Washington, DC, USA. In a new report, the leaders of state Medicaid programs say federal rules discourage them from experimenting with ideas that could save money and improve care.

State Medicaid directors are asking the federal government to fast-track state Medicaid improvements by emphasizing health over bureaucratic process and rapidly disseminating best practices so that states can benefit from the success of others.


“Much of the potential gain from states serving as the laboratories of experimentation has been lost,” says a November 9 report from the National Association of Medicaid Directors. “The transaction costs of innovation in Medicaid have simply been too high and the dissemination of best practices and successful innovations has been too slow.”

When Medicaid was created in 1965, the federal government was assigned the job of ensuring that states provided adequate health care for millions of low-income Americans without bilking Washington for more than its share of the costs. Under the decades-old regulatory scheme, any change to a state’s Medicaid plan requires federal approval and layers of time-consuming reporting.

“States take great offense at that,” says Andrew Allison, who is the Medicaid director in Kansas and the president of the national directors’ association. If cash-strapped states are going to accomplish the monumental requirements of the federal health overhaul over the next several years, a new system has to be built on trust, he says.

One model, the report suggests, is the newly created Medicare and Medicaid Federal Coordinated Care Office. That office is working with states to test systems that deliver better care for so-called “dual eligibles,” who qualify for both Medicaid and Medicare, the health insurance program for seniors and adults with disabilities. The goal, required by the Affordable Care Act, is to quickly share successful new ideas with other states so that quality improvements and cost savings can be achieved nationwide.

Under the existing Medicaid approval system, states are simultaneously asked to seek permission for and report on health care systems that other states have already found successful. The process typically takes more than a year and involves layers of duplicative reports. Often, approval is granted for a pilot study in only a few counties, requiring a whole new process for a statewide rollout.

A case in point is the announcement this week by Kansas Governor Sam Brownback that he intends to put nearly all of the state’s Medicaid beneficiaries under a private managed care program. Brownback, a Republican, aims to shave $350 million off the state’s Medicaid bill over the next five years and save the federal government another $500 million. But nothing will happen until the federal government approves a waiver of Medicaid’s standard rules — and that is likely to take at least a year.

“Granted, the proposal has a Kansas imprint,” Allison says. But it’s not the first time a state has turned over its Medicaid program to a private managed care organization. “I had to dedicate multiple staff members for nearly nine months to visit Texas, Arizona, Tennessee, Michigan and Pennsylvania so that I could cobble together the best practices from them,” he says. “In an ideal world, I wouldn’t have to do that.”

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