Medicaid: Federal Program, State Complications

Medicaid has emerged as an oft-repeated talking point during the current prolonged financial crisis. Obviously, as a state ‘entitlement’ program, Medicaid finds few allies among the GOP, Tea Party, and Libertarian end of the political spectrum. Over the past few years, however, even less ideologically-opposed policy-makers have been forced to consider how best to fund and defend a program that is under such consistent scrutiny.

The biggest battles around Medicaid are currently occurring not on the federal level, but in the individual states that actually manage and administer the funds. Most recently, California has raised a fuss all the way to the US Supreme Court, seemingly about how much freedom the individual states have to reduce payments to health care providers.

At first, this may seem like merely a control issue rather than an economic one. So changes in the rules of Medicaid shouldn’t mean much to California’s struggling budget, right?

According to Gov. Brown, it means a cool $709 million saved in Medicaid reimbursements over the first year alone.

The matter at hand is a bit more complex. Medi-Cal, like all other state Medicaid entities, is a shared program between the Federal government and the states. So when Medicaid reimbursements are reduced, the savings is not simply in the existing Federal funding but also in the state’s contributions. Think of it in terms of mortgaging waterfront real estate refinancing, where you need to weigh the benefit of monthly savings against the total loan amount over the entire term.

However, there is a difference in opinion as to the exact nature of the review. Some prefer to stress that California (and 22 other states that support the Supreme Court review) is asking for limits to private lawsuits over public benefits. Opponents of the review, however, tend to see this as obscuring the fact that the outcome will simply be fewer people getting needed healthcare — and that California’s contributions are among the lowest in the country already.