Ben Nelson Has a Good Idea.

That's not a headline I ever thought I'd write. But political controversy, it seems, is the mother of invention. You'll recall that in exchange for his vote on health-care reform, Sen. Ben Nelson obtained from Harry Reid a provision under which the federal government would pick up the full cost of the bill's expansion of Medicaid – in Nebraska, but not in other states. Lots of people squawked: Why should Nebraska get special treatment, they asked. Of course, states and districts with powerful members (or those whose votes are particularly valuable at a given moment) get special treatment all the time. But that doesn't mean it wasn't a legitimate criticism. And it turns out that even the people of Nebraska (who, being overwhelmingly conservative, are not that hot on health-care reform to begin with) didn't think too highly of the deal benefiting their state.

Now, Nelson is saying that the federal government ought to pick up the entire cost of the expansion for every state, not just Nebraska. And he's right.

The fact is that Medicaid is not particularly well-designed. The cost is shared by the federal government and the states, and up until now every state has set its own eligibility rules. What that has meant in practice is that the more progressive states have set eligibility reasonably high, allowing many people to get coverage, while the more conservative states have set eligibility extremely low, allowing only the desperately poor to get coverage (and not incidentally, putting all kinds of bureaucratic roadblocks in people's way, to make signing up as difficult as possible).

The irony here is that under the current health-care reform, which will make everyone with incomes above 133 percent of poverty (Senate version) or 150 percent of poverty (House version) eligible for the program, the red states that have been miserly with Medicaid benefits will be getting a large infusion of federal money, while many blue states will be getting little or no new assistance. For the first few years of the reform, the feds will be picking up nearly the entire tab for people newly eligible, but not those who were already on Medicaid – their cost will continue to be split between the federal and state government. That's why some blue-state officials are upset about this – they feel like they're getting punished for having done the right thing in the past.

So what's the answer? The first thing Congress should do is take Nelson's advice, and have the federal government pick up the entire cost for all new entrants into Medicaid – not just for the first few years of reform's implementation, but forever. The next thing they should do is federalize the program entirely. Because they have to balance their budgets every year (unlike the federal government), states have often looked to cutting Medicaid when times get tough. Though they will no longer be able to do so if this reform passes, that just means they'll be more likely to cut other social services. The federal government has much more flexibility with spending, and can borrow when it needs to in order to maintain services. Not only that, federalizing the program will make it easier to make some of the other changes necessary to improve Medicaid (and maybe, eventually, just merging it with the rest of the system in whatever way it evolves, meaning that all poor people would get health insurance without there being a poor people's health insurance program).

As we've all realized, legislating is one seriously ugly process. But every once in a while, the push and pull of crass political interests can actually result in something good happening.

--Paul Waldman

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