Op Ed

Medicaid Block Grants Could Benefit State

But only if the proposed change is handled properly.

By - Jan 1st, 2017 02:39 pm
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Paul Ryan. Photo from the Office of the Speaker of the House.

Paul Ryan. Photo from the Office of the Speaker of the House.

Under the heading of “Be careful of what you wish for,” Gov. Scott Walker needs to very careful about the Republican Party’s intention to shift Medicaid management to the states in the form of bloc grants. He has put block grants on his 2017 wish list from President-elect Trump.

The state’s 40% share of the $8 billion in Wisconsin Medicaid expenditures is already stressing the Walker’s state budgets. If the shift of control of the program isn’t handled well, Medicaid could be a budget killer.

The governor has signaled his desire to add funding for K-12 education in the pending 20017-2019 state budget and to restore some cuts to the University of Wisconsin System. But that is not going to happen in any meaningful way if the Medicaid transition goes awry.

His political ally, Speaker Paul Ryan (R-WI), has made his broad plan for the decentralization of Medicaid clear in his 2016 vision statement called “A Better Way.” It calls for:

  • A cap on the federal portion of the Medicaid bill going forward. That could mean any further bulge in Medicaid costs could end up in the laps of Wisconsin taxpayers. Current Medicaid expenditure growth is about 4.5%, about double the general rate of inflation.
  • A shift to a per capita formula to apportion federal dollars among the states. The current formula is based on relative per capita incomes in the states. That change could help Wisconsin. We are currently getting about 1.5% of the federal allotment, but we have about 1.7% of the nation’s population and about the same percentage of the nation’s 72 million Medicaid enrollees.

Walker’s people are running different scenarios to make sure Wisconsin gets a bigger slice of the federal pie. They need to get it right. It’s the biggest pot ever in political poker.

Wisconsin perpetually has ranked 49th or 50th in return of federal tax dollars, mainly because our congressional delegations have been especially dopey over decades on that score. It’s bipartisan dopiness. Former Rep. David Obey brought home the bacon for northwest Wisconsin. But he is the exception. So other states pick our pockets. That metric explains part of the state’s lagging economic growth.

If it were ever Wisconsin’s time in the sun, this is it. With Ryan in the speakership, Reince Prebius of Kenosha as President-elect Trump’s chief of staff, Wisconsin having given Trump a big boost to the Oval Office and Rep. Jim Sensenbrenner in Congress since Moses, we should have the clout to get at least our fair share of the dole.

Also, the Medicaid funding from federal revenue has to be indexed. The federal cap needs to move up, not with general rate of inflation, but with the much higher medical rate of inflation. All states could get the federal shaft in coming years if that is not built into the bloc grants.

The federal revenues are just one part of the equation. The other major piece is cost management. To bureaucrats, that usually means trimming the enrollments in any number of ways.

Wisconsin’s version of Medicaid, known as Badger Care, currently covers about 1.25 million poor people, about 24% the state’s population. That’s a huge number, so management of eligibility is serious business. It’s the access issue that ObamaCare was all about.

The missing link across the board in the public sector, though, has been management of costs. Managers in the private sector have developed a new delivery model that dramatically reduces costs. It’s time to use those lessons learned with the Medicaid population, namely these:

  • Give every enrollee a health account to draw against, along with a high deductible and co-insurance. Indiana already does this. Once it’s a person’s own money, over-utilization and dumb utilization go away. People go to a clinic instead of the costly emergency room. Costs drop 20% to 30%. That has been verified in five national studies since health accounts were introduced in 2003.
  • Make proactive primary care free or cheap. Get after the chronic diseases of the poor people through direct relationships with doctors and nurses in medical homes. Stratify the enrollees, so those with big medical issues get extra up-front care. Keep them out of expensive hospitals. Costs can drop another 30%. Also, one-third of primary care doctors won’t take Medicaid patients because reimbursement is way low. This could be fixed by paying them $1000 per year, per enrollee for full primary care.
  • Do like Medicare already does. Cap elective procedures in bundled prices. Pay no more, for instance, than $30,000 for a joint replacement, versus a market average of close to $50,000. They are available in the Milwaukee market for $26,000 to $28,000. Savings on elective procedures can be up to 50% or more.

In short, it’s more about management science than political science.

With an innovative business model for Medicaid and some savvy politics in the nation’s capital, Wisconsin could get back to higher levels of funding for priorities like education, transportation, public safety and conservation.

John Torinus is the chairman of Serigraph Inc. and a former Milwaukee Sentinel business editor who blogs regularly at johntorinus.com.

Categories: Health, Op-Ed, Politics

7 thoughts on “Op Ed: Medicaid Block Grants Could Benefit State”

  1. tom says:

    Hey John your bias is showing again. You talk about not bringing home the bacon but you forgot that your buddy Walker turned away $800M in mass transportation funding and continues to turn away hundreds of millions in Medicaid expansion dollars. Over a BILLION dollars going to our neighbors due to Walker’s incompetence. Walker refused those dollars for political reasons. He’s a despicable right wing ideologue who panders to his money handlers. Why did you nail congressional representatives and ignore the huge incompetence of our slimy governor? You have no credibility, but you never did so nothing new.

  2. Steve says:

    You know Gov Dopey will funnel this money to his cronies or confiscate it to fill his massive budget deficits.

  3. Barb- West Bend says:

    “Iowa Medicaid payment shortages are ‘catastrophic,’ private managers tell state”.— Recent article in the Des Moines Register.

