Reforming Medicaid

By Greg Scandlen

Fully one-half of the supposed newly insured in ObamaCare will be covered by expanded Medicaid – if all goes according to plan.

Now, I will wager my retirement fund that nowhere near the 32 million estimated will ever be covered. In fact, I would be astonished if even one-third of that number get coverage, and it is as likely that ObamaCare will result in fewer people covered, not more.

But since so much is riding on Medicaid, it might have been a good idea to think through whether Medicaid is such a good vehicle for expanding coverage in the first place. There is evidence aplenty that when it comes to health outcomes, it is better to be uninsured than to be on Medicaid.

Still, with or without Obamacare, Medicaid is a gigantic program – bigger than Medicare in numbers of people covered. And it is helping to drive the states into bankruptcy. So an examination of what to do with it is well overdue.

Recently there has been some fine work done on the topic.  One example is a fine paper published by the Texas Public Policy Foundation and authored by state representative Arlene Wohlgemuth, Brittani Miller, and Spencer Harris, “Medicaid Reform: Constructive Alternatives to a Failed Program.”

The authors propose creation of an entirely new approach, TexHealth. They write:

TexHealth would change the dynamic of Medicaid from a defined benefit program to a defined contribution program, allowing individuals to make their own decisions in regards to their health insurance needs.

They explain:

Under a defined contribution plan, TexHealth will provide better access to health care services and be available to potentially 4 million more individuals than currently served, for less money. Initially, the state would spend $22.26 billion per biennium in subsidies to low-income Texans, $12.4 billion on long-term services and support, and $9.22 billion for implementation and administration, totaling 5 percent less than the state spent on Medicaid in the 2008-2009 biennium. TexHealth strives to offer the maximum amount of choice and freedom in health insurance decisions.

The paper is quite comprehensive and includes summaries of the handful of successful Medicaid reforms that have been implemented to date, including Rhode Island’s Global Medicaid Waiver, Indiana’s Healthy Indiana Plan, and Florida’s Cash & Counseling program.

In North Carolina the John Locke Foundation published a short paper by Nicole Fisher and Joseph Coletti on “Repair and Reform Medicaid.” The paper finds that enrollment n North Carolina’s Medicaid program grew from 639,000 people in 1990 to 1,603,000 in 2006. And the benefits are among the most generous in the Southeast with a per-enrollee cost of $5,668. The future is not bright. The paper says:

ObamaCare will make it nearly impossible for states to make economic reductions to Medicaid due to requirements of maintaining high eligibility while imposing new costly provisions beginning in 2014. Secretary of Health and Human Services Kathleen Sebelius has been all but intractable regarding state requests for flexibility of plan design and payments to providers.

The paper calls for restructuring the long term care component, reducing optional services, and applying for block grant funding similar to what Rhode Island did.

In Wisconsin, the new Secretary of Health Services, Dennis Smith, is doing some similar thinking.

An article by Guy Boulton in the Journal Sentinel reports:

Dennis Smith’s first task as secretary of the Department of Health Services is to eliminate a roughly $500 million shortfall in the state budget for the BadgerCare Plus and Medicaid programs. But his ultimate goal is to make the programs more efficient.

The article explains that Governor Scott Walker’s budget actually increases Medicaid spending by $1.3 billion over the next two years to replace lost stimulus money.

Mr. Smith is taking his time to “get input from the stakeholders,” and, “some advocates are wary.” But, “the Legislature also gave the Walker administration more freedom to remake the Medicaid and BadgerCare Plus programs; that was written into the controversial measure that cut collective-bargaining powers for public-sector unions.”

The article continues:

Smith is open to setting up some version of health savings accounts for people in BadgerCare Plus and other programs. And he talks about providing defined benefits and services for specific groups within the programs. “We don’t need more money,” he said. “We need to use the dollars more wisely.” Much of those dollars are spent on a relatively small number of people, nearly all of them elderly or disabled and many covered by both Medicare and Medicaid. Smith noted that 5% of the people covered by Medicaid account for 58% of the cost, a bit more than the national average of 54%. Long-term care is among areas likely to be a focus. He admires what Oregon and Washington have done to provide community-based  are, enabling people to remain in their homes instead of nursing homes while also saving money.

