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A Boondoggle to Love

Harold Pollack is a professor at the University of Chicago School of Social Service Administration and Special Correspondent for The Treatment.

The Washington Post includes a nice little article by Aaron Davis on House  provisions to extend stimulus-package Medicaid subsidies to states by six months. Davis starts out in familiar jaded fashion:

Wedged in the House health-care bill is $23.5 billion that looks a lot more like new federal stimulus spending than anything to do with national health-care reform.

The barely debated pot of money would allow Congress to continue pumping billions in new short-term aid to states to cover Medicaid costs that have increased with rising unemployment in the past year.

The potential impact of the new spending became clear last week when giddy state budget officials in capitals from Annapolis to Sacramento penciled in the revenue, hoping that if health-care legislation survives in the Senate, the states' bonus might squeak through.

Ironically, the rest of the piece shows why this provision is no shameful midnight deal. States are bleeding right now because their chronic Medicaid challenges coincide with a deep recession that is choking revenue and increasing demand for services. The long-term problem is equally severe. States simply cannot shoulder the growing Medicaid burden. As a result of Medicaid cost growth--and, often, their disastrous mismanagement of employee retirement obligations--many states are being driven into deeper deficits. Patients and providers are suffering as states predictably cut corners to make the budget numbers work.

Current health reforms would enlarge Medicaid rolls and make Medicaid somewhat more generous. Depending on the mechanics, this may worsen states’ burden. (House language significantly protects the states; Senate Finance committee is more worrisome.)

As I, Greg Anrig, Ed Kilgore, and others have noted, a key challenge facing health reform is to shore up the finances of state and local governments. There is no sustainable alternative to a greater federal role in Medicaid financing. States are surely grateful for the six-month transfusion. They need more. Dialysis may be the better metaphor what is really needed.