    Iowa Republican Gov. Terry Branstad (soon to be our Ambassador to China) against the wishes of the citizens of Iowa, turned Medicaid operations over to three private health care insurers. Although the DMR editorial staff have asked Branstad numerous times to furnish financial data on the costs/savings to the State by privatizing Medicaid, no such information is being provided. Branstad threw out figures on savings to taxpayers which had no basis in reality. The private health contractors now claim they need million$ more to run the program or they will have to make drastic cuts to the program or bow out. They cannot operate at a loss! (Republican Wrecking Crew) So here was a well run government program, turned over to the private sector which is unable to economically deliver the goods. So who are the people who will suffer the most by this disastrous move to privatization?… Those least likely to have the power to protest. God bless the Editors and Journalists of the Des Moines Register for exposing this disaster to the public. Republican Governor Branstad and Republican Legislators stay mum about this disaster…nothing to see here, just move along.

    John Torinus: Have you been asked to serve as a member of any Wisconsin “panel” to privatize Medicaid?

  4. Jake formerly of the LP says:

    Barb- I like your cynicism. That does seem like the kind if scam an ivory tower oligarch like Torinus would be up to.

    More likely- any block grant will be for less Federal money than the state currently gets, and Walker would use the “flexibility” to cut people off of assistance, on the name if “savings.”

    If somehow there is more federal money, it will definitely be used to fill in the billions in deficit that are blowing up in this budget. It will NOT be used to improve health care in any way. Torinus has to know that, so why isn’t he admitting it?

  5. Liloldlady says:

    There’s John again with the accusations of “…over-utilization and dumb utilization…”.
    Why aren’t we bargain hunting for urgent care or watching a video on setting broken bones, etc.?!

  6. Liloldlady says:

    Oops. I am forgetting that we should be glad to have a $4800/yr. Deductible (per person).

  7. alex says:

    We’ve seen this game played out before with TANF,using money to plug deficits with more “flexibility”.

    Think of it this way, a parent offers his child $1,000 and its conditioned that he must spend it on education/vocational studies (maybe not women’s studies),food,transportation,etc. He then conditions giving the next $1,000 on whether he does well in school and shows that he/she is using the money for productivity(not beers).

    Although the child could say to his/her parent to convince him for more flexibility (ie,1,000 can be also be used for a car and cheaper vocational training) and at a lower cost ($800 vocational class,$100 car for a total of $900). This is a bit different.

    The parent of course decides the “block grant” approach, he only gives son $400 now and later. Since the son would have to pay for vocational cost out of pocket or only afford to take one vocational class, he or she then decides to continue to work a low wage job and use the next $400 for beers,drug,cig,etc. He could also use it to pay child support for a child he’s not prepared to handle with this girlfriend or pay gambling debts.

    This is what a block grant does, it cuts money because states want to plug deficits or use it for hmos and cronies. The proposal sounds good because it seems like a win win,feds save money,states can decide to use the money for items that would not be covered. Of course then what happens if son gets laid off,gets health issues,gets into an accident,etc

    If there’s an outbreak of a disease or recession then the money won’t be there,folks may clog er,or die. Take Puerto Rico, its block grant medicaid sort of. When Zika came there was less money to prevent and treat disease. The GOP of course is pro-life and “caring about children before birth against evil”, but it would be cheaper for the GOP to give tax cuts to wealthy,give taxpayer dollars to charters for fewer students,give HMOS the bulk of money to cover fewer patients, and let folks in need of transplants die (this has happened in arizona where to save 600k out of a budget of over $1 billion transplants were cut nevermind $2m for algae research and $2m for veterans roof museum). Note that medicaid already has state flexibility, states have many “optional services”.

    In texas a person who work harder in life was denied medicaid for having disability payments increase due to work history and making $900/month instead of say $800.

    Of course don’t be fooled, the RYAN budget is much like Puerto Rico, in addition to medicaid block grants, food stamps for example are block granted and called by a different name. Rather than let people have up to $200 maximum in food stamps, the maximum is usually half that amount with cash flexibility. This has saved the federal government money but there’s no stopping that $25/month out of the $100 from being used for cigs,beers,tattoo,etc.

    Puerto rico also has block grant SSI,before the nixon era SSI was block granted for elderly,disabled,blind (called aabd).It had problems like tanf, where not just depending on the state but county your benefit could be more than 3x. Nixon put an end to that silliness but RYAN and GOP wan’t to go back to that. If your getting $80-100 a month you would probably just use it for cigs,beers,movie since its so little money anyway.

    Of course PR has other issues, but let’s hit the GOP again. The GOP talks about PR being a socialist paradise, in addition to the examples I mentioned above, did you know that PR HAS A LOWER TAX BURDEN THAN THE MAINLINE US ESPECIALLY FOR THE WEALTHY!.

    The top tax rate in PR is 35% vs. 39%+state/local in addition to 5% or even zero! long term capital gains tax rate!(you know that lower capital gains folks pay like hedge funds,long term sale of home),which is why some wealthy citizens like Toby Neugebauer (cruz backer) moved there, oh yeah, and you don’t have to give up your us citizenship and pay exit taxes (leave us for tax).

    So Gee,block grants&cuts to the poor and more tax cuts for the wealthy, hmmmm, it didn’t work before,it aint working in PR, and it ain’t gonna be a great deal here. I don’t need to lecture the evidence is there. Of course blue state v. red state tax givers and takers are a different topic.

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