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Well-known health economists Thomas W. Grannemann of the Centers for Medicare & Medicaid Services and Mark V. Pauly of the Wharton School of the University of Pennsylvania warn in their newly released book, Reform Medicaid First: Laying the Foundation for National Health Care Reform (AEI Press, June 2009), that the existing Medicaid program will need to be reformed or replaced before any serious health care reform effort can be enacted. Today, significant differences exist among state programs. While states such as Mississippi and Nevada spend as little as $5,000 per poor person annually, New York and Alaska annually spend more than $15,000 per person below the federal poverty level. Large differences in the country's second-largest health program remain even after correcting for cost-of-living and medical-price differences. This imbalance in Medicaid among states creates an uneven and unstable foundation for any national program to address the needs of uninsured Americans.

In this first important discussion of the serious flaws in the Medicaid program and how best to reform it, Grannemann and Pauly make a strong case for equity, efficiency, and accountability. They explain that controlling the flow of health care dollars is the key to reform and suggest that any new federal health care funds should be directed first toward the lower-income states where the largest numbers of uninsured persons live. The authors propose specific changes in the Medicaid program--from improving provider payment methods to changing the federal medical assistance percentage--to prevent a backlash from overburdened taxpayers that could sink reform efforts in states with many poor people. Responding to the authors' proposals for reform will be Nina Owcharenko of the Heritage Foundation and Alan Weil of the National Academy for State Health Policy. AEI's Robert B. Helms will moderate.