State lawmakers have a responsibility to reform Medicaid

Michigan and Ohio may be bitter rivals on the football field, but these two neighboring states share a common problem. The GOP governor of each state — Rick Snyder and John Kasich, respectively — supported a state expansion of Medicaid under the Affordable Care Act. Now, Michigan and Ohio face costs far exceeding original projections, with the federal match rate declining and thousands of able-bodied working-age adults crowding out benefits to the most vulnerable. The two states are not alone in this predicament, as many other states expanded Medicaid and are now experiencing greater than expected enrollment and costs.

In Ohio, more than one-quarter of the state’s population is now enrolled in Medicaid, and state costs are more than twice as high as originally promised. Over the last year, the state’s Medicaid spending increased by 17 percent, which is why Ohio tried to reform its Medicaid program in 2016 through a waiver ultimately rejected by the Obama administration.

Michigan lawmakers are also bracing for renewed debate over the future of their Medicaid expansion, thanks to statutory trigger language requiring the state legislature to reauthorize expansion when state costs exceed savings. Though expansion was originally projected to add 450,000 to ultimately 475,000 able-bodied adults to the Medicaid rolls, that number was eclipsed within the first year of enrollment and has now exceeded 620,000.

{mosads}With these alarming trends and mounting enrollment, made weightier by Congress’s 2017 failure to repeal the Affordable Care Act, it is not surprising that a growing number of states have submitted waiver applications seeking to reform Medicaid. In a positive sign, the Trump administration is responding with a recent Centers for Medicare and Medicaid Services (CMS) policy change allowing states greater flexibility in rules governing Medicaid enrollment.

The centerpiece of the CMS shift brings new guidance permitting states to institute work or community engagement requirements, such as charitable or educational activities, for healthy, able-bodied Medicaid recipients. SNAP and other federal-state welfare programs already require beneficiaries to work or engage in work-related activities such as job training, so there is precedent for this type of requirement with proven positive results. Indeed, the 1996 bipartisan federal welfare reform requiring work-related community engagement for able-bodied adults helped move 10 million people off the program.

The administration is already delivering on its commitment to process community engagement waivers. Indiana recently received the green light, making it just the second state (joining Kentucky) to gain CMS approval for a waiver that included such requirements. Approximately 10 other states have either submitted or are working to submit waivers that would establish work or education conditions for able-bodied adults receiving benefits.

To further encourage states to play an active role in reform, the Trump administration is also offering new flexibility within the terms and process of waiver approval. For example, the administration recently granted Mississippi the nation’s first 10-year waiver. CMS has also provided clearer guidance for how states may expedite the timeline for waiver approval. This is especially encouraging, as it suggests states will have more certainty and flexibility in designing programs to best meet their specific needs. Furthermore, state policymakers won’t have to be concerned about having the rug pulled out from underneath them when power in Washington changes hands.

It is now time for states like Michigan and Ohio to move forward on Medicaid reform, and for them to embrace the new opportunities coming out of Washington. State officials that saw previous waivers denied can now focus on advancing responsible reforms that help able-bodied Medicaid recipients gain skills and education, while preserving the safety net for those most in need.

Rea S. Hederman Jr. is vice president of policy at the Buckeye Institute in Ohio, an independent free-market research institute. Lindsay Boyd Killen is Vice President for strategic outreach and communications at the Mackinac Center in Michigan, a free-market education and research institute.