Published Sep 25, 2011

Had former Health and Human Services Commissioner John Stephen been able to implement his Medicaid reforms six years ago, New Hampshire would be in much better shape today.

When Stephen became commissioner in 2003, New Hampshire had already spent more than a decade skimming federal Medicaid money into the general fund. In 2004, Stephen and Gov. Craig Benson arranged with the federal Department of Health and Human Services to change the “mediscam” formula in place since 1997. The deal was that New Hampshire would not be penalized for mediscam taxes if it fixed the formula in the next budget. The state did, but HHS later decided that New Hampshire should pay back $35 million in mediscam taxes collected in 2004 before the changes took effect.

How to find $35 million in savings in this already deeply cut state budget? One method the Lynch administration hopes to use is to switch Medicaid from a fee-for-service program to a managed care program, like an HMO. That’s great, but here’s the interesting bit: Stephen proposed this change soon after he became commissioner, and Democrats, including Lynch, blocked it for partisan political reasons.In 2005, Stephen pushed his GraniteCare plan, which contained Medicaid managed care. Lynch opposed it while simultaneously signing on to a National Governors Association proposal that included Medicaid managed care and other GraniteCare components. His opposition to Stephen’s proposal was purely political.

For five years, Lynch and New Hampshire Democrats blocked Stephen’s reforms, including Medicaid managed care, while similar reforms were adopted in most other states. Today, only three states operate Medicaid on the more costly fee-for-service model: Alaska, Wyoming and New Hampshire. A Kaiser Family Foundation study released last week found that two-thirds of Medicaid patients in the United States are in a money-saving managed care plan.

In the end, Lynch won: He beat Stephen in last year’s governor’s race, partly by continuing to demagogue Stephen’s effort to reform the way New Hampshire manages its subsidized health care. But the taxpayers lost. We could have saved tens of million of dollars by now.