Reforming Our Awful Medicaid Program Requires Massive Doses of Political Courage

Republicans don't know how to roll back Obamacare's massive expansion of this lousy program.


Medicaid is arguably the civilized world's worst health insurance program. And while the bulk of the commentarati has been fixated on reforming Obamacare's

Images of Money via

exchanges, the far bigger political challenge will be dealing with the law's expansion of Medicaid.

Even before Obamacare was foisted on an unwilling nation, this joint federal and state program had become firmly entrenched in every state because Uncle Sam on average gives states 50 cents for every dollar they spend on purchasing health coverage for the poor. Because of this federal largesse and incentive to spend, Medicaid has grown astronomically, becoming the single biggest ticket item on virtually every state budget. But it's not just expensive — it provides lousy coverage, too!

Unfortunately, instead of fixing this terribly flawed program, President Obama essentially money-bombed states into expanding it even further. He offered to pick up 100 percent of the tab for the first three years for every additional person they covered up to 138 percent of the poverty level. After that, he'd taper it to 90 percent in perpetuity. Thirty-one states and the District of Columbia accepted the offer. But 19 states refused. Liberals will tell you that these GOP-run states are helmed by heartless monsters who don't care about the health of poor people. But the truth is that they just didn't want to be left holding the bag in case Uncle Sam reneged on Obama's unsustainable promise.

Of the 16.6 millions previously uninsured Americans who obtained ObamaCare coverage between December 2013 and September 2016, only a net of 2.8 million did so via private coverage, according to Heritage Foundation's Edmund F. Haislmaier. The balance — a whopping 13.8 million — got it through Medicaid and its companion program for children, called CHIP.

In total, Medicaid now covers almost 75 million Americans. And even before ObamaCare took effect, Medicaid paid for almost half of all births in America. That is stunning — and it's a number that has surely grown post-Obamacare.

Medicaid's massive footprint would be acceptable if the program offered quality care at affordable prices. But it doesn't. The combined annual cost of the program now exceeds half a trillion dollars (with the feds' share at 63 percent and states' at 37 percent) — which adds up to roughly $7,000 for every man, woman, and child covered by the program. This is on par with the costs for private coverage. But do Medicaid recipients get comparable service? Far from it.

Several reputable studies have found that Medicaid patients experience no better health outcomes than uninsured people, and arguably even slightly worse outcomes. But the most stunning of all was a 2013 study on Oregon's Medicaid program co-authored by ObamaCare architect Jonathan Gruber of MIT. By luck, it was the closest thing in real life to a controlled experiment.

Here's what happened: Thanks to a budget crunch, Oregon was forced to rely on a lottery to distribute Medicaid coverage to 30,000 out of 90,000 applicants. These people were similar in every essential respect except that some got Medicaid and others didn't. Gruber compared the health outcomes of both groups and concluded that Medicaid "generated no significant improvement in measured physical outcomes" for diabetes, high cholesterol, high blood pressure, and even mortality rates. (Medicaid patients did report better mental health outcomes.)

Liberals claim that repealing ObamaCare will kill people. But at least as far as ObamaCare's Medicaid component is concerned, the opposite might in fact be closer to the truth.

Nor is it hard to understand why. Medicaid reimburses doctors so poorly that providers literally shun recipients. This means that Medicaid patients face far longer wait times to see primary care doctors, specialists, or get surgery. Often they end up in the emergency room just like the uninsured. And in non-emergency situations, the uninsured might in fact get better care than Medicaid patients because doctors have more flexibility to charge them market prices.

Clearly, the program is crying for radical surgery. And Republicans, to their credit, have some pretty decent ideas for how to perform it.

The leading GOP idea is to block grant Medicaid and give states an annual lump sum tied to inflation, basically ending the open-ended entitlement that's burning a hole in federal and state coffers. (Again, for most states, Medicaid is the single biggest — and the fastest growing — budget item.) Republicans would also get rid of the federal mandates that force states to offer a prescribed set of benefits and, instead, let them experiment with alternative arrangements. For example, states could offer beneficiaries the option of buying catastrophic coverage to guard against some unforeseen and costly illness and combine it with a Health Savings Account — basically a tax-free IRA — to pay for routine care and other out-of-pocket expenses. Any balance at the end of the year would roll over into the next year.

This arrangement would give patients a good reason to shop more prudently. Over a period of time, this would curb health care inflation and lower overall spending. The Congressional Budget Office has estimated that block grants could cut Medicaid spending by up to a third over a decade.

This is hardly a new idea. But the reason it hasn't gone anywhere is because liberals hate the notion of anything less than full-blown, guaranteed public insurance that in theory covers everything, never mind the sordid practical reality. But after ObamaCare, the politics of such reform are going to be even more intractable.

