Explainer Episode 51 – Beyond Medicaid? Potential Paths Forward to Better Healthcare

Signed into law in 1965, Medicaid has been active for almost 58 years, during which time its scope has fluctuated and many conversations have been had as to what the appropriate reach, means, and aims for the program should be. In this podcast featuring Tom Miller, he lays out a brief summary of how we got to where we are. He highlights the benefits Medicaid has brought as well as some of the downsides he perceives, and lays out a possible path forward to better healthcare that practically addresses the hurdles to healthcare reform legally, financially, and politically.


Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.

[Music and Narration]


Introduction:  Welcome to the Regulatory Transparency Project’s Fourth Branch podcast series. All expressions of opinion are those of the speaker.


Chayila Kleist:  Hello, and welcome to the Regulatory Transparency Project’s podcast. My name is Chayila Kleist, and I’m an Assistant Director of the Regulatory Transparency Project here at The Federalist Society. Today, we are delighted to host Tom Miller for a discussion on Medicaid and potential paths forward to better healthcare.


Mr. Miller, thank you so much for being with us today. We appreciate you taking the time. 


Tom Miller:  It’s a pleasure to be with you.


Chayila Kleist:  For our audience, Mr. Miller is a Senior Fellow at the American Enterprise Institute, where he studies healthcare policy, including regulatory barriers to choice and competition, market-based alternatives to the Affordable Care Act, healthcare litigation, and political economy healthcare reform. A former Senior Health Economist for the Joint Economic Committee in Congress, Mr. Miller was previously a trial attorney, journalist, and sports broadcaster. Mr. Miller is coauthor of a best-seller book on Obamacare and has also testified before Congress on the uninsured, healthcare cost, Medicare cost sharing, high-risk pools, healthcare competition, and related issues.


He also speaks regularly at various college campuses and teaches a seminar on shaping law and policy at Duke University School of Law. Now, while there’s more to say, in the interest of time, I’ll cut my introduction there. But if you’d like to know more about Mr. Miller, please feel free to check out his full bio at www.regproject.org. With that, however, we’ll turn to our discussion.


Let’s start with some of the basics, although this may be almost too basic, but it’s important for our discussion, nonetheless. What, from a 30,000-foot view, is Medicaid, and what are its intended purposes?


Tom Miller:  Well, Medicaid goes back to being started in 1965, at the same time as Medicare. It’s grown a lot since then and changed in many ways, but it was essentially — it started out as a premise to provide medical assistance, coverage, financial assistance to lower-income Americans who needed to have their healthcare taken care of through some type of publicly assisted insurance program. Started smaller, grew larger over time. It’s grown even larger in the last decade. 


It’s largely income-based, although there’s some statuses that can get you there. There are really three components to the Medicaid program. We’re going to talk today mostly about the one for lower-income Americans below age 65. There’s also coverage that supplements individuals who are eligible for Medicare who are lower-income—they’re sometimes called dual eligibles. There are also individuals who have various medical disabilities. They can be below 65 as well as over 65. They tend to be the more expensive Medicaid enrollees. They’re actually a small fraction of the enrollment in the program, but that’s it, essentially. 


And this is a 50-state program. Though there are a lot of similarities with many federal rules that apply across the board, states do have the ability to somewhat customize or adjust their benefits coverage and some other provisions of the law because it’s actually administered jointly with the federal government, primarily through the 50 states, and again, different how they approach this over time. 


Chayila Kleist:  Got it. Thank you. If I remember correctly—or I should say, if my notes are correct—Medicaid was signed into law in 1965 by President Lyndon Johnson, meaning it has an almost 58-year track record. What aspects of that history are important to understand to frame the conversations being had on Medicaid today?


Tom Miller:  Well, there’s a lot of things we could say about Medicaid. To oversimplify it, it’s grown larger than it first started out. There are a lot of opportunistic moves to try to use Medicaid as a building block for a more federally-oriented, centrally-commanded approach to healthcare. You start at the edges, and you keep filling it in; before you know it, you got a lot of folks involved in it. Certainly, in the last dozen years or plus, we’ve seen further growth in Medicaid through the Affordable Care Act, which was a major expansion of it. There was a lot of legal issues about that as whether you could compel the states to participate in the program, but it increased the income floor for baseline Medicaid coverage. 


It made it very attractive to states to join it because there was a higher federal match in share of it. A lot of Medicaid is driven by — the federal government pays at least half, and sometimes three-quarters, of the cost of Medicaid. In the case of that expansion [inaudible 04:31], which was even more attractive, 90 percent of the funding was federally — well, it was originally 100 percent. It phased down to 90 percent. So everybody in a state normally likes to spend other people’s money. We call that federalism—fiscal federalism, at least—and that was one of the propulsions. 


Now also, we saw a lot of growth in Medicaid in the last few years in the COVID-19 pandemic. Medicaid became a convenient parking place for doing something. “Well, we got to provide coverage to people and provide healthcare to them.” And so, Medicaid grew a lot in that respect. There were also special rules put into place, where the federal funding got even more attractive. It’s called an “enhanced match.” We’ve done this a couple times before, during recessions, where it kicked up about another six percent, and that enhanced financial match also was combined with the requirement that the states could not, basically, do anything to change eligibility. It’s called “maintenance sub-effort,” but basically, you had — their arms are tied. 


