Moving Forward on Medicaid

By Grace-Marie Turner

Congress will try to take a few small but crucial steps toward reforming the out-of-control Medicaid program when it reconvenes to finish work on the budget reconciliation package. 

But even though the proposed Medicaid changes are modest, they have provoked heated battles on Capitol Hill. House Minority Leader Nancy Pelosi said, “Republicans are launching an attack on America's children, America's families, and America's middle class… Republicans give new meaning to the words, ‘suffer little children.’”

There are many provisions in the bill to protect little children and other vulnerable beneficiaries, but even tiny steps toward injecting some spending discipline has created a firestorm of opposition.

Medicaid, which was designed to finance health care for the poor, is a  joint federal-state entitlement program that serves 52 million people and will cost more than $300 billion this year. 

Energy and Commerce Committee Chairman Joe Barton who is spearheading the changes says, “Medicaid works so well it is going broke… It is both growing and collapsing.” The federal government picks up an average of 57 percent of Medicaid’s tab — much more in some states and a little less in others.

Medicaid is the biggest item in many state budgets. Governors don’t see how they will be able to continue to sustain Medicaid and also pay for roads, schools, and public safety, and they are pleading for more flexibility and control.   Medicaid’s caseload has increased by 40 percent in the last five years, and costs have risen more than 50 percent in that time.

Barton has proposed several relatively minor changes that would give governors more control over the program.   For example, the bill would:
 
 Give governors more flexibility in the structure of Medicaid’s overly generous benefits package, allowing it to reflect benefits in plans offered to state employees or by the most popular private plans in the state.

 Cap the amount of home equity a beneficiary could have at $500,000 before qualifying for taxpayer-supported nursing home care.

 Allow states to slightly increase medical co-payments for some Medicaid recipients and give governors the authority to enforce the co-payments (which they can’t now do and are therefore often ignored.)

In most states, Medicaid recipients have access to medical services and prescriptions at virtually no cost. Meanwhile the uninsured, making just a few dollars over Medicaid’s ceiling and often working two jobs with no health insurance, must pay full fees for their medical care. Many Republican and Democratic governors believe those on Medicaid should have to spend at least a few dollars to show they value health coverage that is worth thousands of dollars.

In addition, Medicaid has become much more than a program to provide health care to the poor. Lawyers specialize in helping affluent clients hide their assets to get nursing-home care paid by taxpayers, sometimes called “Medicaid for Millionaires.” The result: Medicaid pays $1 of every $2 spent on nursing-home care in the U.S.

The House proposals would slow Medicaid’s growth by .3 percent (that is correct: .3 percent) over the next five years while the program will still grow by 7 percent over that time — an increase of $66 billion.

But the proposed changes are about more than money.  Forward-thinking governors want to begin to shape the Medicaid program to look more like private health coverage, which would help recipients transition into the workplace.

Governor Jeb Bush of Florida already has taken a big step in that direction, winning approval of a Medicaid waiver that brings private, competing health plans into Medicaid and offers new incentives for recipients to be careful with their spending.

Those who resist reform to Medicaid would do the most damage to those who need the program the most.

Medicaid is an important program for people with severe disabilities and the poor who have no other options for health care. The more political leaders continue to  expand this program to the middle class, the fewer resources there will be to take care of the truly needy. Those on Medicaid are often consigned to seeking medical care in hospital emergency rooms because the program often pays private doctors so little they can’t afford to see Medicaid patients in their offices.

If Congress is forced to back down over Barton’s changes, it likely will be a long time before other politicians have the courage to step forward. By supporting small steps toward Medicaid modernization, members would send a strong statement about the importance of individual and fiscal responsibility.
 
Tinkering with numbers and putting a further squeeze on price controls will not solve the fundamental problems with this program. It’s time to start giving governors the tools they need to begin to bring the program into the 21st century.

— Grace-Marie Turner is president of the Galen Institute, a research organization based in Alexandria, Va., that focuses on free-market ideas for health reform. She is a member of the Medicaid Commission, but the views expressed here are solely her own.