The Tennessean: Sen. Lamar Alexander proposes 'grand swap' on Medicaid costs

Posted on January 10, 2013

U.S. Sen. Lamar Alexander proposed shifting the burden of Medicaid entirely onto the shoulders of the federal government in a speech Wednesday to Tennessee lawmakers.

The Republican senator said he would file a bill that would take away states’ responsibility to fund a portion of Medicaid, the health care program for the poor, in exchange for taking on more of the cost of public education and other expenditures.

Alexander said he first came up with the plan three decades ago while governor of Tennessee. With Medicaid set to expand under the Affordable Care Act and health care costs continuing to rise, the idea should be revisited, he said.

“Medicaid is going to ruin the states,” he said. “What we’ll have to do is find enough state programs to transfer back to the states.”

Alexander, who recently announced plans to run for a third term, used his chance to address Tennessee lawmakers at the outset of the 108th General Assembly as an opportunity to denounce unfunded mandates set by the federal government. Over the years, Republicans and Democrats alike in the state Capitol have slammed federal requirements that they spend money in certain ways, with former Gov. Phil Bredesen, a Democrat, famously calling President Barack Obama’s health reform program “the mother of all unfunded mandates” shortly before he left office in 2011.

In recent years, the federal government has covered close to two-thirds of Tennessee’s Med­icaid program, TennCare, but the program still costs the state close to $3 billion a year. The program is expected to grow as more Tennesseans who currently qualify enroll ahead of a new federal requirement that people have health insurance coverage.

Gov. Bill Haslam is also weighing whether to expand eligibility for Med­icaid to more Tennesseans. The federal government would pay the full cost of an expansion in initial years and at least 90 percent through 2019.

Alexander said shifting Medicaid spending to the federal government would take away the political and budget questions that have been raised among the states by the Affordable Care Act. But he declined to offer an opinion on whether Tennessee should expand Medicaid.

“I follow the one-governor-at-a-time rule, or try to,” Alexander said. “That’s Gov. Haslam’s decision, along with the state legislature’s.”

As it currently stands, shifting Medicaid to the federal government and taking on education spending would save the states about $92 billion a year, $2 billion of that in Tennessee alone, Alexander said.

Difficult to pass

But he acknowledged that a realignment of Med­icaid would be difficult to get passed in Washington.

“It’ll be hard,” he said. “It didn’t do well when we had a Republican president. It would be hard to do today. But the chances of it happening are improved by the fact that there’s a lot of attention on how the Medicaid program is bankrupting the states.”

Alexander served as governor of Tennessee from 1979 to 1987, and he said he first proposed a “grand swap” to then-President Ronald Reagan. If the federal government would take on all the costs of Medicaid, Alexander said, states could take on the full expense of public education. Reagan liked the idea enough to include it in a State of the Union address, but he was unable to win passage for it in Congress.

Medicaid spending has since grown to take up even more of federal and state budgets. With that in mind, Alexander said states would have to offer to take on more programs that currently are split between federal and state governments.

Alexander did not lay out specifics, but in his speech, he decried a federal labor ruling that threatened incentives offered by the state of South Carolina to convince Boeing to build a plant there. He also criticized rules that require portions of federal highway money to be spent on bicycle routes.

“They’re making narrow roads into bike trails that are inappropriate to get the federal money,” he said. “I like the idea of bike trails. … The state, not the federal government, should make that decision.”