2014 as the health reform law requires, a state would eliminate the program and give up federal Medicaid funding on the assumption that it could shift most beneficiaries into the new health insurance exchanges that the law will create, where they would get federally funded tax credits to buy health coverage. The state would then cover the rest of the former Medicaid beneficiaries entirely with state funds and somehow come out financially ahead.
This proposal, however, relies on flawed assumptions and would be a terrible deal for a state:
For the people who remained eligible for publicly funded coverage, states might scale back benefits. Possible reductions include benefits that are important to people with disabilities and children with special health care needs, such as mental health care and therapy services, which Medicaid covers but private insurance typically doesn’t. States might also increase cost-sharing charges, which means fewer people would receive needed health care.
And although states have already sharply reduced their reimbursement rates for Medicaid providers (such as doctors and hospitals) to help close their budget deficits, they would have to further lower their rates — at the same time that providers would face rising costs for uncompensated care costs as the ranks of the uninsured swell.