On Tuesday, Senator Orrin Hatch and Congressman Phil Gingrey unveiled new legislation, The State Flexibility Act, which they touted as providing states with “greater Medicaid flexibility in order to innovate and better target health care spending.” Let’s be clear: the only “flexibility” this bill provides is to cut seniors, people with disabilities and low-income children off health coverage.

“The State Flexibility Act” Cuts Costs by Cutting Care The State Flexibility Act repeals a provision in the Affordable Care Act (ACA) that prohibits states from cutting Medicaid eligibility for most adults until 2014 and for children until 2019. Eradicating this protection, known as the Maintenance of Effort (MOE) requirement, would jeopardize access to care for millions of vulnerable Americans. It would:

  • • allow states to cut long-term care for thousands of seniors suffering from Alzheimer’s, Parkinson’s, and other chronic conditions.
  • • put Americans with disabilities – such as multiple sclerosis, AIDS, and severe mental illness – at risk for losing access to services that allow them live independently.
  • • mean millions of children throughout the country could lose their health coverage and no longer be able to see a doctor when they got sick or injured.
States Already Have Flexibility to Cut Costs by Improving Care If Senator Hatch and Congressman Gingrey are truly interested in promoting “state flexibility”, they should work with states to fully utilize the tremendous flexibility states already have in designing payment and delivery systems. As we have pointed out time and time again, there are countless ways states could reduce their Medicaid costs by improving care for beneficiaries, and no state has taken full advantage of that flexibility.

For example, as we discussed in our recent policy brief, states currently have the authority to move from a payment system that reimburses providers for more services, toward one that pays for better health outcomes. Maryland recently began tying hospitals’ payment levels to their rates of preventable complications like hospital-acquired infections, so that hospitals that did a better job at preventing these life-threatening complications would get more money, and hospitals with higher rates of infections and other complications would get a bit less. Infection rates – and the costs associated with those infections – dropped dramatically in Maryland as a result of this innovative payment reform. Despite this success, few states have followed Maryland’s lead.

Another state option, created by the ACA, provides states with additional federal matching dollars to set up health homes for Medicaid beneficiaries with chronic physical or mental illnesses. Health homes have been shown to save money by better coordinating the complex care of high-risk beneficiaries and helping them avoid costly ER visits, hospital readmissions, and duplicated tests and procedures. About half the states are exploring the option, though so far only a few have made a commitment to move forward.

These are just two examples illustrating how states can reduce Medicaid spending by better serving the needs of their beneficiaries (for more ideas, check out these resources developed by Community Catalyst’s Integrated Care Advocacy Project). Until states have taken full advantage of opportunities like these, there is no excuse for proposals like the State Flexibility Act that could undermine care for millions of seniors, people with disabilities and low-income children.

— Katherine Howitt, Policy Analyst