The case for taking Medicaid off the fiscal cliff negotiating table

Medicare and Social Security have been getting the bulk of the attention from outside advocacy groups, the punditry, and actual fiscal cliff curb negotiators in the past few weeks. Medicaid has been left largely out of the mix, and that's potentially a problem. Because it doesn't have the same public advocacy profile, it could become a big, juicy target for budget cutters. Delaware Gov. Jack Markell, chairman of the National Governors Association, is one advocate for Medicaid. He made his case directly to President Obama this week.

Markell said reductions in federal funding for Medicaid could force Delaware to consider abandoning its decision to expand the low-income health care program as envisioned under Obama's 2010 health care law. An additional 20,000 to 30,000 Delawareans are expected to be covered by the Medicaid expansion, which is scheduled to take effect in 2014. Medicaid accounts for an over-sized portion of Delaware's $3.5 billion budget and is projected to cost the state $780 million in the upcoming budget year.

"Some of us have made the decision to expand Medicaid," said Markell, who serves as the National Governors Association chairman. "In our case, we made that decision because of the underlying economics, the fact that there is a higher reimbursement for the population that we're already serving. Clearly if that were changed, we would have to revisit that decision."

Markell raises a key point: Medicaid expansion is foundational to the Affordable Care Act and without it, millions could still be left out of Obamacare's reforms. It's not just those being left out that pose a problem for the reforms and for health care costs in general going forward. Medicaid is extremely cost effective to run, with the CBO estimating that it costs about 50 percent less to insure people through Medicaid than to subsidize private insurance from a state-run health insurance exchange. Providing expanded Medicaid coverage will help drive down costs through the entire health care system, a systemic view that lawmakers generally overlook when looking at the government's bottom line.

Because Medicaid is so efficient to run, there's not a lot of cost savings to be wrung out of it, Sara Rosenbuam, a professor of health law and policy at the George Washington University School of Public Health and Health Services, argues. She writes that the kinds of cuts being discussed in Washington would be "shaking its structure in ways that reduce basic coverage." Reducing basic coverage would exacerbate the crisis that the Affordable Care Act was passed to start solving.

The Medicaid expansion is already under assail thanks to the Supreme Court ruling that states could opt out. Further undercutting this linch-pin to Obamacare in the fiscal cliff fight would be cutting reform off at its knees. Health care costs are most definitely a driving force for the deficit, but austerity is most definitely not the answer to creating long-term savings.