New Jersey Governor Chris Christie has emerged as one of the nation’s leading budget crusaders. With dedication and determination he has taken on the spending lobby and state bureaucracy in the Garden State, so far with more victories than losses.
So far his budget fights have been relatively moderate, at least in terms of the dollar amounts involved. It was inevitable that at some point he would have to put his spotlight on the heavy entitlement programs that dominate the state budget. Therefore, it comes as no surprise that he now has Medicaid in his crosshairs. From the New Jersey Herald:
A lack of information, preparation and training is plaguing efforts to reform New Jersey’s Medicaid program, advocacy groups and beneficiaries warned Monday. Groups representing children, the disabled and the mentally ill told the state Senate Health Committee that New Jersey is unprepared for Gov. Chris Christie’s proposed changes to Medicaid, cautioning that vulnerable populations are about to fall through the cracks. Last month, the Christie administration laid out a plan to overhaul the government-funded health care program for at-risk populations, the realization of the Republican governor’s goal to cut $300 million from Medicaid spending in next year’s budget. The plan calls for heavily restricting eligibility and moving more patients into managed-care programs. … At an Assembly hearing two weeks ago where state commissioners presented the overhaul framework, lawmakers reacted with indignation to the eligibility changes, which would limit coverage for new adult enrollees to those earning less than $5,317 per year for a family of three. The federal government jointly funds Medicaid and must approve those changes, which the state plans to submit through a waiver at the end of June. But New Jersey doesn’t need a waiver to move most populations into managed-care, drawing the ire of those who said the state has moved too quickly in phasing out fee-for-service plans.
There is no question that Governor Christie is right in that the Garden State’s Medicaid is in dire need of reform. However, a chainsaw cut across the budget is a short-sighted solution that combines bad economics with questionable ethics.
Other states are trying the same strategy. Medicaid is being cut in, e.g., Arizona, New York, South Carolina and Utah. In Delaware, lawmakers have fiercely debated Medicaid cuts but eventually decided to pretend that Medicaid is not a cost problem. There is no doubt that this strategy will prompt even tougher budget battles down the road. (Even more foolish are lawmakers in Kentucky who have bet their Medicaid system on a perpetual stream of ARRA “Stimulus Bill” federal funds.)
Florida is trying a different strategy. Essentially, the idea is to let market forces, not politicians and bureaucrats, contain Medicaid costs. A state-provided voucher would allow enrollees to buy an insurance plan on an open market. Competition and consumer choice will bring costs down and improve services. This contrasts to the lopsided cut-it-all strategy that Christie has chosen, which will bring down costs but leave vulnerable, government-dependent families out in the cold.
The voucher model is not perfect. It comes with two problems: it works best for Medicaid enrollees who are not exceptionally high risk, and the state needs federal approval for the voucher reform. The first problem is best addressed by separating Medicaid enrollment populations from each other: the “regular” families whose only reason for being on Medicaid is low income are the best suited for a voucher system. Once the voucher model works for them, it can be expanded to other groups.
The second problem is a bit tougher to deal with. The current administration is unlikely to accept any market-driven reforms to Medicaid. Legislators in Florida are aware of this and are therefore considering a secession from the federally sponsored program. An in-state only Medicaid solution would allow them to use vouchers and other innovative reforms independently of the heavy federal hand.
Governor Christie would be well advised to take a look at the Florida model. In its best form, the voucher model would actually allow families on Medicaid to get more and better health care, while providing a welcome cost relief for taxpayers. With his current strategy, Christie is allowing the state to default on health care promises to low-income Jerseyites. This is bad economics because the program is still in place and will still cost taxpayers a lot of money. It is also bad ethics: as dysfunctional as Medicaid is, it is nevertheless a program that eligible people plan their lives around. They have become dependent on a reckless promise made by government; the right thing to do is to implement solutions that help them and taxpayers at the same time. A market-driven voucher reform is a big step in that direction.