These state efforts are getting a boost from Congress. The Wall Street Journal reports:

House Republicans are preparing to propose a major shake-up of the Medicaid health-care program for the poor, a first step in their drive to overhaul federal entitlements, according to a member of the House Budget Committee.

Entitlement reform will be part of the 2012 budget proposal that Paul Ryan will be unveiling in April, but there is some talk about beginning with the remaining FY 2011 budget.  Block grants to the states are a popular idea. That would enable the states maximum flexibility to design a wholly new approach to covering the poor. Of course, they had that flexibility with the SCHIP program and didn’t do much with it.

At a minimum, the states should separate out the three programs that constitute Medicaid – long term care for the elderly, health coverage for the disabled, and health coverage for low-income families. These three components have little in common and having them merged makes it difficult to even talk about how much Medicaid costs. Total program costs are meaningless when looking at reform.

But the states need to do much more, including voucherizing Medicaid for most eligible families. A recent study in Health Affairs found that such families are constantly moving in and out of Medicaid eligibility, even at a 133% of poverty cut off point. This is disruptive and confusing for such families. It would be far better if they could apply Medicaid funds to the cost of private coverage they could keep as circumstances change.

At the same time, some significant portion of the population is incapable of managing any form of insurance program. They may be illiterate, drug addicted, mentally ill, or otherwise too dysfunctional to make appointments, fill prescriptions, and follow treatment plans. These people need the direct delivery of services.

Getting Medicaid right is not easy, but the stakes are enormous. We need to get serious about it.


10 Responses

  1. Your most recent critique of ObamaCare underscores still again what is wrong with the Administration’s version of “health care reform.” And that is, it attempt to reform the wrong things, adds new parts to the health care system (that will no doubt need reforming), while ignoring other parts (malpractice, fraud/abuse/waste) and choosing not to at least test market reforms.

    Tomorrow Bloomberg Government will be hosting a briefing on the first anniversary of ObamaCare, called the Iron Triangle of Health Care. Not sure of the significance of this title, unless it refers to the panelists moderated by the HHS Secretary:
    Karen Ignagni/AHIP, Peggy O’Kane/NCQA and Stephen Ubl, Advadmed.

    The briefing will be held tomorrow at the Newseum — 555 Penna. Ave, NW — from 8-Noon. Click here to register:

  2. I dropped my own participation in Medicaid when their rules forced me to do harm to my patients. I had a patient on stable doses of opioids for chronic pain, then they decided they would only cover oxycontin for cancer pain. 6 months later, after jumping through all their hoops, he was back on the stable dose, but had suffered needlessly for 6 months. When I quit, I told them that I had 10 patients that I wanted to still provide care for, and I was willing to do it pro bono if they would honor my prescriptions and referrals. Their answer: no.

    Medicaid is not about providing good care to patients. It is about how makes the decisions.

  3. I have trouble with the basic premise of calling Medicaid an entitlement. Think about it. Why would we “entitle” someone to something paid for by taxpayer dollars only if we fail? Or have babies out of wedlock? Or become an alcoholic or a drug addict? Or not prepare for a career? Why would we want to trap people in a system where they lose their “benefits” when they get well or get a job?

    Of course, some people on Medicaid lost everything because of a major illness that depleted all their funds, but the premise that this leads to an “entitlement” seems backwards. We are entitiled to things we earn, not to dip into the pockets of taxpayers for something we did not earn.

    People who find themselves poor and ill need medical care, not an entitlement or “insurance.” We do not need a big bureaucracy.

    In New Jersey, a plan is advancing to completely change the culture of Medicaid. We a proposing that people who are sick and have no funds or insurance be directed to one of 100 free non-government clinics dotted throughout the state. We are proposing that physicians donate 4 hours a week to care for patients in these clinics with no direct compensation. No billing, No CPT codes, No money coming from the State capitol.

    Presently, the Federal Tort Claims Act gives free federal medical malpractice coverage for work done in a free clinic. So we are asking the State to expand this same coverage to the entire practice of these same physicians, thus giving indrect compensation.

