New Medicaid Study: ‘Waivers Are Temporary, Expansion Is Forever’

A study to be released next week challenges the claim of some Michigan lawmakers that by adopting the Obamacare Medicaid expansion states can gain greater flexibility in reforming the medical welfare program, which is operated as a state-federal partnership.

The report is a joint project of Michigan's Mackinac Center for Public Policy and Ohio’s Buckeye Institute for Public Policy Solutions, and is co-authored by Buckeye President Robert Alt and visiting fellow Nathaniel Stewart. The authors were assisted by Ed Haislmaier, senior health care policy researcher at the Heritage Foundation in Washington, D.C.

"It is unrealistic to assume that the Obama administration will weaken the Medicaid requirements that they fought so hard to get," Alt said. "No state should expand Medicaid based upon the illusory hopes of waivers, which are inadequate to genuinely reform Medicaid's ills."

In the study, Alt and Stewart explain how relying on waivers to operate a more flexible and cost-effective Medicaid program may be "illusory."

The authors write: "[R]eliance on waivers as a source of long-term flexibility to reform the operation of Medicaid programs is ill-placed, and trading expansion for waivers is a risky bargain for states."

The Michigan Senate may vote to implement the Obamacare Medicaid expansion as early as next week. The State House passed it earlier this summer. At least 19 states have rejected the expansion and several more are leaning that way.

This summer a Senate work group made some changes to the House-passed bill. Both versions would require the state to seek permission from the federal government for waivers to implement various Medicaid reforms, including modest copays and a four-year cap on benefits.

The Mackinac/Buckeye study provides three reasons to believe that even if waivers are initially granted, they are unlikely to provide the foundation for genuine and permanent reforms.

First, Medicaid waivers are "designed to be temporary," meaning legislators would be expanding the program in return for reforms that may have to be retracted later.

Second, waivers are "highly discretionary" on the part of officials in the Obama administration and the federal Department of Health and Human Services, which will only grant them to the extent they are in accord with the policy goals of the Patient Protection and Affordable Care Act and Social Security Act.

Third, waivers are also subject to judicial review, even after they've been approved by federal officials.

For these reasons, the study says, it's unlikely that waivers will work to sufficiently offset the costs of expanding Medicaid. 

The paper supports these assertions by describing the experience of a number of states that have recently been denied waivers to modify their Medicaid programs, or even to continue existing reforms, including Oklahoma, Indiana, Arizona, California, Florida and Connecticut.

"Just as it would be imprudent for anyone to enter into a legally enforceable written contract with the expectation that the he can later persuade the other party to waive parts that are no longer preferable, likewise agreeing to expand Medicaid ... based upon the hopes of procuring future waiver concessions is ill-advised," the study says.

"Any decision to accept the Medicaid expansion today should not be based on the illusory promise of a federal waiver tomorrow," the study concludes.