Obamacare restricts how states can save money on Medicaid until they take on larger burdens they can't afford in 2014. Meanwhile, Michigan has a $1.5 billion spending overhang going into the 2011-2012 budget year due to the use of one-time "gimmicks" and remaining federal "stimulus" dollars to prop-up the current budget.

The federal Patient Protection and Affordable Care Act (PPACA) forbids tighter eligibility standards except to "nonpregnant, nondisabled adults" with incomes over 133 percent of poverty, which applies to exactly zero people on Michigan Medicaid.

With no option to reduce eligibility, the way Medicaid currently works, states must either eliminate optional services or reduce payments to doctors. The former likely won't save enough, unless the state also eliminates prescription drug coverage. The latter may also be limited by federal requirements on maintaining access. Doctors are already dropping out of Medicare and Medicaid because of low payments from the government insurers. Further reductions in Medicaid reimbursement will only worsen the problem.

That is why I have advocated seeking a waiver to transform Medicaid into a premium support program to aid in the purchase of private insurance and fund personal accounts. As Nebraska Sen. Ben Nelson wrote, "[P]rivate insurance generally is better than Medicaid." If the state can reduce cost and provide better health care coverage to the poor, the premium support and personal account plan should be a no-brainer and get federal approval for a waiver.

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