Lanhee Chen
By Lanhee Chen
With each new day comes news of yet another state opting to expand its Medicaid programme as a result of the Affordable Care Act. This week alone, Governor Tom Corbett in Pennsylvania announced his support for the move, and Governor Rick Snyder signed into law Michigan’s Medicaid expansion.
More than half of the states have committed to put more of their residents into the flawed and expensive programme. Reform is desperately needed — particularly in light of the Congressional Budget Office’s finding this week that health care is the most significant driver of increasing federal spending.
Much of that growth comes from Medicaid. Federal spending on the programme is expected to more than double over the next 10 years, to $554bn. This reflects increases in not only the number of beneficiaries but also the cost per beneficiary: The CBO estimates that federal spending for each adult on Medicaid will increase by 9 percent a year over the next decade.
Medicaid is a programme designed primarily to help the poor, but conservatives have long argued that it is a poor way to do so. Aside from being expensive for taxpayers, Medicaid may not produce the health outcomes that we want, particularly given how much we’re spending on the programme.
Yet Obamacare doubles down on Medicaid by expanding eligibility for the programme. That risks limiting access to care for those already covered, places more pressure on already-tight state budgets, and could “crowd out” millions of Americans from higher-quality private health insurance. Obamacare also does nothing to address the quality of care being provided through the programme.
Thus, the Supreme Court did Americans a favour in July 2012 when it ruled that states couldn’t be forced to expand their Medicaid programmes. But states that do so may be tying themselves to a rapidly sinking ship. First, while the federal government picks up most of the benefit costs associated with the Medicaid expansion for the first three years (and phases down to 90 percent thereafter), states will be responsible for all of the administrative costs.
Second, there is no guarantee that the enhanced matching rate that Obamacare puts in place will remain in law as fiscal pressures mount. States, however, will have difficulty dropping people from Medicaid once they’ve been put into it.
Finally, the CBO has concluded that rising Medicaid costs will probably cause state governments to make choices that will ultimately hurt beneficiaries: paying providers less, limiting services covered under the programme or tightening eligibility to reduce the number of people in the programme. Medicaid also constrains states’ ability to innovate or tailor benefits to the needs of their individual populations.
Finally, there are “blended” solutions that would keep the most vulnerable Medicaid beneficiaries in the current funding system while moving healthy adults and children to one of the reformed payment systems discussed above. Legislation introduced last year by a group of Republicans, led by Oklahoma Sen. Tom Coburn, would take this approach.
Reforming Medicaid is crucial to our nation’s fiscal future. Unfortunately, Obamacare only makes matters worse by drastically increasing the number of people dependent on the flawed programme. Fundamental reform of the programme is long overdue, and policymakers should seize this opportunity to truly improve Medicaid for taxpayers and beneficiaries alike. WP-BLOOMBERG
By Lanhee Chen
With each new day comes news of yet another state opting to expand its Medicaid programme as a result of the Affordable Care Act. This week alone, Governor Tom Corbett in Pennsylvania announced his support for the move, and Governor Rick Snyder signed into law Michigan’s Medicaid expansion.
More than half of the states have committed to put more of their residents into the flawed and expensive programme. Reform is desperately needed — particularly in light of the Congressional Budget Office’s finding this week that health care is the most significant driver of increasing federal spending.
Much of that growth comes from Medicaid. Federal spending on the programme is expected to more than double over the next 10 years, to $554bn. This reflects increases in not only the number of beneficiaries but also the cost per beneficiary: The CBO estimates that federal spending for each adult on Medicaid will increase by 9 percent a year over the next decade.
Medicaid is a programme designed primarily to help the poor, but conservatives have long argued that it is a poor way to do so. Aside from being expensive for taxpayers, Medicaid may not produce the health outcomes that we want, particularly given how much we’re spending on the programme.
Yet Obamacare doubles down on Medicaid by expanding eligibility for the programme. That risks limiting access to care for those already covered, places more pressure on already-tight state budgets, and could “crowd out” millions of Americans from higher-quality private health insurance. Obamacare also does nothing to address the quality of care being provided through the programme.
Thus, the Supreme Court did Americans a favour in July 2012 when it ruled that states couldn’t be forced to expand their Medicaid programmes. But states that do so may be tying themselves to a rapidly sinking ship. First, while the federal government picks up most of the benefit costs associated with the Medicaid expansion for the first three years (and phases down to 90 percent thereafter), states will be responsible for all of the administrative costs.
Second, there is no guarantee that the enhanced matching rate that Obamacare puts in place will remain in law as fiscal pressures mount. States, however, will have difficulty dropping people from Medicaid once they’ve been put into it.
Finally, the CBO has concluded that rising Medicaid costs will probably cause state governments to make choices that will ultimately hurt beneficiaries: paying providers less, limiting services covered under the programme or tightening eligibility to reduce the number of people in the programme. Medicaid also constrains states’ ability to innovate or tailor benefits to the needs of their individual populations.
Finally, there are “blended” solutions that would keep the most vulnerable Medicaid beneficiaries in the current funding system while moving healthy adults and children to one of the reformed payment systems discussed above. Legislation introduced last year by a group of Republicans, led by Oklahoma Sen. Tom Coburn, would take this approach.
Reforming Medicaid is crucial to our nation’s fiscal future. Unfortunately, Obamacare only makes matters worse by drastically increasing the number of people dependent on the flawed programme. Fundamental reform of the programme is long overdue, and policymakers should seize this opportunity to truly improve Medicaid for taxpayers and beneficiaries alike. WP-BLOOMBERG
