Medicaid is the nation's largest health insurance program, providing health and long-term care services to approximately 59 million low-income pregnant women, children, individuals with disabilities and seniors. It is a vital health care safety net and provides important services to those who cannot obtain care from any other source. Medicaid coverage also is critical for reducing the number of the uninsured, currently estimated at more than 45 million nationwide.

Authorized under Title XIX of the Social Security Act, Medicaid is a means-tested entitlement program financed by state and federal governments and administered by the states. Within national guidelines established by the federal government, each state establishes its own eligibility standards; determines the type, amount, duration and scope of services; and administers its own program.

Policy References:

• EC-16. Medicaid Reform Policy
• EC-17. Foundations in Health Care Reform
• HHS-22. Private Sector Health Care Reform
• HHS-24. Implementation of the Deficit Reduction Act of 2005
• HHS-27. Medicaid Reform Principles Policy
• HHS-28. Long-Term Care

Testimony:

• June 11, 2009 Testimony  by NGA Executive Director Ray Scheppach before the Senate Committee on Health, Education, Labor and Pensions on health care reform

• May 5, 2009 Testimony by NGA Executive Director Ray Scheppach before the Senate Finance Committee hearing entitled "Roundtable to Discuss Health Care Reform Coverage"

• March 25, 2009 Testimony by NGA Executive Director Ray Scheppach before the Subcommittee on Health of the Senate Finance Committee on "The Role of Long Term Care in Health Reform"

• March 27, 2007 Testimony by NGA Executive Director Ray Scheppach before the House Energy and Commerce Subcommittee on Health on "Insuring Bright Futures: Improving Access to Dental Care and Providing a Healthy Start for Children"

NGA Position

Governors understand the vital role that health plays in productivity, competitiveness and quality of life and have made providing cost effective health care to their citizens a top priority. Given its unsustainable course, significant reforms of the health care system are necessary. More than 45 million Americans are currently uninsured, and millions more are underinsured. Achieving greater access to affordable, quality health care is a critically important goal. Medicaid has an important role in meeting the needs of our most vulnerable populations and governors are committed to modernizing the program so that it better responds to their needs.

Modernization of Medicaid also is critical because of the program's long-term fiscal outlook.  Medicaid accounts for more than one fifth of total state spending. Increases in state spending on Medicaid have been driven by a combination of factors, including rising health care costs, fluctuations in enrollment and increases in demand for services for individuals with complex medical needs.

Medicaid has become the nation's de facto source of long-term care coverage as well as a critical source of coverage for individuals eligible for both the Medicare and Medicaid program—known as the dual eligibles. The dual eligibles—including aged and non-elderly people with disabilities—are some of the most expensive Medicaid enrollees. While they represent only about 18 percent of the Medicaid population, they account for about half of Medicaid spending. Comprehensive Medicaid reform must focus both on reforming Medicaid and on strengthening other forms of health insurance and long term-care services and supports.

Governors believe that meaningful Medicaid reform should include both short-term flexibilities that allow states to more efficiently manage the program and subsequently serve all those in need, as well as long-term structural reforms that will make Medicaid sustainable going forward.
Short-term flexibilities that governors propose to modernize, streamline, strengthen and make Medicaid a more cost-effective and high quality program include:

• Provider payment reforms can be advanced by states to improve quality and contain costs. These reforms include pay for performance incentives, payment for care coordination services, for example by medical homes and bundled payment for services.
• Coordinate Medicare and Medicaid administration, rules and funding streams to ensure sound care models, streamlined administration and cost-savings for both programs.
• Streamline regulatory, purchasing, and contracting roles to ensure that Medicaid, the Children's Health Insurance Program (CHIP) and Medicare work in tandem to advance consistent health care goals and send consistent signals to the health care market.
• Strengthen initiatives to reduce fraud and abuse and coordinate program integrity efforts at the state and federal levels across programs in a way least burdensome to states.
• Revamp the State Plan Amendment ("SPA") and waiver processes to be transparent, consistent across states, grounded in published policy and streamlined.

While not representing comprehensive health care reform, governors further propose polices focusing on populations that may become Medicaid eligible as well as underlying cost drivers in the overall health care system. Such policies that aim to slow the number of low-income individuals and elderly becoming eligible for Medicaid include:

• Enhancing quality and reducing costs in the overall health care system;
• Strengthening employer-based and other forms of private health care coverage; and
• Slowing the growth of Medicaid long-term care.

Governors believe that Medicaid will always have an important role as the health care safety net, but other forms of health care coverage must be strengthened to ensure Medicaid's financial sustainability. In particular, a national strategy for sustainable financing of long-term care services and supports for elderly and people with disabilities, regardless of income, must be developed. The absence of any national strategy has thrust the responsibility to states and to the Medicaid program specifically. Enhancing the quality of care and containing costs are also critically important. Governors believe that Medicaid reform must be driven by good public policy.