That meant that a lot of folks went on to the Medicaid roles and never came off them, whether or not they were still eligible or had found other coverage or got jobs or whatever, and we’ve been out of most of the worst effects of the pandemic economically for some period of time. Now, we can talk later about how that public health emergency provision—which was somewhat discretion of the Administration’s part—now being phased out, somewhat, for opportunistic reasons, but that accounts — that latest PHE limited on state’s changing eligibility, and that’ll roll out over the next year or two. That also expanded the growth of Medicaid.


Now I’m just talking numbers, which everyone likes to talk about numbers in Medicaid. That’s not what it really should be about. But Medicaid is to—in my words—cover as many people as possible, as cheaply as possible, and close your eyes and say you’ve done a successful work. There’s less concern to the quality of the coverage or the targeting of the coverage or whether you’re getting the best health outcomes for what you’re trying to do with the money you spend. 


So, on both sides, there’s a — on the one side, there’s — on the left, they like to use it as a way to grow the federal government’s role in healthcare. On the right, it’s to say, “Well, we gave it at the office. We took care of those poor people, so we don’t care about them. Besides, people from out of state are paying for it.” That’s a little bit of a cynical version of it, but that’s how Medicaid has succeeded politically. And my frustration is if you want something better, you better not just try to beat Medicaid at its own game, which most of the right-of-center reforms have tried to do, and they’ve failed in doing that. So that’s a quick overview. 


Chayila Kleist:  Got it. Well, with that background, then let’s turn to the present state of Medicaid. And before we get into some of the possible paths forward and, maybe, to the problems, I would love to start with some of the positives. How has Medicaid succeeded in fulfilling its purpose, and what benefits does having such a system provide the U.S.?


Tom Miller:  Well, I mean, if you spend a lot of money on something, you’ve got to accomplish something. That’s the formula in Washington, and we don’t argue about, on the margins, whether it’s efficient or what the cost per enrollee is. Certainly, going back to where Medicaid was starting from, we had serious problems with lower-income Americans not being able to have access to healthcare. That’s undeniable. 


That was also the story of Medicare—somewhat overstated—in terms of the elderly getting access. So certainly, you had provided a floor of protection for individuals so that they know that when they have a need for healthcare, they can go somewhere, not just to the emergency room at the last minute, which is another federal provision. And there’s, at least, that shell of basic coverage. 


Medicaid also has a very large role—and it continues to increase—in childbirth. Maternity coverage — particularly as demographics have changed, more children are being born into lower-income families. The origins of Medicaid for the below 65 coverage was mostly single mothers with — pregnant and with children, and that was — tie into somewhat of the old-style welfare program of the federal days, carried out through the states. Now, you certainly need to make sure that—well, even before birth—mothers are safe and healthy, and their children are going to have the best opportunity to grow up healthy. And certainly, there’s some front-end investments that need to be done on that front and should not be — and there’s moves now to try to extend that postpartum coverage as the latest end of Medicaid. So I’d say that’s one of the successful things. 


Also, I mean, I would find fault in some of the qualitative performance of Medicaid, but certainly disabled Americans often—not only not being able to support themselves economically, but also increasingly being extremely needy of intensive, comprehensive care—can get some assistance when they’re income impaired through Medicaid. 


Nursing homes are a little bit more of a mixed story. We’ve tried to move away from nursing homes as much as we can to in-community coverage through Medicaid waivers. But that’s another area in which Medicaid provided a layer of assistance to folks who otherwise might have been neglected. The problem with that has been that a lot of middle-class people have found ways to access Medicaid for nursing home and other types of home-healthcare coverage, when, perhaps, they should have better been able to provide for themselves. But that’s another gimmick we go through in order to access federal money.


Chayila Kleist:  Fair enough. Okay. So then I will ask the flipside. You mentioned earlier you see there may be some serious problems with Medicaid as it exists and as administered at present. What are those?


Tom Miller:  Well, I mean, folks on the right like to always say, “Medicaid costs too much. The budget’s exploding. We got deficits.” That’s all true, but that’s not the reason you should be most concerned about Medicaid compared to other areas of the federal government and healthcare involvement. If all you’re trying to do is think that you can save a little bit of money in the near term, most of those savings end up getting washed away the next time around. They’re not really that sustainable, for other political reasons. People blink, and they say, “Oh, we got to do something after all.” and so, “Forget about where you made those little promised savings for the future.”


Where we should be concerned about Medicaid is whether it’s focused on its core mission and doing it better, as opposed to being spread wide and thin. All of the political imperatives and compulsions are to make Medicaid do more—or pretend to do more—as a way to have a more even, level field of everybody gets the same thing everywhere in all the states and is part of the federalization guarantees of healthcare coverage, regardless of what individuals might need or want, and it’s just poor performance and targeting. 


