Easy Solution to the States' Medicaid Crisis

It's the issue that has confounded every state government: funding its share of Medicaid. Here in Kentucky, the hole Medicaid funding blew in the state budget forced the General Assembly into a special session to try to figure out how to close the gap.

But for those of us in the reality-based community who understand what is the proper purpose of the federal government, the answer is obvious.

Kevin Drum:

Although Medicare is getting most of the attention today, Paul Ryan's budget proposal also contains big changes to Medicaid. But Suzy Khimm reports that cuts to Medicaid aren't much more popular than cuts to Medicare:

But new polling from the non-partisan Kaiser Family Foundation also suggests that Medicaid is more popular than Beltway insiders might assume. Though public support for Medicaid lags slightly behind support for Social Security and Medicare, it's still robust: According to the KFF poll, only 13 percent of the public was willing to support major cuts to Medicaid....[Drew] Altman explains that part of the support for Medicaid comes from the services it provides for the elderly and disabled: though the program's usually described as an entitlement for the poor, seniors and the disabled make up two-thirds of Medicaid costs.

For what it's worth, I think Ryan's Medicaid proposal is far worse than his Medicare proposal. Basically, he endorses the Republican party line, which is to turn Medicaid into block grants for states, and then give states the freedom to spend it any way they want. But this is exactly the opposite of what we should be doing.

Here's the problem: states aren't allowed to run budget deficits, so when the economy turns bad they have to cut back on spending. But bad economic times are precisely when more Medicaid spending is needed. So unless Ryan is proposing to automatically increase those block grants whenever individual states or the country as a whole are in a recession — and he's not — this produces the worst possible dynamic you can imagine: a safety net that gets worse at exactly the times when it's needed most.

States have been experimenting with Medicaid for decades, and successes are few and far between. There just aren't any magic bullets here, and giving them more scope for experimentation isn't likely to produce any new miracles. A better bet would be to federalize Medicaid entirely. It's a huge burden to state budgets, and one that's especially burdensome during an economic downturn like the one we're in now. Ryan is right that there's really no good reason for Medicaid funding to be split between states and the federal government, but he's wrong about how to fix that. Medicaid shouldn't be a 100% state program, it should be a 100% federal program, one that's both a true safety net and a useful automatic stabilizer during recessions.

Who will be the first state governor to call on President Obama to make this happen?