Republicans Have the Moral High Ground on Medicaid Reform | Opinion

Republicans need to claim the moral high ground on Medicaid reform.

As the House and Senate debate what to put in the reconciliation bill, Democrats are savaging their colleagues across the aisle for "gutting" the health care program, hoping Republicans will lose the nerve to do what's right. But Republicans can win the debate by rallying around a simple policy: Stop states from putting able-bodied adults ahead of the disabled and elderly.

One of the biggest problems in Medicaid is that its expansion under Obamacare to include all adults below a certain income threshold corrupted state priorities. In the 41 states that have expanded Medicaid, the federal government pays for 90 percent of the costs for the expansion population, including a new class of able-bodied adults who mostly don't work. By contrast, the federal government only covers an average of 57 percent of costs for traditional Medicaid recipients, such as seniors, children, and people with disabilities.

The result is a perverse incentive for states to cut services for the truly needy. As Medicaid spending has taken over state budgets, governors and state lawmakers have looked for ways to control costs. In Medicaid expansion states, there's little appetite to cut spending on able-bodied adults who bring in $9 in federal money for every $1 the state spends. Instead, states look to cut spending on the vulnerable, who bring in as little as $1 in federal funding for every $1 in state outlays. The fiscal logic is as clear as it is awful: Who cares about the needy if they aren't making the state money?

This threat to the vulnerable isn't hypothetical. Last year, Indiana's Medicaid program faced a billion-dollar shortfall, which led the state to create a waiting list for caretakers of elderly and disabled Hoosiers, including kids. Meanwhile, hundreds of thousands of able-bodied adults stayed on Medicaid with no change.

Across all Medicaid expansion states, more than 700,000 elderly people and people with disabilities are on waiting lists for home- and community-based care, largely because states haven't targeted their Medicaid programs to these vulnerable groups. Between 2014 and 2018, about 22,000 vulnerable people died while on waiting lists in expansion states, even as those states enrolled millions of able-bodied adults to Medicaid.

Republicans should point out this obvious moral and medical injustice. Lawmakers should call out states that neglect the elderly and the disabled—and prioritize able-bodied adults—out of a selfish desire to soak taxpayers with little regard to life or death. Alongside this justified outrage, Republicans can propose a common-sense solution: End the 90 percent federal payments for people on Medicaid expansion and replace it with the traditional rate. The higher federal payments distort state priorities, so equalizing the treatment will get them to focus on who matters most—namely, the truly needy people Medicaid is supposed to serve.

This policy would quickly benefit vulnerable groups by causing states to re-prioritize them. If a state has to choose between covering an able-bodied adult and a disabled kid on equal terms, the disabled kid will win every time.

Taxpayers would save huge sums of money, too. If Congress immediately equalized funding levels, taxpayers would save more than $560 billion over the next decade, according to new research from our organization. If Congress eliminated the higher payments for new enrollees only or slowly reduced the payments over several years, the savings would be at least $318 billion. The first approach is the most ethically and fiscally sound, yet the second may be more politically feasible in a closely divided Congress.

Under all these reforms, states would have to make some long-overdue choices. Eleven states—including Illinois, Virginia, Arizona, and North Carolina—have laws that require them to revisit or repeal Medicaid expansion if federal payments drop. They would have to decide if they want to re-expand Medicaid, covering millions of able-bodied adults without getting paid more by the federal government.

Expansion states would have to limit how much they spend on able-bodied adults. All of them—even the bluest ones—would have a strong incentive to enact work requirements for the expansion population.

They'd also have a much stronger reason to crack down on waste, fraud, and abuse. About 21 percent of Medicaid expansion spending is improper due to eligibility errors, according to federal data our organization has obtained. Yet expansion states don't really care because they're paying so little for the expansion population—see California, which is known to have at least 366,000 ineligible recipients on the dole. If states are forced to pay more, the high cost of fraud would become real and spark reforms of their own.

These are the choices that Republicans should force states to make, for all the right reasons. While the savings for taxpayers are vitally important and urgently needed, the biggest winners will be the most vulnerable. In the face of relentless Democratic attacks over Medicaid reform, Republicans shouldn't throw in the towel. They should address the broken program, and proudly support the poor, the elderly, and the disabled.

Jonathan Ingram is the vice president of policy and research at the Foundation for Government Accountability, where Paige Terryberry is senior research fellow.

The views expressed in this article are the writers' own.