Dayton’s plan on Medicaid? Several flaws

Gov.-elect Mark Dayton has announced that he will expand the state’s federally funded Medicaid program to poor adults without children as soon as Jan. 3.

He plans to do so under an agreement hashed out by DFL legislators and Gov. Tim Pawlenty at the end of the 2010 legislative session. President Obama’s Patient Protection and Affordable Care Act made expansion possible in Minnesota and 10 other states. Expansion was a DFL priority last session, but Pawlenty wanted nothing to do with Obamacare. As a compromise, they agreed to give the next governor the option — until Jan. 15 — to expand Medicaid.

Presumably, this would once and for all fix persistent problems with General Assistance Medical Care, one of two state health care programs for poor childless adults.

There are two problems, however. First, the statute that allows Dayton to expand Medicaid is probably unconstitutional. Second, rolling GAMC into the state’s Medicaid program effectively reinstates the old GAMC program, with all its shortcomings.

The Minnesota Constitution divides power between the legislative, executive and judicial branches and requires that these powers remain separate. The Legislature is given the power to enact laws. Giving the next governor the power and discretion to expand Medicaid through an executive order effectively delegates the power to enact a law, which violates the separation-of-powers requirement.

Yes, the division of powers is not always clear. There are certainly instances in which the Legislature can delegate authority to the executive, and the distinction between proper and improper delegation can be hazy.

But there is no haziness here. The Legislature essentially gave away its authority to settle whether Medicaid expansion became Minnesota law, a clearly improper delegation. The Legislature and governor cannot delegate their power and responsibility to settle tough issues. If you don’t see the problem, imagine if the statute instead gave the next governor the power to expand the sales tax to clothing or to expand the definition of marriage to same-sex couples.

Delegating power in this case also made the 2010 governor’s race a referendum on Medicaid expansion, which changed the stakes and the character of the election. Again, if you don’t see the problem, imagine if the Legislature tied the definition of marriage or some other deeply contentious issue to the outcome of the governor’s race.

Yet even if Dayton were able to constitutionally expand Medicaid, it’s still bad policy.

In case you need a refresher: In 2009, Pawlenty vetoed GAMC to force the Legislature to come to terms with the program’s inherent shortcomings and rapidly rising costs. The purpose of the veto was to force lawmakers to redesign the program, not to eliminate it. And in 2010, lawmakers did, in fact, completely redesign how providers get paid under the program. Instead of a fee for each medical service, hospitals now receive a lump sum for the entire population they serve. The hope is that this gives them an incentive to better coordinate patient care and, at the same time, control costs.

Unfortunately, the new GAMC program is struggling. It’s tremendously underfunded, and only four Twin Cities hospitals participate.

Moving GAMC enrollees into the state’s federally subsidized Medicaid program is certainly tempting. By opting to expand Medicaid early, the state would qualify for a huge federal match. Funding problem solved — or so it would seem.

The problem with expanding Medicaid in this way is that it abandons our efforts to redesign GAMC and reinstates the old program’s payment system. Like Medicaid, the old GAMC program paid providers for treatment delivered to an uninsured patient if the patient enrolled in GAMC soon after. Consequently, providers were paid to sit back and wait for people to show up at the emergency room or wherever. Paying providers to do so is both bad for the budget and bad for the impoverished Minnesotans who need timely and coordinated care.

There is a better way forward. Minnesota may be able to qualify for different federal Medicaid funding to support the new GAMC program with its new payment system. State law actually requires the Department of Human Services to go after that funding. Dayton should wait to exhaust those efforts before pursuing his current plan.

Peter Nelson is a policy fellow at the Center of the American Experiment in Minneapolis.

This commentary originally appeared in the Star Tribune on December 20, 2010.
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