The Heritage Foundation - Leadership for America

While the Massachusetts health reform has generated a significant amount of attention, few have focused on the critical Medicaid demonstration “waiver,” which enabled the reform and was set to expire on June 30.

Absent an agreement on the terms and conditions of the waiver’s renewal, last Friday the feds granted the state its fifth two-week extension in order to continue negotiations.

While the feds and the state aren’t willing to make public the details of their ongoing talks, the local media have reported that the Bush administration is standing firm and refusing to give in to the state’s request for billions of additional dollars from federal taxpayers. The administration deserves credit for holding the line. Until Massachusetts can demonstrate that there has been an appropriate shift in funds away from institutions to individuals, there should be no room for agreement.

To be clear: No one wants to stand in the way of an innovative health reform experiment in Massachusetts. But Massachusetts officials themselves are undermining a key element of their plan’s financing by shoveling dollars that should go to offset the cost of insurance into the coffers of politically favored hospitals.

Granting additional time to negotiate the waiver renewal is one thing, but if, as some have reported, the state might be putting off serious talks in hopes of receiving a “better deal” in the next administration, then federal officials should remain firm and give the state an ultimatum. Federal officials need to ensure that waivers are not a state entitlement, but rather a useful policy tool to effect innovative reform.