Also, because Medicaid is stretched so thin, how does it make up the difference? Because it doesn’t really cost as much as you think per enrollee. The spending increases in Medicaid over time—and it’s quite huge—are due to increased enrollment more than cost per beneficiary. That’s largely because the incentives are to enroll cheaper people in Medicaid— younger people who don’t need as much healthcare. And so, you may — well, you say, “Look at the market share we’ve gained.” So as a result of that, the actual quality of the coverage and care they provided in Medicare—because providers are paid less than what their costs are and certainly much less compared to Medicare, let alone private insurance—it means that you’re always scrambling to get good enough care or an accessible provider than you might otherwise. 


So it’s always going to be somewhat second-class care, which some people are probably comfortable with, but we should think about being a little bit more compassionate and concerned about those who are in more vulnerable straits, who need good care. And because we’re spending those dollars on a lot of other things, we’re not able to target them as effectively and efficiently as we should. And so, they’re the ones who lose out as Medicaid focuses on doing other things that are more politically popular or on the agenda at the moment. 


Chayila Kleist:  Fair enough. Following up in this conversation of focusing on covering more people, perhaps a minimum level of care versus what you’ve identified as a core — the core goal of Medicaid. Have the issues you’re identifying at present existed long term, and if so, what progress has been made in addressing those issues? Put another way, which way are we trending? Is this a problem that’s getting worse or something that’s, perhaps, improving?


Tom Miller:  Well, there are different waves of Medicaid expansion. There was a period of time, getting into the later ’80s and early 1990s, where Medicaid was boosted in various clever ways—back in the old days of Henry Waxman running the House Energy and Commerce Committee—and so, they built it up there. But there’s all the — a little bit of a push/pull, a yin/yang, a boom/bust with Medicaid. Sometimes, in recessions, with other incomes going down, jobs being lost, there’d be a growth in the Medicaid roles, and the states would be short of money because they didn’t have any revenue coming in during a recession, right, so they’d end up trying to economize, and then they’d cut back on that. So a little bit of an up and down. 


But more recently, beyond all the various Medicaid expansion pushes, through marginal eligibility changes in benefits, there’s a big boost forward, under the Affordable Care Act, which was deliberately done to raise the income floor for Medicaid eligibility. A lot of states seems to be way below the federal poverty line, particularly the southern states, to be straightforward about it. But what the ACA wanted to do—Obamacare, if you will—was to raise that level to 133 percent of the federal poverty line—different numbers at different times. I’ll just keep it at that level. 


The Supreme Court case in 2012 said you couldn’t coerce the states and say, “You’re going to lose all your money for the old program if you don’t join this one –” was involved in that litigation. So it was a choice. But most states, over time — just like the original Medicaid program took time for states to join it—Arizona was the last one to come on board in 1982. So there was a little bit of time before all the states joined. 


In the case of the ACA — and there was other contentious political reasons why states were being opposed to joining Medicaid as part of the opposition to the ACA. Nevertheless, over time, more and more states came on board. First, it was half the states and then more. So now, we’re at about—depending on how you want to calculate it—38/39, on the way to 40 states being — taking the ACA expansion “voluntarily,” which gives them much enhanced federal funding, increases coverage of what used to be called the “able-bodied poor,”—childless adults who didn’t used to automatically fall under Medicaid coverage. And also, the states don’t have to pay very much for that because now, after initial phase, then they pay — they get 90 cents on the dollar paid by the federal government, whereas most matching rates are anywhere from 50 percent to in the low 70 percent rate. 


So as a result of all that, we’ve had quite an expansion in the Medicaid coverage for that level of populate, which is a little healthier, a little wealthier, and not, perhaps, as vulnerable as the old style, and it didn’t pay as much to pay attention to the more vulnerable, old Medicaid beneficiary. There was some work done on that in terms of, perhaps, giving shorter shrift to the disabled than the elderly Medicaid benefits. But I won’t get bogged down on that one. 


So that accounted for a sizable increase. A good bit of the reduction in the uninsured under the Affordable Care Act was just done to expansion of Medicaid coverage because the individual market exchange in the early years didn’t really work very well for multiple reasons—cost as well as just getting them set up. And that was the case — and then Medicaid actually went down a little bit in enrollment in the couple years before the pandemic hit in 2020. Things had leveled out. They were a little disappointed that it wasn’t growing the way they wanted it to. And then the pandemic effects with, “you got to find somewhere to park money in a hurry and then spend it and also prop up hospitals,” which are part of the lobbying coalition to want financing for some money rather than no money for treating poor patients. 


All of that combined to cause a sizable jump in Medicaid enrollment. You could estimate about 15 million or so came on board in those couple of years. We’re about to phase that down, and there are all kinds of predictions as to what that will mean. But right now, we’re at about — if you combine the CHIP coverage, which is the low-income children, which is an alternative to Medicaid coverage of children — it used to be called SCHIP, but the democrats wanted to get rid of states, so they took the S off of it. It was a therapeutic procedure on their end. No pain was involved, I believe, just political advertising. But in any case, I digress. 


