During a speech in Toledo this week, Gov. John Kasich noted the obvious: State government cannot erase a projected $8 billion shortfall in its next budget without controlling the cost of its Medicaid health-care program for low-income Ohioans.
But as the governor and lawmakers look for immediate ways to cut Medicaid spending, they ought not adopt policies that would drive up health care costs in the long run. Nor should they disproportionately deny access to, or reduce the quality of, essential care for Ohio's neediest people.
Medicaid serves more than 2 million poor and disabled Ohioans, about one-fifth of the state's population. It is the largest single item in the two-year, $50 billion state budget.
The federal government pays about 60 percent of Medicaid costs, and has increased its support during the recession. But much of that added aid will end once the new state budget takes effect July 1, even as Medicaid caseloads are predicted to grow.
The Kasich administration estimates that if current policies do not change, Medicaid will cost Ohio taxpayers $1.6 billion more next fiscal year, as the state's share of program costs rises to $4.9 billion. Such an increase is unsustainable.
So Medicaid policies must change. The only question is whether they will change in a way that does more than merely slash spending now, but also will contain long-term costs and help make Ohioans healthier.
The federal health-care reform law seeks to enhance access to care in part by expanding Medicaid. In that light, Governor Kasich's proposal that the Obama Administration allow him to reduce Ohio's Medicaid enrollment and limit eligibility without losing federal funding seems unrealistic.
A major focus should be on nursing-home costs, which consume about one-fifth of Medicaid spending in Ohio. Mr. Kasich is correct to emphasize keeping elderly and disabled Medicaid clients at home whenever possible, rather than placing them in nursing homes. Enhancing community programs to support such clients, such as assisted living, makes sense.
Changing priorities won't be easy, given the lobbying clout that for-profit nursing homes enjoy in Columbus. But that isn't the only complication.
In many cases, recipients need skilled long-term nursing care that families cannot provide, even with financial help. Too often, the state's Medicaid payment rules do not take into adequate account the quality of care, or differences in the cost of providing that care across the state.
Sending a patient home who cannot be cared for properly there, or demanding the lowest-cost nursing home care to the exclusion of quality considerations, is a false economy - especially if it makes that patient more likely to have to visit a hospital emergency room. By contrast, paying for good care instead of the cheapest care can save money.
The state should review the rates it pays all Medicaid providers, with an eye to reducing them. Again, though, if the program cuts rates so much that providers bail out of the program en masse and leave large numbers of recipients without coverage, it's hard to see the gain.
Mr. Kasich's administration is on firm ground when it emphasizes preventive care rather than after-the-fact treatment within Medicaid. If state officials can reform Ohio's medical malpractice system without denying patients needed protection from bad medicine, do it.
If there is unnecessary administrative duplication between Medicaid and the state's Medicare program for elderly Ohioans, eliminate it. If there are better ways to coordinate the delivery of medical services and prescription drugs, embrace them. If market mechanisms such as managed care can provide the same services at less cost, include them.
The Obama Administration has offered useful ideas for moderating Medicaid costs, including charging for or dropping some optional services and benefits, and leveraging more federal dollars. Officials in Columbus should look at which of those ideas would work in Ohio, instead of taking a not-invented-here approach.
Cutting Ohio's Medicaid costs is as necessary as it is difficult. Keeping the focus on fairness, quality, flexibility, and long-term efficiency will make the process marginally less painful.