States need help with Medicaid

Medicaid is a lifeline to approximately 53 millions of Americans, but it is killing every state’s budget. At a recent gathering of governors in Washington, D.C., the growing costs for this health care program dominated discussions.

States share the costs with the federal government, but the feds call the shots. They decide state allocations, how to interpret the rules and whether to enforce laws.

Medicare gets more attention from the media and policy makers, but Medicaid serves about 12 million more people. Its recipients do not comprise the kind of squeaky wheel that gets congressional grease – 48 percent are children; adult recipients have low incomes.

Mess with Medicare, and powerful organizations rise up and strike. Mess with Medicaid, and the repercussions are relatively tame.

But governors are starting to make some noise, regardless of party affiliation, because Medicaid is making it nearly impossible to balance budgets without raising taxes or imposing painful spending cuts.

The National Governors Association is denouncing a recent decision by the feds that any money left over in a state’s Medicaid account must be returned to the federal treasury. The feds want the money to help cut the budget deficit. The governors want the money to help needy people who don’t qualify for Medicaid. An estimated $40 billion is at stake, and states will either have to kick hundreds of thousands of people off their health-care rolls or spend hundreds of millions to replace money they’ve relied upon for years.

Part of the problem is tied to the constant rise in health care prices, and that’s why it’s distressing to discover that the feds are not doing all they can to control costs. Congress passed a cost-containment law in 1990 that said Medicaid would not pay for prescription drugs unless providers offered discounts, which come in the form of rebates to the states. A recent study by the Government Accountability Office showed that Medicaid is routinely overpaying for drugs.

The GAO found that drug manufacturers sometimes conceal their “best price” (i.e., lowest) to avoid the rebates. When the feds discover such practices – or even honest mistakes – they don’t pursue the matter.

As Sen. Charles Grassley, R-Iowa, said: “For 15 years, drug companies have been profiting from a system that costs taxpayers untold hundreds of millions, if not billions, of dollars annually.”

The GAO estimates that the lack of oversight costs taxpayers $6 billion a year. We can think of at least 50 governors who could put that money to good use.