You combine CHIP with Medicaid, and you’re about 91 million by some enrollment numbers. These enrollment numbers are inexact, and they’ll probably come down a little bit, but that’s been a substantial boost. So Medicaid’s covering more people than Medicare is now. It covers them at a little less expense because of the lower income predominance — lower age predominance, but that’s where we are right now. So the question is, “What’s coming ahead?” Do we continue to keep Medicaid at its bloated level? When we find out over time that a good number of the individuals—perhaps 10 million or so—are ineligible under income categories or have moved out of state or whatever, we go looking for them, and some states don’t want to do that, some do. The question is where those people will go to. A number of them will go to the Affordable Care Act’s individual marketplaces that are federally subsidized and fairly heavily regulated. But a few of them also will be uninsured, so there’s a lot of wailing and gnashing of teeth over what will happen on that front.


Chayila Kleist:  Got it. Well, you’ve opened the door, and so, let’s continue through it. Given the nature of the issues that you’ve noted and the barriers or incentives for states to use those and the incentives that exist to cover as many people as possible, perhaps while cutting back on quality, what are the possible paths forward? And I’ll add to this: toward what end would you have these paths aim? What’s the goal here?


Tom Miller:  Correct. It’s important to know what you’re trying to accomplish rather than just throw a lot of stuff up in the air, or to say, “We tried this before. It’s on our song list—the play sheet. We’ll do it all over again.” I like to call that “rinse and repeat.” “Yeah, it didn’t work the last five times. It got rejected politically or it didn’t actually materialize or it wasn’t sustainable, but we can’t think of anything else, so we’ll do it out of habit.” So that’s what usually is the standard resort. You say, “Well, there’s a lot of fraud and abuse in Medicaid. We’re going to crack down this time,” even though it seems to grow naturally no matter what you do. And there’ll be more of those efforts. You can try to nibble on the edges. You can try to find little marginal take backs in different ways. You can imagine all kinds of gimmicks.


And we went through some of this, both in the effort to try to change Obamacare—mostly in the 2017 legislative effort — I could give you a roster of all the various formulas and nostrums, whether it’s block grants, per capita allotments, “Well, we’ll outsource it to private companies—private managed care. They’ll be more efficient. We’ll find ways to give people incentives with special advantages whether the count amounts with experiments,”—it’s kind of like HSAs, except for lower-income people—“and then we’ll occasionally throw you off the rolls if we feel like it because you didn’t do it.” 


And then the other mantra was to solve everything with work requirements. Now, there’s something to be said for incentivizing work. We’d certainly worked in a lot of the context a couple of decades ago in welfare programs. It was a little more complicated when this was attempted through federal rulemaking and waivers in the Trump administration, to have states impose work requirements on some of their Medicaid enrollees, saying, “Unless you show some activity, whether it’s direct work or efforts toward work or study, with all kinds of exemptions, that we’re going to kick you off the role for three months.” 


That ended up being pretty much a fiasco. I’m not saying it couldn’t have been done better, but it wasn’t done better. It wasn’t planned very well. Administrative problems in a hurry kicked in, and also it got hammered in the courts because there are problems with the way the Medicaid law is written, where you have to — when you do these things, you have to actually fit the requirements of the law, and there were some problems in making that match.  


So it was all the various state efforts to do these work requirements — got killed in federal court—mostly the same D.C. court for different states. That terrain has changed slightly—doing the legal side of this—because the Biden administration probably miscalculated, got a little full of themselves, and they pulled what was going to be a Supreme Court decision before oral argument. They thought they were in good shape, and so, it was all going to be mooted. So that never actually got closure on it. It was back in March 2021, and they were going to finesse this by, just through administrative rulemaking, getting rid of all the waivers, which worked for the short term. They pulled all these waivers up—most of them weren’t operative anymore anyway—while they were stalled for the court action. The last holdouts were mostly, well, Arkansas, to an extent, New Hampshire. Georgia had a separate thing still going on. 


So the long and short of it—the surprise on this—is after they thought they’d killed everything off, Georgia actually won in a lawsuit in federal district court back last fall in October — August/September, where they overturned for arbitrarily and capriciously the Biden administration’s withdrawal of their waiver, and so that’s back in operation. But that’s the only state that has one going on.


If you want to do work requirements, you have to do them much more narrowly. You need to target them with — at least Georgia had a partial argument that says “with the population that hadn’t been expanded.” So you actually get a coverage gain rather than a coverage loss. There’s a lot of complexities to that one. But there’s not a big horizon for widely expanding the work requirement approach to Medicaid coverage because with the current administration, they wouldn’t approve any new waivers. So we only have one, and there’s not going to be another one. 


You then think about a world in 2025 and beyond, but that’s not really going to get you somewhere to a larger place that you want to be. That’s somewhat of a partial issue, which has some benefits but can be overstated is the short version of it.  


So those are all the things that didn’t work very well, and I could go on and on, and a lot of folks will continue to propose them. So the transition is if you keep failing at doing something again and again, it’s just a thought that you might want to try something different. And don’t try to create a — have a miracle—although it’ll be difficult—but consider ways to make it look like something positive is being offered, as opposed to just a negative takeaway. Now, this requires some thought, some work, some heavy lifting, and you have to actually prove that it works in practice.  


