As a physician, I am committed to caring for all patients in need. As the dean of a premier research-intensive medical school, I must also ensure that our faculty practice, critical to our teaching and research missions, remains financially sustainable. Some of the recent proposals to reduce federal Medicaid funding threaten our ability to achieve both goals. However, I believe there are ways to reform Medicaid that can sustain our commitment to vulnerable Floridians without jeopardizing our leading medical schools.
Medicaid is a joint federal and state program that provides health insurance to low-income individuals and families, including eligible pregnant women, children, elderly adults and people with severe disabilities. Florida’s medical schools, especially the University of South Florida, the University of Florida and the University of Miami, and their respective teaching hospitals, provide a high proportion of the highly complex specialty care needed by Florida’s Medicaid patients. This is an extraordinarily expensive undertaking, and USF Health loses money on each patient treated. This loss is partially offset by additional federal funding provided by the Centers for Medicare and Medicaid Services and allocated through Florida’s Agency for Health Care Administration. We simply could not provide this sophisticated level of care to these high-risk patients without such support. Even with it, we must cross-subsidize Medicaid-related expenses from other funding sources. Thus, as the federal government analyzes possible cuts to the U.S. Medicaid program, it is vital that this specialty care funding to Florida’s academic medical centers, known as Supplemental and Low-Income Pool payments, continue.
But that is not to say that Medicaid should not be reformed — it should. As the dean of a public medical school, I am acutely aware of our obligation to be a good steward of taxpayers’ money. The current national Medicaid system is inefficient and unfair to states such as Florida that have been judicious in their use of state and federal taxpayer dollars for their Medicaid programs. High-spending states like New York ($3,047), New Mexico ($3,281) and California ($2,167) receive far more federal Medicaid dollars per capita than Florida ($991). These funding variations stem from complex Medicaid policies that allow certain states to game the system to draw down excessive federal funds often redirecting money to low value or non-care expenses. Some of the drivers of these disparities and their potential solutions include:
· End disproportionate state spending without incentives to save — We need to remove incentives for higher-spending states to draw down disproportionately larger amounts of federal dollars while penalizing more fiscally responsible ones like Florida. For example, we should repeal New York’s 1997 Congressional “grandfather” exception to the requirement for transparent and uniform provider tax calculations.
This costs us about $600 million in federal funds annually. More recently, California’s December 2023 Medicaid waiver was approved by the Biden administration, even though it does not meet all CMS statistical tests. This waiver will cost $2.6 billion in state and federal funds annually from 2025-2026.
· Sunset the Affordable Care Act’s 90% federal financial match for expansion funding back to the standard rate — This federal subsidy was designed to induce states to expand Medicaid to cover adults up to 138% of the Federal Poverty Line. It was originally meant to be a temporary measure but is now contributing to the financial insolvency of the program. Sunsetting the ACA’s enhanced federal financing would save $560 billion over 10 years.
While these steps would recoup a significant amount of money, the ultimate strategy to eliminate gaming of the system by certain states and to greatly accelerate innovation would be to provide federal Medicaid dollars as unencumbered block grants to states based on a single national per capita coverage rate, either by enacting caps on the overall program or with per enrollee spending caps. Program caps on spending growth would reduce spending anywhere from $450-$480 billion over 10 years, depending on implementation strategies. Caps on spending per enrollee over 10 years could reduce spending by $588 billion. Our goal should be to ensure that all states receive the same share of federal support. This would allow individual states to determine their own expenditure matches and stand-up innovative programs, effectively transforming them into laboratories for health care efficiency, effectiveness and high-value care.
Modernizing Medicaid and allowing individual states to innovate while preserving evidence-based high-value care and life-saving services would be a far more rational approach than indiscriminately cutting essential services. Moreover, rational Medicaid reform could help spur a broader set of much needed reforms across the entire U.S. health care system.
Charles J. Lockwood, MD, MHCM, is executive vice president of USF Health and dean of the Morsani College of Medicine at the University of South Florida.