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Innovation Isn't Easy When it Comes to Medicaid

It’s almost impossible to find a politician these days who isn’t very concerned about the deficit. And it has become clear that the deficit problem is largely a health care spending problem. Given the political difficulty of reducing Medicare spending in the short-term (politicians want to win, after all), the focus inevitably turns to Medicaid. That’s not surprising. Medicaid composes a significant portion of health care spending, costing about $400 billion in fiscal-year 2011.

The fiscal-year 2013 budget recently passed by the House of Representatives would reduce federal Medicaid spending by $750 billion over the next decade, even if the Affordable Care Act (ACA) is repealed or struck down. It would do so by changing the program from an open-ended program for eligible individuals using matching funds from both the federal and state governments to a block grant of a fixed sum given to states, and the states decide how to allocate the money. The idea is that states can “innovate” at a local level to find ways to deliver needed benefits at reduced cost.

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