Medicaid

States Still Struggling to Pay for Medicaid

|

Some 50 million people are currently enrolled in Medicaid, the joint federal-state health program for the poor and disabled. Another 16 million are expected to join the system after the new health care law's major coverage provisions kick in in 2014. But there are serious potential problems with this plan. For example, many states can't afford their Medicaid programs as they exist—and the coverage expansion may cost far more than expected. Via The Arizona Republic, here's what's happening in Arizona:

Federal health officials have approved an additional 5 percent reduction in the rates hospitals and other health-care providers ar reimbursed for Medicaid patients, part of Gov. Jan Brewer's budget-balancing package.

The rate cut, retroactive to Oct. 1, follows another 5 percent reduction in April and a rate freeze imposed in 2007.

It will save the state an estimated $95 million this year, savings hospitals say comes at the expense of health-care facilities and privately insured patients.

Arizona hospitals will now be paid 70 percent of what it costs to care for a Medicaid patient, said Pete Wertheim, a vice president with the Arizona Hospital and Healthcare Association.

The doctor will not see you.

Arizona mangled its Medicaid program in the late 1990s when it made the decision to fund expanded health coverage using tobacco settlement revenues, which, thanks to lower smoking rates, are now declining. But it's not the only state that's cut back on Medicaid payments. California cut back payments in hopes of saving more than $600 million too. And now health providers are suing the state over the rate cuts, and warning that as a result of the payment reductions the state medical system won't be able to handle the new health law's expanded coverage requirements. Those coverage requirements, meanwhile, may end up costing far more than expected: A recent study by Harvard health researchers warned that the Medicaid expansion was subject to substantial uncertainty, and that it could cost nearly $100 billion a year—roughly as much as the entire law was projected to cost.

There isn't an easy fix. Last year's health care overhaul not only pushed states into a coverage expansion, it also threatened the loss of billions in federal funding should states cut Medicaid eligibility in between now and 2014. Yet most states are bound by balanced budget requirements, which means that they have to cut back somewhere. And with Medicaid clocking in as one of the top budget items for state governments, it's got a big target on it. So payment rates get cut, and providers balk, launching lawsuits or cutting back on the number of Medicaid patients in their caseload. Care quality, already extremely poor within Medicaid, gets even worse. State budgets become constrained as they attempt to pay for Medicaid. Yes, the federal government shoulders much of the burden of the new health care law's expansion, but states will eventually pick up about 10 percent of the cost, which, in the context of already strapped state health care budgets and rising health costs, is still a heavy burden.

When Medicaid was passed, it was an afterthought to the bigger and more politically important program, Medicare. At the time, most policymakers assumed that Medicare would serve as the vehicle for government-funded health expansion. But it turns out that both states and the federal government have found ways to stuff people into Medicaid instead. ObamaCare brings Medicaid coverage to the bottom edge of the lower middle class—about 133 percent of the poverty line. And yet we still don't know how to pay for it. The program, designed to be modest in scope, has been asked to do far too much. 

NEXT: Why Does Keynesian Success Feel Like Failure?

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. One of the problems with Medicaid costs is that people that are on it, the ones without a good track record of making good decisions, are often malnourished, or obese, or smokers, or stressed due to income issues or family issues…all things that contribute to people being in a position to get Medicaid, ie they’re poor in general. So they don’t get preventative services that can lower costs. They get services, in the ER, when that is the last resort. So costs are much higher. If we’re going to keep these entitlement programs, put an annual physical requirement on it. It will add a cost while reducing larger costs for hospital use, assuming the people will heed the advice of the GP they see at their physical.

    Oh wait, they won’t heed his or her advice. Therefore, end the entitlement program because it is unaffordable, unconstitutional, and does not garner the results the People expect. It just pays and pays and pays because too many in our government legislate with emotion and not common sense, logic, or statistics.

    1. So they don’t get preventative services that can lower costs.

      There is no good evidence that preventive services lower costs in the long run. The short run, yes, but in the long run, no.

  2. Arizona mangled its Medicaid program in the late 1990s when it made the decision to fund expanded health coverage using tobacco settlement revenues, which, thanks to lower smoking rates, are now declining.

    Statists, who pride themselves on their pragmatic smarts, never see this coming. They always insist that their confiscation schemes will simultaneously reduce a targeted “bad” behavior and provide an unlimited cornucopia of funds for big government projects. Sorry folks, you can’t do both.

  3. This Medicaid expansion of coverage to millions more people is so not going to work. Do they really think doctors are going to take on even more patients at a loss? I don’t know exactly how the unintended consequences will play out, but a plan premised on ignoring human nature and expecting people to work at a loss is gonna fail.

  4. Thank Tebow that Obamacare will solve this problem utterly. Or is that udderly? I always get those confused.

    1. never confused about tits, always good

  5. Suderman nails it once again.

    The problem with Medicaid IMHO is that there are WAY too many people that receive it. One out of every 6 persons in this country is on it. This is far too high a number to sustain it. To top that, it would be a difficult sell to just cold-turkey the program.

  6. in any profession except among professional politicians, such malfeasence would be punishible by censure or beheading (but they’re like flatworms and that wouldnt hurt them or slow them dowm at all, their heads being such useless appendeges)

  7. Almost without exception, when we have a patient that blows off appointments, refuses to follow the doctor’s instructions, abuses our staff, wastes our time and resources, and just generally exhibits the worst attitude, they are a Medicaid patient.

    The above character flaws are summarized as “the entitlement mentality.” And they are our future.

    1. They could also be a VA patient. If you don’t do exactly what they want, they’ll write a letter to their congressman. You owe them for their service.

  8. I have to wonder, how much does paperwork add to Medicaid costs, and would providing a cash grant instead lower costs?

  9. Florida’s Medicaid Reform Pilot has been a decided success, improving the health of enrolled patients, achieving high patient satisfaction and keeping cost increases below average. Since then, Florida has passed its Statewide Reform, which promises to extend these benefits throughout the state. If Florida’s Medicaid Reform Pilot experience were replicated nationwide, the outcomes in almost every facet of the program would be significantly improved and would offer participants meaningful reforms to a system that has been falling into decay, says Tarren Bragdon, of the Heritage Foundation. The pilot program, which was isolated to five counties in Florida, saved an estimated $118 million per year, with an aggregate estimated annual savings of $901 million when the reform is put in place statewide. Researchers suggest that if a similar program were to be put in place nationwide, it would save $28.6 billion annually. The pilot program’s results can be fairly projected on the nation as a whole because the program served a diverse population of 2.93 million, which includes 290,000 Medicaid recipients (http://eng.am/u3jm0H).

Please to post comments

Comments are closed.