But I’ve sketched out, at different times, a route by which, could you do it legally? Yes—crossing my fingers because I know the complexities in that field. Could you do it financially? Yes, although there’s a lot of hurdles on this, and it takes a while for it to pay off in the backend. Politically, you have to actually talk in different terms to people so they think they’re coming out ahead rather than behind in order to make this work, and you have to build a coalition that sees how they could prosper from this. And it also means you have to expand your horizon and think about what are you trying to do through this program, and how are you actually improving people’s lives, rather than the bottom lines of those who say they’re helping the poor but are mostly helping themselves. So that’s the intro to doing something different. We will sketch that out in a moment.


Chayila Kleist:  Got it. Yes. I would love to transition to that. So can you put succinctly what the overarching plan would be? 


Tom Miller:  Okay.


Chayila Kleist:  And then I’d love to get into the three aspects you laid out of what would [inaudible 25:20].


Tom Miller:  The first thing to do is to find out a way to do something different and have a proof of concept. We have all kinds of theories. You actually have to do something on the ground, and you can’t imagine solutions without actually thinking about how they’re going to come about. There’s both a pathway you have to go through—what are the more likely opportunities for making this come about, and then what are the hurdles? Be realistic about it. What do you have to do to make this come about, and how do you have to incentivize people and make it pay off, and recognize that it’s going to take time, and it’s going to be a lot of tradeoffs and, etc., etc.? So don’t over-promise. 


And in doing all this, it’s not a one-sided giveaway. You have to make people accountable for what they say they’re going to do, and say, “If you don’t achieve it, that’s like at-risk capital in a new venture.” There’s an upside, but there’s also a downside, and that’s how to make sure it actually delivers. 


So the route I’ve suggested is to build upon the waiver process. Why do I say that? Because I’m not living in a cloud dream land, where you say, “Congress, tomorrow, will legislate the following.” Take a look at the vote numbers. Take a look at partisan control. Take a look at history. It’s not going to happen. They have trouble passing an end-of-year continuing resolution, not — and major health legislation, for multiple reasons, is complex and comes around, at best—probably at worst—15-20 years is what we often get. But that’s not going to happen. 


We saw, in the case of the Trump administration, some efforts to use the waiver process. They stumbled. I’ve written about this as well. It didn’t execute, but there’s some ways to go back to this. The better way is to make the — deal with a larger package than a smaller package. If you try to do little narrow one-offs, you don’t necessarily add enough scale, enough remixing and rearranging of the deck chairs to know that you actually can reassemble things in a more productive way and provide some upside to enough parties to see how they could gain from it. 


So that’s why I’ve suggested using the waiver process by combining two types of waivers for a larger scale and to have more mix-and-match opportunities in tradeable and scorable assets. That’s to combine the waivers that are still available—although compressed under Section 1332 of the Affordable Care Act. That’s for the individual market side of the ACA—mostly the exchanges. And there are things you can do to waive there. In the Trump administration, they made it possible to do more things. They did change around an order called the statutory guardrails to be more permissive. Not a lot of state take-up on that. They mostly gorged themselves on re-insurance waivers, so I won’t get into that, but there are things they could’ve done better and more imaginative on that front. But they didn’t have enough money on the table in doing that. 


If you combine the 1332 waivers with a different section of the law—usually called 1115 under the Social Security Act for Medicaid. These are demonstration waivers, which allows you to waive certain provisions of the Medicaid rules in order to try different ways to deliver healthcare to lower-income individuals in Medicaid. Now, these are usually five-year waivers. Sometimes they can be shorter or longer. They’re supposed to prove something. And then, if you do that and you meet the parameters, then you continue on, and then, actually, maybe other states will carry on with it.  


The problem with both of those is, in isolation, they sometimes can’t get over the top by themselves. There are various limitations. You have to show that you are budget neutral. That’s what they say. In reality, they often are not budget neutral, but I’m just playing the game according to the way it’s laid out there officially. And there’s other requirements in the 1332 waivers in terms of coverage and affordability and comprehensiveness, which the Trump rules—which were rescinded or were revised—changed around—by the Biden administration. If they were restored, they’d allow for that opportunity for the 1332 waivers to come up again. 


So my argument is, why do we have a separate individual market for people just based on income? If you’re in the individual market, don’t we want an individual market that is a little more integrated and comprehensive so that you don’t have these various cliffs or hurdles you run into as you might change at your income level? You can get the same coverage in both places, whether you’re lower income or higher income, particularly for the portions of the Medicaid population that could take private coverage just as well as anybody else. They just don’t have the money to pay for it.  


So if we allow the expansion — potential expansion population onto the ACA, to instead move into the regular individual insurance market, and we reform that individual insurance market, so it’s not the ACA exchanges alone but what we think of as real—closer to market-based—individual insurance coverage, with more options and flexibilities, then you begin to get a more vibrant opportunity for true reform up and down at the state level. You have to do this a state at a time. 


We’re not going to disrupt the entire marketplace and have people go through all that political turmoil. You have to actually do this in stages. But if you can get a state to show that this might work, not only do they maybe come out a little ahead on the money side, but more importantly, they’re actually doing something to improve the health of the people who are getting — maybe it doesn’t promise as much in benefits, but it actually does a better job because they have better doctors or they provide you the benefits you want. And in addition, people are getting what they think they need and what they want, and they might want some of that money for other purposes that might also improve their health.  


