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.

Advertisements