This book was published in 2009 by the American Enterprise Institute, a conservative think tank. The authors are an academic economist and an economist who works with Medicare and Medicaid.

The authors were concerned that the Obama Administration's push for health care reform would impose a large system on top of the already complicated and diverse Medicaid programs offered by states. They argue for greater uniformity in Medicaid requirements across states and more equitable funding of those programs; wealthier states currently spend more on Medicaid and thus receive more federal matching funds.They lay out the case for reforming Medicaid as the highest priority before moving ahead ahead with whatever reforms the Administration wanted to make to private insurance and the rest of the health care system.

In principal, the authors are sympathetic to many of the policies later enacted under the Affordable Care Act. Having a payment advisory board that authorizes funding for high-value treatments (weren't these the "death panels?"), imposing uniformity from CMS on states receiving federal funding, and are even unopposed to a "public option" or at least a publicly-funded managed care organization to name a few examples. They also forsee some time of health exchange program for people to shop for coverage.

The authors do not propose many specifics for reform, but do outline a program of Medicaid with a graduated system of premiums. Medicaid could cover everyone up to 300% of the federal poverty line but with fewer services and "meaningful" premiums the higher up the income scale. They stress the importance of having low marginal tax rates as benefits are reduced or premiums increased, something that the ACA roughly failed at doing properly.

Pauly and Grannemann also advocate ending special treatment to certain providers such as rural hospitals, ending the disproportionate share hospital (DSH) subsidy, and medical education payments. By making Medicaid reimbursement rates more "adequate," the authors write, there will be no need for these types of carve-outs. States should also have more control over provider networks, similar to that in private managed care plans; seeing as how most states have moved to an MCO model this seems to be less of an issue.

Surprisingly for an AEI work, the authors are not opposed to a public option and and believe that coverage and rate-setting should be made on a "technical basis" by objective decision-makers with "expertise," a very technocratic approach. They believe in value-based cost containment, but do not offer any innovative ways to make that happen.

Several of their proposals sound like what has been adopted by Pennsylvania and Arkansas, who received waivers to try out some experiments with requiring premiums and incentives to maintain health, or private health insurance that is subsidized by the state.

This book is not for people looking for an introduction to Medicaid and specific policy proposals, for that I'd recommend the Mercatus Center's recent The Economics of Medicaid (my review here). The authors provide no definitions for things like DSH. As such, two stars out of five.

The first thing to know about this book is that is was written during and for a particular time. It was written between the time President Obama took office and the time the Patient Protection and Affordable Care Act (PPACA, sometimes referred to as Obamacare) was passed. Some of the concepts continue to be applicable; others have been overcome by events. I think it likely that it was required reading for the policy makers laboring in the forges that cast the PPACA.

The premise of the book is that universal health care is so big a change that it must be conducted in increments, working from what we have and adding eligibility and benefits to a population not currently covered by Medicaid and CHIP. The authors draw a clear distinction about a taxpayer's feelings about his/her state taxes arriving in the pocket of a member of the state as opposed to federal tax dollars arriving in the same pocket. I don't doubt that their research is accurate, but I think it is a curious state of affairs to consider federal tax money to be such a different beast from state taxes *from the taxpayer's point of view.* The authors are persuaded that the benevolence of taxpayers decreases rapidly as the beneficiaries' income approaches the contributors' income.

So, problem. One solution from the authors' standpoint is to standardize the amount of support that the fed gives to states. That is, to reduce benefits to high benefit states and raise benefits in low benefit states. And savings will emerge.

From first hand experience, it is one thing not to offer a Medicaid benefit; another altogether to remove or reduce an existing benefit. Moreover, to bring uniformity to the states' Medicaid programs will defeat the laboratory feature of separate state programs, the feature that produced the Massachusetts model that became the basis for the PPACA. Vermont also has a promising experiment in the works. It is unclear what mechanism will replace innovation in the states in a consolidated system.

It seems to me that a more equitable distribution of federal Medicaid funds to states is the extent of the authors' true desire. Any advance farther than that toward a coordinated federal plan is fraught with difficulties that the authors identify ably.

The authors seem to argue against their premise on page 15 (note that the work is 47 pages) that there is not a path from Medicaid expansion to a generalized health care system. Elsewhere they describe the difficulties with bending the cost curve. In another place it is stated that we can never afford universal coverage if costs stay on their current trajectory. And late in the book, they come perilously close to saying something to the effect that there might not be enough of other peoples' money to go around.

Today, mechanisms that have the potential to bend the cost curve are emerging, notably the rise of super-practices (and their policy cousins, Accountable Care Organizations (ACOs), and capitation of coverage rather than fee-for-service.

Now that the PPACA is passed, states' chief concern is gearing up for the additional recipients, implementing HITECH, and gearing up their Health Benefits Exchanges.

Since the reason underneath the remaking of American Health Care is supposed to be taking are of the poor who can't seem to get insured it would make sense to take a close look at Medicaid, our expensive program to care for the medical needs of the nation's poor. Thomas Grannemann and Mark Pauly are economists who specialize in healthcare and they have provided us with this monograph to help us understand what is going on in Medicaid today and why we must begin by reforming Medicaid before setting out to fix healthcare or we will not get to the real issue, which is supposed to be caring for those in need.

They show the tremendous disparity in providing Medicaid and explain why equalizing Medicaid payments must be done before you attempt anything else to change health care in America. In fact, if we do a good enough job in caring for the poor and make a few adjustments to existing insurance, such as portability, equalizing tax treatment for individuals buying health insurance and employer based care, and a possible few others and we won't need Obamacare (this last sentiment is mine).

The authors offer this checklist: "interstate equity, equality of payments across settings, claims-based accountability, provider network control, and value-based cost containment. They wisely urge us to be clear about what we want to end up with and take a slow and deliberate approach towards our health-care rather than the rash process being attempted against us now.

Reviewed by Craig Matteson, Ann Arbor, MI