We fail to think imaginatively and creatively about what produces health. It’s not just that you go to the doctor’s office and that you get the prescribed drug. It’s: what is your entire lifetime experience that went toward creating your health when you started out young and when you grow older? There’s a whole range of things, whether you want to use the buzzword which is popular now—social determiners of health”—but not gimmicky. It’s tradeoffs. 


You have to use the stuff that works best, and you switch one for the other, depending on [inaudible 31:19]. Or it might be at a certain stage in your life—you need to educate your kids, you need to have a better house, you need to have a better job, you need to have an income. That’s the totality of what produces healthy, self-supporting lives, as well as ones that also pay off on your health. We forget about that because we only do what works within the ingrained benefit structure of the various interests who are selling that and the political people who support them.  


So the idea of a “mega-waiver”—is the term—is to combine 1115 and 1332, both Medicaid—for some portions of the population—and the individual market, and drive this in a more market-oriented, private-sector-oriented — let’s not be imaginary here. There’s still going to be a lot of rules and regulations—this is healthcare, after all—but at least it’s moving us in the right direction. This is a competition—to put it in blunt terms, politically—for market share. Which team’s going to win? Is it going to be the one that is team market and team deregulation, or is it going to be what we’re seeing right now? It all came from Washington, and it’s all someone else’s money, and we know what’s good for you, whether you want it or not, and this is what it’s going to be, and everybody is going to feed accordingly from that. 


That’s what the larger political divide is about. We haven’t fought it very well, to put it in more blunt terms—why we’re offering something better and how it could work for you. And when you do these waivers — the old-style waivers were always to just hand out some money to the states, close your eyes if you like them politically, and meanwhile, five years later, maybe they got away with it or maybe they didn’t. The honest way to do it is to have a real contract. The federal government can give away a lot of money. What it doesn’t do a very good job of is paying attention to what it does.  


So if you actually had accountable mega-waivers, where the state said, “We’re going to take a shot at doing it our way. Here’s what we’re going to do, and here’s what we’re going to let our people be able to have the freedom to do. And in return for that, we think that things are going to be better, in a certain respect. So let’s bargain as to what those deals are, and we’re going to be held accountable for delivering on that.” It’s going to take a — it’s hard to do this even in five years. You’d like to do it in ten years. 


But you want to be on the line for that. You want to give them a bonus if they do better and pay a little bit back if they end up coming up short. That’s the way you actually get some real competition, choice, and innovation in healthcare that matters to people. And you give the individuals the choices so they can also go on the line and say, “I think I’d be better off doing this. I need a little bit less coverage, but I think I can do it in this manner, and this will help in other ways for my larger life, as well as my future health.” That’s the larger prescription. There’s a lot of technicalities in how you would have to do this, what you’d have to get passed, how you could thread the needle, whether you can get some willing parties. Aside from that, it’s pretty easy. 


Chayila Kleist:  [LAUGHTER] Well, putting aside all of that and the requirements, let’s dive into the three metrics of success — attainability—there’s the term I want—that you put forward. I think you said it’s legally feasible, it’s financially feasible, and then you put asterisks on both of those, saying it’s not easy. It’s feasible, not easy. And then it’s politically possible, given the right circumstances. 


Tom Miller:  Right.


Chayila Kleist:  Starting with legality, what aspects of the current legal and regulatory framework—we are with the Regulatory Transparency Project, after all—could remain the same, and what would have to change in order for this to be feasible? 


Tom Miller:  Right. The front-end barriers in current law — and I’d say regulation more than law because a lot of this is not statutory required. There’s a lot of leeway on this. And we can also talk about what’s changing in administrative law, which makes this a little bit more of a guessing game as we’ve seen the old Chevron deference days are fading away. And a lot of things got put in through the ACA because they could get away with it. Now, it may be a little harder to do it. We’ll see how the courts play on this. 


But the first barrier to doing this, aside from inertia, which is the major barrier in any kind of health reform, was in 2015, the Obama administration put out guidance. They were worried about losing their market and, “Oh. These people may do other stuff, so we got to close some doors.” They said that you could not combine budgetary savings under the Medicaid waivers with budgetary savings or scores under the 1332 waivers. That was initially done as guidance in December of 2015. Well, guidance you can tear up with a change in administration or change in days, in reality. I mean, you don’t want to do it arbitrarily, but basically, you can change that pretty easily. 


The Trump administration reinforced that budgetary neutrality stance in 2018. They’re out to lunch on this. I’m sorry, I have arguments with folks inside there. They think they’re actually saving the taxpayers money. While they’re doing these little penny ante things, thinking they’ve maintained Medicaid’s — you can look at the budget, you look what was spent on healthcare, and it’s just penny wise and pound foolish. So as a result, they thought they were being really good about maintaining — Medicaid wouldn’t have these games of budget neutrality they did in 1332. All that was all lost in the wash by the time you got through the pandemic, but you’re going to have to look at the bigger picture of these things. Meanwhile, they didn’t accomplish anything, and they didn’t get anybody to do a significant waiver on that front. 


