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pipes states use medicaid as credit card without limit
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Pipes: States use Medicaid as credit card without limit

Housing. Utility payments. Meal delivery. Grocery cash. These are all nice things to have. None of them constitutes health care. Yet they’re currently provided under Medicaid in at least some states. Medicaid was created in 1965 as part of President Lyndon Johnson’s “Great Society” to provide health coverage to low-income and disabled Americans. The incremental expansion of the program is bleeding taxpayers and straining its ability to fulfill its historical purpose. Its scope needs to be scaled back. Each state runs its own Medicaid program. The federal government provides at least one dollar in funding for every dollar the state devotes to the program. In 2022, more than seven of every ten dollars spent on Medicaid came from the federal government. States can apply for permission from the federal government to tweak their programs’ eligibility rules, benefits, cost-sharing, and methods of delivering care. They’re getting creative with how they structure their Medicaid programs. After all, if they can classify their expenditures as Medicaid spending, then they can more than double their money with matching federal contributions. Massachusetts recently requested federal matching funds to house undocumented immigrants, citing the widespread social and fiscal costs of the migrant crisis. In California, Governor Gavin Newsom has proposed tax increases on the state’s Medicaid-managed care providers to generate up to $5 billion in additional revenue. The move exploits a loophole in Medicaid’s funding formula. The state extracts money from providers with the new tax and then sends an even greater sum back to those providers in the form of higher rates. The federal government recognizes that increase in state Medicaid spending — and matches it with additional federal funds. So California and providers who see Medicaid patients get a cash windfall. Federal taxpayers across the country pick up the bill. And since 2021, at least seven states have approved the use of Medicaid dollars to fund gun-violence prevention programs. Such programs are no more the purview of Medicaid than driver education or workplace safety training. Blue states are not alone in treating Medicaid as a credit card with no credit limit. Deep-red Arkansas is approved to cover housing transition and moving costs, as well as nutrition counseling. Purple Arizona is authorized to fund up to six months of rent and utilities for certain Medicaid enrollees. With services like food and housing assistance already covered by other federal grant programs, states are double-dipping. States have leeway to expand Medicaid beyond health care largely thanks to guidance issued by the Biden administration last year. It allows for states to cover so-called “social determinants” of health — which in addition to housing and food can include things like transportation, nutrition counseling, moving costs, and tenant-rights education. Nineteen states have already expanded Medicaid to include such programs. Evidence that these interventions are worth their cost is at best inconclusive. Medicaid had been swelling for some time. Obamacare expanded Medicaid eligibility to all individuals earning up to 138% of the federal poverty level. States that have expanded Medicaid within the last five years include Idaho, Kentucky, Missouri, Montana, Nebraska, North Carolina, Oklahoma, and South Dakota. The Families First Coronavirus Response Act, which passed early in the pandemic, turbocharged Medicaid enrollment to nearly 94 million people by March 2023 by temporarily preventing states from disenrolling recipients. The pandemic may be over, but the Biden administration is still pressuring states not to disenroll anyone — even if they no longer meet eligibility requirements. Continuously expanding Medicaid to cover more services for more people will have steep costs. We have evidence from the recent past. A paper from the Paragon Health Institute found that Medicaid expansion under Obamacare led to higher-than-projected program costs, an explosion in improper payments, and worse healthcare access for enrollees. Currently, there’s no limit on federal Medicaid payments to states. One solution for reining in the program would be to institute state block grants with strict spending caps. This would stop rewarding states for expanding their programs. Medicaid’s finances are already strained. Total spending on the program was $800 billion in 2022. Expanding its mandate beyond conventional health care is a prescription for failure. And the vulnerable people for whom the program was originally created will likely suffer most. Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is “False Premise, False Promise: The Disastrous Reality of Medicare for All” (Encounter 2020). Follow her on X, formerly Twitter, @sallypipes.

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