    By eliminating the huge Medicaid bureaucracy, we anticipate saving $2 billion per year for starters. Currently Medicaid HMO’s get $500 million per year for administrative costs and profit in New Jersey. Eliminate that! End the bureaucracy. End the fraud. Phase out Medicaid altogether. Real charity is better and has proven to work at one-tenth the cost.

  4. The NJ Volunteer Physician Protection Act. Give me reasons why this would not work.

    With the baby boomers retiring, we will be providing volunteer opportunities that will lead to a resurgence of prosperity in the states.

    This worked before 1965. It will work again.

  5. Greg, good post. We need to get money into the hands of the poor to buy care. insurance vouchers ala Massachusetts only feed the corporations. As far as volunteering free services for Medicaid in NJ, good luck when you have to spend time with paying patients to keep your office door open. So it’s real money that would work, How to do this? I’ll send it to you by email, but it is an HSA-like program with state rules for use of a debit card so that a person cannot take out the family medical account money and buy a boat. Bob

  6. The devil is in the details, Bob. “Getting the money into the hands of the poor,” is asking for immense abuse of the taxpayer. Who decides who gets those funds? How much do they get? Why work if the check is in the mail?

    We have operated a free clinic, the Zarephath Health Center, in central NJ for the past 7 years. The physician earns his living elsewhere, but provides care in an environment where he pays no overhead and where volunteers cheerfully help the poor in many ways other than medical care. It is assertive, basic, compassionate, challenging, and more effective than any government program.

    The cost to provide care in our clinic is 10% what it costs to provide care in a taxpayer funded federally qualified health center. The taxpayers are getting fleeced when Uncle Sam pays the bill. They cannot afford it anymore.

    And the poor would do well to avoid being trapped in dependency on the government.

  7. Dr Eck, this sounds like a breath of fresh air!
    How many months out of a year does the average physician work just to pay for malpractice insurance? How much pressure does he take to accept new/indigent patients? The NJ system, I suspect, will be more than worth it to medical participants for these reasons alone—to say nothing of that intangible: “feeling like I make a difference.”

  8. Yes Abigail. The rewards will be great when we have the satisfaction of taking back control of our profession, of having the poor feel genuinely grateful instead of entitled, of being with a team of volunteers that will seek many ways to lift the person up rather than keeping him trapped in a dependent welfare state.

    We have lived this for the past seven years at the free clinic we founded apart away from our practice. The volunteers who have worked with us and the former patients who now have become volunteers will remain loyal friends for a lifetime. Our church has gone from 150 to 1500 people, attracting many who want to belong to a church that is doing something significant to live out their faith.

    Our plan is advancing in the legislature as the state is simply out of money. The only people who will not like this plan are those who have been enriched in the system without touching the patients– Medicaid HMOs, medical malpractice companies, trial lawyers, bureaucrats and the scooter manufacturers. Patients, physicians and taxpayers will be the big winners. It would pay to be on the right side of this one. Stay tuned.

  9. Points:
    Medicaid outcomes (poorer) vs from insured patients: A large majority of Medicaid patients have factors which predispose to doing poorly, even with good treatment. Many patients come from poverty levels of society, where nutrition is poor. Many have given up on expecting good things.
    Medicaid only pays 22 cents on the dollar.Pts can’t find a doctor now. Will be worse w/Abysmalcare.
    Running an office costs 40-45 cents on the dollar.
    Volunteer? We are volunteering 78% of our time spent seeing Medicaid pts, and 74% seeing Medicare…involuntarily. Pay doctors who want to “volunteer” something like $100/hr spent, with no billing responsibilities or malpractice liability. Of course I applaud Dr. Eck’s clinic…but state money as I suggest above could expand coverage.

    • The only problem with your suggestion, Dr. Stecher, is that the states are out of money. That is why extending state medical malpractice coverage to ALL the work done by a physician who donates a certain amount per week to care for the poor is a reasonable plan.

      It is indirect compensation as we would no longer be paying that med-mal premium and would actually cost the taxpayers less than the current highly bureaucratic Medicaid system. WIN-WIN-WIN for patients, physicians and taxpayers.

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