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Vote Alert

An Open Letter to the United States Congress: Stop the One-Size-Fits-All Medicaid Rules!

May 19, 2011

Dear Member of Congress:                           

    On behalf of the 362,000 members of the National Taxpayers Union (NTU), I urge you to support the State Flexibility Act, introduced as S. 868 by Senator Hatch (R-UT) and as H.R. 1683 by Representative Gingrey  (R-GA). This bill would repeal the costly Medicaid “maintenance of effort” (MOE) requirements embedded in the Patient Protection and Affordable Care Act (PPACA) and provide states the flexibility they need to deal with long-term fiscal challenges. 

    The economic recession has precipitated unprecedented budgetary shortfalls for many state governments, stemming from unsustainable expenditures and temporarily reduced tax revenues as a result of the recession. With every state save Vermont having a variation of a balanced-budget law, the $430 billion in cumulative deficits from 2009 to 2011 have been closed, to varying degrees of satisfaction for overburdened taxpayers. Nevertheless, with states’ projecting another $112 billion in total shortfalls this year, legislatures will need to make more decisions to shore up their fiscal position.   

    The passage of PPACA has made states’ budgetary situation much more precarious by unceremoniously removing Medicaid from the discussion. As part of its implementation, PPACA included a maintenance of effort provision that prevented states from altering Medicaid’s eligibility requirements. With the program’s total state-level spending already increasing by 8.8. percent in Fiscal Year 2010, MOE requirements will essentially handcuff states’ from dealing with one of their primary budgetary challenges. Compounding these difficulties is the fact that just as the MOE mandate kicks in, temporary stimulus funds are being phased out. In 2009 NTU warned that less prudent states could come to depend upon this infusion of federal cash as a substitute for home-grown budget discipline. Today, this prediction is unfortunately coming true in many areas of the country. Furthermore, even those states that spent their citizens’ money responsibly are now facing unpleasant chances because of the squeeze from MOE requirements.

    H.R. 1683 unshackles state policymakers from the onerous MOE provision, allowing them the flexibility to adapt Medicaid to changing fiscal realities. Whether it be through tailoring the Medicaid program itself, such as amending income eligibility thresholds, or enacting money-saving innovations, like shifting Medicaid beneficiaries into new private exchanges, states must have the ability to pass reforms free from unfunded MOE requirements. Furthermore, by eliminating the one-size-fits-all approach, the State Flexibility Act allows states to make budget decisions with less pressure to impose harmful tax increases or to seek another federal bailout (one Washington cannot afford).  

     If states are to successfully grapple with the dire fiscal situations they face Congress must first untie their hands. S. 868 and H.R. 1683 are the first step toward accomplishing that goal and therefore NTU is proud to work for passage of this important legislation.


Brandon Greife
Federal Government Affairs Manager


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