Today, House Budget Chairman Paul Ryan released his 2012 budget proposal–“The Path to Prosperity.” Ryan’s proposal outlines a path to cut spending significantly. He also takes on entitlement reform. Economists and commentators have already begun to debate the plan–some on the right arguing that his budget does not go far enough and others on the left concerned with the size of his proposed cuts.
One reform in particular could be significant for the commonwealth. Ryan proposes a block grant for Medicaid. The block grant would cap the amount of federal aid states receive, and in turn, states would gain greater flexibility to run their individual Medicaid programs without oversight by the federal government.
For a state like Kentucky, Medicaid budgetary problems are not a secret, as we watched in this year’s legislative session. The Bluegrass Institute has argued that increased federal funding will only hurt the state and will not solve our economic crisis.
When states limit federal funding and gain greater control, they have the opportunity to create and manage sustainable programs. Rhode Island has already proven this with its Global Consumer Choice Compact Waiver. The waiver capped spending, gave the state greater flexibility, saved the state over $100 million and even led to a budget surplus in the midst of the recession.
The debate for the 2012 budget is far from over, but a block grant for Kentucky’s Medicaid program could make a substantial impact.