Stopping Medicaid's 'Pac-Man Doomsday'
In December 2009, as Congress debated whether to approve President Barack Obama's Affordable Care Act, U.S. senator George Voinovich (R-Ohio) compared the Medicaid entitlement program to "the Pac-Man that gobbled up our state budget dollars," consuming every other government program.
Expanding the taxpayer-funded health care program to include individuals and families earning up to 133 percent of the federal "poverty line," Voinovich said, would crowd out allocated resources for other programs, eating up state governments' budgets as if they were so many white dots.
By taking entitlement reform, a process started in the 1990s, to the next level, state lawmakers and Congress can work together to stop Medicaid's looming Pac-Man doomsday, ensuring that the truly needy are being helped.
The federal government spent about $545.1 billion – about $1,694.05 per man, woman, and child – on Medicaid in 2015, the most recent year for which official numbers are available. Incredibly, 14 cents out of every dollar taken from taxpayers go to this one program.
Unless significant reforms are made, the U.S. Department of Health and Human Services predicts that "over the next 10 years, expenditures are projected to increase at an average annual rate of 5.7 percent and to reach $957.5 billion by 2025," or about $2,756.71 per capita – a 62.7-percent increase in the program's cost.
Working hand in hand, lawmakers in Congress and our statehouses can apply two time-tested solutions to the ballooning Medicaid spending crisis: block grants and work requirements.
Lawmakers in Indiana, Kentucky, and Pennsylvania are ahead of the curve; they are seeking federal permission to enact work requirements for able-bodied Medicaid recipients. Lawmakers in every state need to follow suit. By mandating that individuals who are capable of being self-sufficient, at the very least, seek employment, work requirements help to ensure that only the truly needy are being assisted, slowing Medicaid Pac-Man's budget binge.
Another key to stopping the Medicaid explosion is block grants, a reform integral to defusing welfare's detonation in the late 1990s. In 1996, President Bill Clinton signed the Personal Responsibility and Work Opportunity Act (PRWOA) into law, reforming the welfare system, cutting welfare rolls, and dramatically helping millions of people move to self-sufficiency.
Although the provision was ultimately left out of PRWOA, block-granting Medicaid was on the table, according to Clinton adviser Peter Edelman.
"Whatever the reason, when the governors came to town for their winter meetings early last year, the President invited them to draft and submit new proposals on welfare and, for that matter, Medicaid," Edelman wrote in a 1997 article published in the Atlantic.
By replacing the broken Aid to Families with Dependent Children program with the Temporary Assistance for Needy Families model, states were allowed to set their own food stamp entitlement programs, including work requirements for able-bodied recipients without dependents, reducing the overall cost of entitlement programs and increasing the quality of service.
Applying the lessons learned from PRWOA's success to the looming Medicaid apocalypse means that state lawmakers would have more power to try out new ideas, such as global spending caps, health savings accounts, or program budget rebalancing. Cost overruns would be discouraged by more direct pressure from taxpayers, incentivizing lawmakers to fight Medicaid fraud and mismanagement and optimizing programs to get the most bang for taxpayers' bucks.
Time is running out to stop Medicaid's "Pac-Man Apocalypse," but it's not unavoidable. The best time to reform Medicaid was yesterday, but the second-best time to do so is now.
Jesse Hathaway (firstname.lastname@example.org) is a research fellow with The Heartland Institute.