Editorial: Don't disrupt state's Medicaid solution


After convincing the Supreme Court to allow it to hedge on the language of the Affordable Care Act, the Obama administration is trying to hold Michigan to the strict letter of the Medicaid law. In the process it risks blowing a $1.3 billion hole in the state budget.

The state has been using revenue from the Michigan Use Tax on Health Maintenance Organizations (HMOs) to fulfill its matching funds requirement to qualify for some federal Medicaid dollars.

The feds previously OK'd the use tax as an appropriate source of matching funds, which are required to come from the General Fund and not from a tax on health care services or providers. The government fears allowing states to apply a health care tax would raise costs that would end up being paid by Medicaid and Medicare.

The state argues that since the Use Tax is on the HMO insurers, and not on actual health care, it meets the federal guidelines. The Use Tax also goes to the School Aid Fund and for other General Fund expenditures.

But the Centers for Medicare and Medicaid Services (CMS), the federal agency that writes the rules for the government health insurance programs, is now challenging the propriety of using a tax on health insurers to draw the matching federal funds.

A ruling by the center says the Michigan Use Tax is too specific in its applicability to the health care industry. If it stands, the state would have to dip into its already stressed General Fund to get the match, or forgo the federal funding.

Rep. Al Pscholka, chairman of the House Appropriations Committee, fired off a letter to the CMS challenging the ruling and reminding the agency that "Michigan's design has worked well for years and has met our health care service needs. The federal government is now trying to fix what isn't broken."

And that's what the feds should be concerned with. In a way, Michigan is making the same plea for practicality that the Obama administration did in urging the Supreme Court to uphold its rewriting of the Affordable Care Act to make it work as intended.

Pscholka's letter to the CMS notes that the terms for complying with its matching fund mandate are murky. But even if they weren't, he contends, Michigan "should be judged on the intent and functionality of the existing system."

In other words, what we're doing works, so leave us alone.

There's no evidence that the user tax is driving up the cost of delivering medical services, which is what the CMS should be concerned with.

Michigan came up with a solution that allowed it to meet its obligation, and it should be supported, not punished.

The guidelines from the feds on what constitutes a health care related tax seem arbitrary, and as Pscholka notes, give the government "nearly infinite wiggle room in determining which funding mechanisms are General Fund money ..."

The focus should be on getting health coverage to the most people possible, and with the least burden on taxpayers. Michigan's answer may not be technically perfect in terms of meeting complex federal rules, but it is cost effective and manageable.

Throwing it out the door will most likely mean that fewer people will get coverage, an outcome that would seem to run counter to the administration's overall health care goals.