As Congress continues to dither and delay entitlement reform, the Trump administration has empowered state lawmakers to take charge and do what Washington either can’t or won’t do: reform government spending and health care.
Section 1115 of the Social Security Act authorizes the U.S. Department of Health and Human Services to approve state governments’ requests for Medicaid waivers, allowing states to tailor the program’s implementation to their respective needs.
In January the Centers for Medicare and Medicaid Services published guidelines for states seeking to use Section 1115 to institute work requirements affecting “non-elderly, non-pregnant adult Medicaid beneficiaries who are eligible for Medicaid on a basis other than disability.”
Many states have already started to take advantage of this go-ahead because they know it will help get people back to work. But there’s another important reason to apply work requirements to Medicaid: the government’s massive debt time-bomb.
The federal government spent $368 billion — about $1,138 per man, woman and child — on Medicaid in 2016. Currently, about 11 cents out of every dollar taken from taxpayers goes to this one program. According to estimates from the Congressional Budget Office (CBO), the gap between the national government’s income and spending, commonly referred to as the deficit, will exceed $1.46 trillion in 2027, or roughly $4,144 per person.
Absent a major course correction, the cost of Medicaid alone is expected to increase at an average annual rate of 5.9 percent over the next decade, reaching a total cost of $655 billion per year by 2027, or about $1,845 per capita. That’s nearly double its current size.
However, using the tools provided by the Section 1115 waiver process, state lawmakers can take control of their own budgetary destiny and help prevent Medicaid’s collapse by trying out new, innovative ideas that could improve the quality of care for Medicaid recipients and reduce the burden placed on taxpayers. Potential reforms include across-the-board spending caps, creating health savings accounts, and rebalancing spending on budget line items. Additional state-level control of Medicaid implementation also discourages cost overruns and incentivizes states to fight fraud and mismanagement.
When states are given more power over their welfare programs, voters’ political power over the programs’ administration is better concentrated, making it easier to hold bureaucrats and politicians accountable.
Although Americans should remain optimistic the Republican-led Congress will reform its ways and stop Washington’s reckless spending, state lawmakers should prepare for the worst-case scenario by laying the groundwork for reforming Medicaid at the state level. At the very least, filing Medicaid waivers and requiring individuals capable of being self-sufficient to seek employment or engage in community engagement activities help to ensure that only the truly needy are being assisted.
Time may be running out to defuse the national government’s debt time-bomb, but it’s not yet inevitable. State legislators have a vital role to play in rescuing our nation from fiscal collapse. It’s time they seize control over the issue by passing their own reforms, rather than wait for Congress to solve all their problems for them.
Jesse Hathaway is a research fellow with the Heartland Institute.