Despite deep philosophical differences between our two political parties, there is a uniquely American solution to saving Medicaid.
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Medicaid was founded in 1965 to provide care for our most vulnerable. The program is funded by federal and state governments, administered by the states. However, because of dramatic increases in the population covered-2 percent at inception to today’s 22 percent (>74 million participants)-and ever-increasing expenditures per patient, there is agreement that with huge increases in cost, it cannot survive in its present form. According to CMS, total Medicaid spending as of 2016 was $565.5 billion and under current law projected to be $957.5 billion by 2025.
Presently, state expenditures for Medicaid exceed that for primary and secondary education. This is disturbing because adequate education is the means by which the young can avoid needing Medicaid in their future. Budget limitations have created lower reimbursement rates for physicians and hospitals. This limits physician access (varying by state), resulting in continued use of expensive emergency departments for otherwise routine care. Low reimbursements have led hospitals to cover losses by negotiating higher reimbursements from private insurance. In many poorer rural areas this has not been possible, leading to hospital closures.
This “cost-shifting” causes higher premiums for employer-sponsored and other insurances, contributing in part to stagnation of salaries for many workers. In effect, this is a hidden tax to subsidize the program. Many studies have consistently demonstrated a lack of health outcome benefit for Medicaid patients. Recently, the Government Accountability Office claimed not enough is being done to eliminate fraud. Faced with unsustainable costs, many states are applying for federal waivers to explore a variety of options, such as Medicaid managed care, work requirements (recently negated by a federal court), direct primary care, health savings accounts, and premium assistance among other options.
Solutions are difficult as evidenced by recent attempts to save funds, in this case paying hospitals a yearly amount caring for Medicare/Medicaid patients, irrespective of usage, called global capitation. This has had the unintended consequence of seriously curtailing and endangering pediatric care. As a price-fixed, third-party program, individuals are removed from any cost signals. Despite these many criticisms, a few states that initially refused to expand their Medicaid program via the ACA expansion are now doing so, perhaps to capture the federal funds that are going to nearby states funded, in part, by their taxpayers. These states’ hospital associations are strong advocates to expand Medicaid, seen as a money stream in addition to already covering their costs by “cost shifting.” There is also the belief that insurance should be available to as many as possible. Others argue that insurance is not synonymous with care especially with Medicaid because of the findings of no improvement in outcomes and its huge state and federal costs.
With deep philosophical differences between our two political parties, is there a solution to saving Medicaid? Yes. There is a uniquely American solution. Let individuals decide between the present Medicaid and a proven successful plan that provides better care at far less cost. This alternative could be modeled after Indiana’s successful Medicaid pilot program (2007-2012). The idea behind this plan was relatively simple: with the proper financial arrangements the poor would wisely manage the money and develop healthy behaviors. A health account was set up for each participant, a $1,100 deposit (would need adjustment) into the individual’s account paying for routine care, coupled with nationally available insurance solely for bigger ticket items. Contributions by federal/state governments and the individual would be on a means-tested sliding scale, thus avoiding a “welfare cliff.” This insurance would be in the individual’s name, thus immune from cancellation due to developing a chronic illness. Funding for hospital care would be at private insurance levels greatly helping rural institutions. For the recipients to receive funding for the following year they had to obtain preventative care. This plan avoids “middle men” between patients and care. The results were impressive: 96 percent had positive feelings about this plan. It was proven that Medicaid recipients managed their healthcare dollars in a proper manner, their use of EDs significantly declined, as did their medical costs. They reported improved health.
Medicaid now is spending more than $7,000 per person; this alternative would cost significantly less, conserve government funds, and allow for personal choice. This should appeal to conservatives. It would also improve care of our most vulnerable and be available to more Americans. This should appeal to liberals. Importantly more resources could then be devoted to the future of our nation by putting more emphasis on educating our young, which should appeal to everyone.
Kenneth A. Fisher, MD, is an internist/nephrologist, teacher, author ("Understanding Healthcare: A Historical Perspective" and "In Defiance of Death: Exposing the Real Costs of End-of-Life Care"), and co-founder of Michigan Chapter of the Free Market Medicine Association.