Later on, in the Biden administration, they reinforced it a little further. First, they also — the Biden administration wiped out the Trump regulatory — well, it became rules [inaudible 36:48] first guidance for 1332 waivers. So they blew out all that expansion of what the guide rails would permit, whereas the Obama administration had been too tight on that. Both of them in either range of — the statutes are written the way they are, where you can drive trucks through them if you want to. And both administrations have done that. Nevertheless, right now, the Biden administration made it hard to do 1332 waivers because they’ve returned to the old interpretations of budget neutrality and comprehensive coverage and the other requirements as well. 


So you’d have to have a new administration. Let’s be serious about this. The Biden administration isn’t going to go, “We hadn’t thought of that. Oh. We’ll just do it 180 degree different.” No. That’s not going to happen, and Congress can’t really force its way past this with just a Republican House anyway. So you’d have to have a new administration, which restores, roughly, the Trump rules for the individual market waivers. You would also have to — although you could walk around, and you’d probably have to provide some additional guidance in terms of saying, “No. The mega-waivers can be done, and here’s how you can do them.” And I could weigh that out. You have to do sequential timing. You have to pass a state law and get — everything has to be all coordinated to work at the same time in order to do it. But that would allow you to — basically, if you save money from the Medicaid side, you could use that to expand the individual market side, and you could also have a better individual market. That’s the idea of, if you put a bigger pot together and you can move things around a little bit differently, all of a sudden, some possibilities happen that weren’t there before. 


Now, all this next involves who’s the first mover? That’s the problem in many of these areas. States got tired. The ones who had ideas in 2016 and 2017 got burnt. Either they got held off, even by the Trump administration, or it didn’t quite work out, etc. So you have to think about how you can motivate a couple of states to do this and try it because they’re going to have to go on the line and actually stand up and put on their big boy and big girl pants and say, “We’re actually going to do something for a change, and we’re going to say, here’s what we’re doing and why it’ll work. And if it doesn’t work, we’re in deep doo-doo. That’s not what politicians normally do. I understand, but I don’t understand because let’s get on with it. 


The other part of this is to think about how you bulletproof this legally so it looks good. You do your homework. You actually have to make some findings. You have to work through this carefully, as opposed to do it quick and dirty. The harder thing to guess is whether there’ll be as much leeway to make these changes in rules and regulations that we had in the last couple of years under what’s now more major questions land in administrative law because the old Chevron days are washing away, eventually. 


And so, you have to work through this in a way that it looks like you’re really doing an honest demonstration, still within the core requirements of the statute but not transcending them. You have to keep coverage up, for one thing. The way the Medicaid statute is written, it’s just, “We don’t care what kind of coverage it is. We don’t care what it does. We don’t care whether anybody’s healthy. You just got to cover bodies.” I’m oversimplifying, but that’s how this played out, and that’s why it killed the work requirement efforts.


So you’re going to have to at least provide some type of coverage that stays at the same place in numbers. You can change what that coverage covers, but that’s an imperative because Medicaid doesn’t care about other stuff for its statutory purposes. That’s part of staying within the rules for a demonstration. But you can do other things along the way, as well. And you have to actually do this in a way that it looks like it comes out ahead of the game. The harder problem is also showing these numbers work out over a five-year span—or if you got lucky, a ten year waiver renewal—because it takes a while for front-end reforms to pay off. They usually cost more up front. You have to get the structure right. Everybody does it backwards. And you also have to pay off some people in order to make it less attractive to them later on. 


The lesson to learn from this is what happened in Medicare. Now, look, I fought the good fight on Medicare, but the fact is the way that Medicare got improved was by, basically, buying off people and paying more for private coverage until we got Medicare Advantage, which is real popular now. It’s not perfect, but it basically says, “Don’t argue as much about the money. Make sure you get the program you want it to be, and then you can change the parameters of it a little bit later down the road.” That’s how you get more private, market-oriented health reform. You got to give people a taste along the way. 


There are tons of hospitals in the way that say, “Well, what’s going to happen to my revenue feed, this slow drip?” The people who are already ingrained in what they have, you can’t jeopardize their lives overnight. There are vulnerable people. You can’t blow up their coverage. All these are important considerations which slow the speed at which you can do this. You have to be careful, so you want to start small and build from there. But if you build successfully, just like small businesses, you pick up scale. You get into other collateral lines. You make sure you’ve proven it in a successful manner, and then you say — other people say, “Well, maybe we’ll try that, as well.” That’s the effort. That requires a lot more patience. It’s real work. It’s not speechifying and doing rhetoric like I’m doing right now. 


There’s a lot of blocking and tackling involved in this, but it could be done. The politics are difficult unless you explain why you’re doing it and how people are coming out ahead. And you have to explain to people why they’re losing under the current system. And you have to appeal to lower-income people to say, “Don’t you aspire to something better? Is your goal to be a Medicaid beneficiary for the next 10 or 15 or 20 years and never get out of that particular rut, or do you want to move upward?” So how do we have some levers and ladders to improve your mobility, your health, and human capital? And that’s what America used to be about, should be about today, and should be about in the future. 


