Health reform by other means.

How to fix health policy.
Feb. 1 2010 6:17 PM

Health Reform by Other Means

Has the cannibalization of Obamacare begun?

Click here for a guide to following the health care reform story online.

Barack Obama. Click image to expand.
Barack Obama

President Obama's proposed budget for fiscal year 2011 includes $25.5 billion that might be characterized as health reform lite.

Our story begins a year ago, when Congress passed the stimulus bill. That bill contained a spending increase for the state-federal Medicaid program, which provides health insurance to the poor. Before the stimulus bill, the federal share of Medicaid spending, which varies from state to state, averaged about 57 percent. The stimulus bill raised that average temporarily to 63 percent, with additional relief to states with particularly high unemployment. This increase in what's known as the Federal Medical Assistance Percentage ended up being a very big deal. It accounted for about one-third of the $82 billion in stimulus dollars that the federal government paid out over the last year to help state governments ride out the recession. The states needed the cash because the economic downturn swelled Medicaid rolls in virtually every state. According to the Kaiser Family Foundation, every 1 percent increase in unemployment typically creates 1 million new enrollees in Medicaid and the Children's Health Insurance Program (another state-federal health insurance program for people with low incomes).

In February 2009, when the stimulus bill was enacted, the unemployment rate was 8.2 percent. Today it's 10 percent. That means the states need that FMAP increase even more today than they did a year ago. But it was scheduled to expire at the end of 2010. So the House, when it took up health reform, extended it through June 2011. (See Section 1749.) The Senate did not, though it included some more narrowly defined FMAP increases, of which the most notorious was the so-called "Louisiana Purchase," a $300 million adjustment for the state of Louisiana that secured the vote of Sen. Mary Landrieu, D-La., for health reform to proceed to the Senate floor.


You know what happened next. Quite unexpectedly, Scott Brown, a Massachusetts Republican, won a Senate seat held previously by two Kennedy brothers for nearly 60 years. ("It's not the Kennedy seat, and it's not the Democrat seat. It's the people's seat.") Brown's election reduced the Democrats' effective Senate majority to 59 from a filibuster-proof 60, instantly halting progress on a health reform bill that was already in House-Senate conference. No FMAP increase. Not even a Louisiana Purchase.

The death of health reform is the source of much public glee for the bill's Republican opponents. But there's one little problem. Across the country, states have been counting on health reform to extend the FMAP increase through the first six months of 2011. In Maine, whose Republican Sens. Olympia Snowe and Susan Collins both voted against health reform, the state has, in preparing its budget, figured in a projected $35 million extension from the health reform bill, according to Janet Adamy in the Wall Street Journal. California's Gov. Arnold Schwarzenegger (who, Adamy points out, called health reform a "trough of bribes, deals and loopholes") just proposed a $1.2 billion increase in Medicaid spending, based on … the health reform bill. The House took the precaution of also tucking the FMAP increase into the jobs bill it passed in mid-December, but Brown's victory has cast some doubt whether that measure can now clear the Senate.

And so it's the Obama budget to the rescue. Nobody in Congress, as far as I know, opposes extending the FMAP increase, even though that would increase federal spending. That's because nobody wants to stand between his or her state and $25.5 billion in much-needed federal assistance. In the larger scheme of things, the FMAP increase represents a pretty tiny slice of health reform; it isn't even that large a portion of the bill's overall increase in Medicaid spending. (The bill would expand Medicaid enrollment on a permanent basis by about 25 percent.) But it would seem hard for any conservative to make a principled argument why this part of health reform should be sacrosanct while the rest of it should be beyond the pale. Extending health insurance to people who need it is what the bill is largely about. Once the current recession is over, there will still be tens of millions who can't afford health insurance. But since governors and state legislatures aren't stuck with buying it for them, they are invisible.

E-mail Timothy Noah at



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