State Responses to New Flexibility in Medicaid

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Abstract

Context

States have long lobbied to be given more flexibility in designing their Medicaid programs, the nation's health insurance program for the low-income, the elderly, and individuals with disabilities. The Bush administration and the Deficit Reduction Act of 2005 have put in place policies to make it easier to grant states this flexibility.

Methods

This article explores trends in states' Medicaid flexibility and discusses some of the implications for the program and its beneficiaries. The article uses government databases to identify the policy changes that have been implemented through waivers and state plan amendments.

Findings

Since 2001, more than half the states have changed their Medicaid programs, through either Medicaid waivers or provisions in the Deficit Reduction Act of 2005. These changes are in benefit flexibility, cost sharing, enrollment expansions and caps, privatization, and program financing.

Conclusions

With a few important exceptions, these changes have been fairly circumscribed, but despite their expressed interest, states have not yet fully used this flexibility for their Medicaid programs. However, states may exercise this newly available flexibility if, for example, the nation's health care system is not reformed or an economic downturn creates fiscal pressures on states that must be addressed. If this happens, the policies implemented during the Bush administration could lead to profound changes in Medicaid and could be carried out relatively easily.

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