Chayila Kleist:  Got it. Well, certainly excellent on the speechifying and also identifying the sort of, “Hey. Here are the real-life barriers that may exist to getting this plan in place.” I appreciate you identifying how, legally, it could be done, regulatorily, it could be done, what the financial effects might be/what would need to be considered, and then, politically, some of the aspects. 


I have a last couple of questions, looking at –




Tom Miller:  Let me just say one small thing. One of the things that’s changed around the terrain a little bit—I wrote in my particular book chapter last fall—with the public health emergency now being declared over, officially—and it was done for somewhat gimmicky reasons, with CBO scoring, where they came up a way to save some money to spend on other things—it’s changed around the projections for — it’s good and bad. On the one hand, there’s less money on the table, going ahead in the future. So normally, you could take more of that Medicaid money and say, “Well, let’s just move it somewhere else before it goes away.” That’s a little harder lift. On the other hand, the coverage numbers are going to go down, depending on when you bring this into place. All of a sudden, you’re not losing coverage. You might have an opportunity to gain coverage under a different service. So these are all — there’s always moving parts, and you have to figure out how to use them appropriately. Continue. Sorry.


Chayila Kleist:  Got it. So my last question is actually tied to that. And you’ve just covered, “What might the effects of President Biden ending the COVID public health emergency?” But I would love to know how COVID has—and the related stresses—affected this conversation on Medicaid. Obviously, Medicaid has been part of the political conversation for a long time. COVID has been a part of the conversation for a significantly shorter amount of time, and I would love to know how the two have interacted, what effect COVID has on this conversation, and how it may — how the effects of COVID and what we saw over those years affect the paths forward you proposed, the possibility of them being implemented, and the risks we consider when thinking about Medicaid reform.


Tom Miller:  Well, I mean, there are a couple aspects of that. In the depths of COVID and any life raft in a storm — so people would — and so, more people probably got accustomed to being in Medicaid than ordinarily wouldn’t have been there because it was the quick-fix device to provide a delivery vehicle. Now, a lot of people have moved on and have jobs, have better incomes; they’re doing pretty well. They’re willing to still take that along the way, so that’s kind of a mixture. We would assume, barring the unexpected—which always happens every other year—if the economy is on a better keel, we continue to have more people finding ways to get coverage or pay for it without being — now, the COVID period also made people who are more accustomed to being subsidized, being subsidized even more lavishly. Congress and the administration—both administrations—went a little crazy. They were increasing subsidies for the individual market exchanges, going up the income ladder, making it more generous, but it’s all passed through. It’s only taxpayer money. We don’t really count that as real dollars. And in the same way, the Medicaid money was somewhat free stuff.


One of the things that I’m — the reason I’m also arguing for this is we’ve still got, you know, however you want to count them, whether it would be down to about ten holdout states, at some point, they’re not going to hold out much longer. I mean, I’m in North Carolina most of the time. They’re going to do a deal to take a Medicaid expansion. They almost got there last year. South Dakota had a referendum. Some other states may end up doing that.


So you’re getting down to, basically, the old Confederacy, after all is said and done, for holdouts —  and Florida and Texas are big players. But there aren’t that many states who are saying, “I’m going to keep leaving this money on the table while everybody else goes to the bank,” So it’s harder and harder, unless you have a better alternative, to keep those states from, basically, signing on board with this, ultimately, at the end of the day. And state elections changed things as well.  


So we need to come up with something that those states can go to, to say, “Yeah. I’ll expand my coverage, but I want to do it in a different manner. And I wanted to do it in not the way that you’re giving me this cookie-cutter set of options.” So that’s the other reason for thinking about how to build this as another platform to say, “Yes. We do have a different way to change your healthcare market and what the healthcare outcomes are in your state if you’re willing to go on the line and actually try something a little harder than just ranting about, “Oh, there’s that Obamacare all over again.”  


Chayila Kleist:  Got it. Well, barring any final comments, we can wrap it there. Mr. Miller, thank you so much for joining us today and sharing your expertise and insight. It is really appreciated. I appreciate your perspective and your summation of the Medicare, the facts around it, the history, and then, this possible path forward you propose.


Tom Miller:  Appreciate it very much. Let me just give you one closing thing. They used to talk about in the British — because [inaudible 47:34] the National Health Service [inaudible 47:36] having cradle-to-grave coverage. What we forget is that Medicaid covers so many of the births in the United States, and if you look at deaths, Medicare plus Medicaid combined—I once tried to do that calculation—we’ve got cradle and grave coverage. We’ve just been filling in the in-between ends with some private market coverage along the way. Not a good way to think about it.


Chayila Kleist:  Well, with that last comment, thank you so much. We’ll end it there. Appreciate it.




Conclusion:  On behalf of The Federalist Society’s Regulatory Transparency Project, thanks for tuning in to the Fourth Branch podcast. To catch every new episode when it’s released, you can subscribe on Apple Podcasts, Google Play, and Spreaker. For the latest from RTP, please visit our website at www.regproject.org.




This has been a FedSoc audio production.

Thomas P. Miller

Senior Fellow

American Enterprise Institute

FDA & Health

The Federalist Society and Regulatory Transparency Project take no position on particular legal or public policy matters. All expressions of opinion are those of the speaker(s). To join the debate, please email us at [email protected].

Related Content

Skip to content