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Paul S. Edwards: Utah's thoughtful approach to Medicaid reform

Published: Friday, May 6 2011 12:00 a.m. MDT

Utah state legislators convene today to consider overriding Gov. Gary Herbert's veto of SB229, a bill that would allocate 30 percent of the future growth in sales and use taxes toward roads.

If Utah lawmakers see any wiggle room that allows them to categorically allocate future revenue growth toward our highway infrastructure they may wish to thank their colleague Sen. Dan Liljenquist, R. Bountiful, who proved again this year to be the Utah Legislature's champion of long-term structural fiscal reform.

Through a bold Medicaid reform bill that would change how medical service providers are reimbursed under Medicaid, Liljenquist might very well have spared Utah's fiscal future from the omnivorous appetite of Medicaid.

State Medicaid funding requirements are doubling every decade. Ten years ago Medicaid used 9 percent of state funds, this year it requires 18 percent and in 2020, under current guidelines, Medicaid will account for 36 percent of Utah's state budget. The Affordable Care Act 's expansion of Medicaid could push the 2020 expenditures to 46 percent of the state budget.

Although Liljenquist can rattle off wonkish percentages and projections, he can also persuasively frame the problem in terms of stark fiscal trade offs. To pay for projected Medicaid costs under the status quo, the state could lay off tens of thousands of teachers or begin shutting down a few of its universities.

But Liljenquist's lawyerly study of the state budget and the federal rules, coupled with his professional management consulting background has provided an innovative path forward. Instead of a standard fee-for-service model, Utah's Medicaid would become an integrated managed care system, where physicians would be rewarded for positive health care outcomes instead of procedures.

Furthermore, overall growth in the program would be tied to growth in revenue, and a Medicaid rainy day fund would be established to smooth the countercyclical utilization of Medicaid.

According to the Legislative Fiscal Analyst's Office, these reforms could save $770 million in state funds over the first seven years.

Liljenquist's reform, SB180, passed both houses of the Legislature unanimously. Nonetheless, it must receive a federal waiver before being implemented.

According to former Utah governor and U.S. Secretary of Health and Human Services Michael Leavitt, the HHS secretary has full authority to waive most of the Medicaid rules that stand in the way of implementation. Indeed, Utah already has 11 federal Medicaid waivers for other projects (and HHS has granted well over 400 such waivers nationwide).

But Leavitt notes that SB180 "calls for action that contradicts the ideology of the current administration." He further notes that it calls for transformative change that tries to "realign longtime flows of money, power and control." So although Leavitt sees a federal waiver as within the realm of possibility, "it won't succeed overnight."

This is unfortunate. Left unchecked, Medicaid spending will erode Utah's capacity to address any its other critical spending priorities.

Perhaps it was the lack of controversy around Liljenquist's Medicaid reform, perhaps it was because the issues are somewhat technical, but SB180 did not receive the fanfare it deserves. Just like Liljenquist's prescient reform of the state pension system, SB180 has the potential to provide a model for fiscally responsible reform nationwide.

I was saddened to learn that one of America's great social thinkers, Richard Cornuelle, passed away last week. Cornuelle's major works, Reclaiming the American Dream (1965) and Healing America (1983) have significantly influenced at least two generations of liberty-loving social reformers and are more relevant today than when they were first published.

Reclaiming the American Dream eloquently demonstrated that the answer to many of America's social ills can be found in what he called the "independent sector," the rich non-governmental civil society that is unique to America. In Healing America he introduced the paradox that "Government is growing as it fails, and, to a chilling degree, it is growing because it is failing."

I was blessed to associate ever so briefly with Cornuelle on a project of mutual interest. His demeanor and conduct were even more dignified and stately than his elegant writing. My life is significantly richer because of his thought and friendship.

Paul Edwards is editorial page editor of the Deseret News. Email: pedwards@desnews.com.

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