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John Graham: Medicaid Reform Should Not Be So Hard

by Benjamin Domenech on June 2, 2011

John Graham writes at Free American Health Care on the challenge of Medicaid reform, Tom Coburn’s S.1031 proposal, and why it should be less difficult to fix Medicaid than it is to tackle other entitlement reform issues:

The politicians who invented Social Security and Medicare asserted that these programs would be funded by payroll taxes in order to foster the illusion of entitlement. We pay for the benefits in our working years, and the benefits arrive after we’ve retired. It’s all nonsense of course.

The taxes we pay do not go into accounts that belong to us. Rather, they pay current retirees and fund other government programs. Nevertheless, it is exceedingly difficult to convince people of the truth that we have not paid for our Social Security or Medicare. But Medicaid spending, to which nobody is “entitled,” is now greater than Medicare spending.

This has occurred because Medicaid’s funding formula incentivizes the political class to overspend. For every dollar a state politician spends on Medicaid, the federal government pitches in at least one dollar – or even more, as a result of the misnamed “stimulus” of 2009 – via the Federal Medical Assistance Percentage (FMAP). The federal government actually rewards states for making more residents dependent on Medicaid.

S.1031 would transform the federal government’s funding for Medicaid, but it would transform it into a “capped allotment.” This was the model of the successful welfare reform of 1996, which reformed Aid to Families with Dependent Children (AFDC) into Temporary Assistance to Needy Families (TANF).

Read the rest here.

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