How Much Health-Care Freedom Should Trump Give States?

From the onset of the Affordable Care Act, critics protested that it amounted to federal overreach and was too strict on states. That fight has besieged the two political parties for the past decade. Now, much of the federal battle over health care has coalesced around how much freedom states should have in crafting their Medicaid programs. The Obama administration came under fierce conservative criticism for rejecting most requests from Republican-dominated states for waivers from Medicaid regulations. But how much would giving states more freedom impact costs, coverage and innovation in care? Could state governments help guide the federal government forward on health-care reform, or would more flexibility just become a mechanism for states to undermine the amount and quality of care?

The answers, like most everything involving health-care policy, are unclear. It’s also unclear what the states asking for flexibility would use it for. The most likely approaches center around conservative ideas such as requiring recipients to work, submit to drug testing or pay monthly premiums. The Trump administration has promised this sort of flexibility, but has been slow to approve the necessary waivers.

Indiana was arguably the most conservative state to get a Medicaid waiver approved by the Obama administration, which allowed it to require beneficiaries to pay monthly premiums. Results from Indiana’s experiment have been mixed. While more than 200,000 people have gained coverage, many reportedly have encountered problems navigating the state’s payment system.

But flexibility has another meaning for many of those who administer Medicaid at the state level. They want more freedom to streamline bureaucratic structures, make better use of data analytics and pursue what’s called “value-based purchasing” -- moving, for example, from the standard fee-for-service model to managed care or other approaches that reward doctors and hospitals for positive health outcomes and penalize poor results. They don’t want to have to ask permission from Washington for every departure from federal regulations. At a minimum, they’d like to see the cumbersome, time-consuming waiver approval process made more efficient.

The need for flexibility to tailor program administration to local conditions and seek efficiencies is one that health-care administrators generally agree on. “What works for rural Alabama is not going to work for New York City,” says Matt Salo, executive director of the National Association of Medicaid Directors. “The flexibility that states are looking for is for things that dovetail with value-based purchasing.”

Advocates of greater flexibility are likely to find an ally in Seema Verma, the new administrator of the federal Centers for Medicare and Medicaid Services (CMS). Verma was an architect of Indiana’s system. In a 2013 congressional hearing, she described the Medicaid bureaucracy as a set of “rigid, complex rules” that have “created an intractable program that does not foster efficiency, quality or personal responsibility.”

But as veterans of efforts to streamline government bureaucracy and improve program efficiency know all too well, there are always going to be up-front costs. Health policy experts worry that the kind of large, across-the-board cuts to Medicaid funding being proposed in Congress would work against the kind of flexibility initiatives that appeal to the program’s state administrators. “It’s very difficult to change the health-care system in a value-driven way,” says Salo. “It takes investment and resources to do that. If you take enough money out, no one is going to have enough money to make that investment and to change the direction of this battleship.”