Entitlement programs are in desperate need of reform, and it’s no secret. Social Security, Medicare, and Medicaid accounted for an astounding $2.1 trillion, or 48%, of the fiscal year 2019 federal budget.
This number will balloon to an estimated $2.9 trillion in fiscal year 2021. Overall, the Congressional Budget Office predicts a $1.1 trillion deficit for the fiscal year 2020 federal budget. It’s clear that legislators must do something to rein in spending while ensuring access to healthcare during this unprecedented crisis.
However, in the COVID-19 environment, the only thing more harmful to fiscal conservatism than doing nothing about the broken entitlements system is doing the wrong thing. Unfortunately, that’s what the Centers for Medicare and Medicaid Services may do. Through a new, misnamed regulation called the Medicaid Fiscal Accountability Rule, CMS is attempting to increase transparency in a way that will both violate states’ rights and fail to implement responsible cost-cutting.
Medicaid’s funding currently stems from federal matching on state contributions. For every dollar a particular state injects into the program, the federal government matches it by approximately 50% to 75%, depending on the state. Seemingly in an attempt to reduce the impact the federal match incurs on the federal government, the Medicaid Fiscal Accountability Rule would invalidate many of the Medicaid funding mechanisms the states use today.
The Medicaid Fiscal Accountability Rule’s regulations seem to be based on critical misunderstandings of the states’ Medicaid programs. For example, one of the state-funding techniques regulators take umbrage with is the supplement payments that many states make to Medicaid providers. They likely see these payments as accounting trickery to inflate their Medicaid budgets and thus qualify for more federal cash, but this characterization couldn’t be further from the truth. Such a characterization ignores the fact that the Medicaid rates are often set far below market costs, and these supplemental payments are necessary to keep many Medicaid providers’ practices open.
This becomes especially true in rural areas, where operating margins are significantly lower than the rest of the country. Many of these facilities are already at a significant risk of closure, with a whopping 172 closing over the last 15 years. Failing to let the states pay market rates to these suffering care centers will exacerbate the rural hospital crisis at a time when almost one-fifth of rural residents are already saying that access to good doctors and hospitals is a major problem within their communities.
If the federal government still believes it prudent to restrain Medicaid costs during this pandemic, even while many states are facing shortages, it could do so easily through block-granting (conservatives’ long-accepted method of entitlement reform), which would get rid of the federal match altogether. But the Medicaid Fiscal Accountability Rule’s sweeping federal action violates state sovereignty, amounting to less access to care or a massive increase in state taxes while over 30 million people and counting have filed for unemployment.
Red-state governors, particularly in areas with problems accessing healthcare such as Iowa, Indiana, and Missouri, will inevitably suffer the political consequences from these bureaucrats’ actions. The blame-games they receive will set the stage for more Democrat gubernatorial political victories that will only make the nation’s healthcare situation even worse.
Kevin Mooney (@KevinMooneyDC) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is an investigative reporter in Washington, D.C., who writes for several national publications.
