Some States Weigh Unthinkable Option: Ending Medicaid
WSJournal November 22, 2010

"Huge budget shortfalls are prompting a handful of states to begin discussing a once-unthinkable scenario: dropping out of the Medicaid insurance program for the poor.

Elected and appointed officials in nearly a half-dozen states, including Washington, Texas and South Carolina, have publicly thrown out the idea. Wyoming and Nevada this year produced detailed studies of what would happen should they withdraw from the program. Wyoming found that Medicaid accounts for 63% of the state's nursing-home revenue.

The idea of abandoning Medicaid as a solution is so extreme that even proponents don't expect any state will follow through, but officials are floating the discussions because dire budgetary pressures have forced them to at least look at even the most drastic options.

Medicaid, begun in 1965 and jointly funded by federal and state dollars, is the nexus of care for the neediest Americans, and a huge payer to hospitals, nursing homes and doctors. Medicaid enrollment totaled 62 million nationwide in 2007, the most recent data available.

But Medicaid has become one of the biggest items on state budgets, and states complain they don't have enough flexibility to pare it without losing their federal matching funds. The federal government, on average, covers 57% of the cost of the program for states. In exchange, states must keep Medicaid open to all who qualify.

Some states, in particular those led by Republicans, are calculating whether they'd be better off giving up the federal funding and replacing Medicaid with a narrower program of their own. Texas Gov. Rick Perry has proposed that his state get out of Medicaid in favor of a state-run system unburdened by federal mandates�including the one that prohibits states from reducing eligibility for the program if they want to qualify for the federal matching funds. "