Here's why:

Essentially, if the block grant to each state is calculated based on its pre-ObamaCare Medicaid population, many of the newly covered would lose insurance, surely triggering a popular revolt. However, if the block grants were based on the post-ObamaCare Medicaid population, the 19 states that did the fiscally responsible thing and didn't sign up for ObamaCare's Medicaid expansion would be unfairly penalized. And given that all these states have Republican governors, GOP lawmakers on Capitol Hill would have to face the wrath not only of liberals but also their own party. It's hard to imagine President Trump, a man obsessed with polls, signing up for either of these outcomes.

The other alternative would be to give all states enough money to cover everyone at 138 percent of the poverty level. But this would mean that the GOP's repeal-and-reform would be even costlier than ObamaCare itself.

Republican Gov. John Kasich of Ohio, a Medicaid expansion state, has indicated that he would be willing to accept block grants covering only people up to 100 percent of the poverty level in exchange for more operational control. However, convincing dozens of other governors to go along with telling millions of Americans they no longer get Medicaid would be… an uphill task. Making things even more difficult: This would have to be settled before April so that it could be included in the budget reconciliation bill that Republicans want to push out before insurers finalize their 2018 plans for participating in ObamaCare.

ObamaCare is like a Rube Goldberg contraption. Taking it apart and reassembling it is easier said than done — even if it's the right and smart thing to do. And if Republicans can't figure out a way to do so, American patients and taxpayers will be the big losers.

NEXT: Deregulation of Local Foods Is a Winning Idea That's Spreading

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 or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Obama and Pelosi made a bunch of unsustainable promises in 2009 and then pushed the costs out past 2016.

    This isn’t a coincidence.

    And that second paragraph was totally squirreled.

  2. SD;DR

    1. Shame, because this was a relatively good one.

      1. I am going to start calling this rollback incrementalism- Rolling back hugely burdensome government welfare programs until the majority of Americans just accept them as the status quo.

        Obamacare too much poison to take at once? Your oppressors will rollback government medical “insurance” to block grants to the states…..

        Social Security, Medicare and Military Industrial Complex spending too much poison to take? Your oppressors will not rollback this welfare until _____ .

  3. Hey, Dalmia’s still here and she’s not even excusing and even advocating violence against people she disagrees with politically. Baby steps you cute little aggression apologist you.

    The article was fairly good though.

  4. …and it’s a number that has surely grwon post-Obamacare.

    Should probably be “grown” although the whole thing makes me groan.

  5. Two things:

    1) Medicaid is a big part of the problem.

    One of the biggest reasons providers are forced to gouge private insurers is to make up for all the money they lose caring for Medicaid patients. The purpose of the individual mandate was to make people who don’t use their private insurance buy it anyway to take some of the pressure off of insurers for getting gouged to cover losses providers suffer because Medicaid doesn’t pay enough to cover the cost of providing care.

    2) The rest of ObamaCare can rightly be seen as a means to allow for the Medicaid expansion.

    Understand, when we see the middle class being forced to sacrifice their quality of care and pay higher premiums with higher deductibles, that isn’t because the system is flawed. The system was designed by the Obama administration to force the middle class to sacrifice their quality of care and eat the costs of extending Medicaid to more poor people. In that sense, ObamaCare was not a failure. It’s working as intended.

    1. Obamacare was a way to tax people for universal health care without calling it a tax (except at the Supreme Court).

  6. The American people were hoodwinked* into thinking it was about making things better for average working people. People were afraid of losing their coverage for changing jobs or having a preexisting condition, etc., so they thought ObamaCare was meant to alleviate those fears. It wasn’t. It was intended to take the pressure off the providers and insurers that Medicaid was putting on them–and letting the Obama administration expand Medicaid to more poor people besides.

    Until we see Medicaid eligibility rolled back, we’ll know that the real cause of the problem isn’t being addressed.

    *Not that ObamaCare was popular when the ACA was passed. It wasn’t. Just certain parts of it were, e.g., the prohibition against discriminating against people with preexisting conditions.

  7. “…Because of this federal largesse, Medicaid has grown astronomically, becoming the single biggest ticket item on virtually every state budget. But it’s not just expensive ? it provides lousy coverage, too!”

    “CMS said 9,539 physicians who had accepted Medicare opted out of the program in 2012, up from 3,700 in 2009. That compares with 685,000 doctors who were enrolled as participating physicians in Medicare last year, according to CMS, which has never released annual opt-out figures before. Meanwhile, the proportion of family doctors who accepted new Medicare patients last year, 81%, was down from 83% in 2010, according to a survey by the American Academy of Family Physicians of 800 members. The same study found that 4% of family physicians are now in cash-only or concierge practices, where patients pay a monthly or yearly fee for special access to doctors, up from 3% in 2010. A study in the journal Health Affairs this month found that 33% of primary-care physicians didn’t accept new Medicaid patients in 2010-2011.

    Read more at:…..ue-de-rugy

    1. Ken, you should check out glibertarians and the reasonoid sites.

  8. Click on my name, Shikha. Feel the power of the Glib side.*Force pimp smacks Shikha*

  9. Words not found in this piece: “immigration” or “immigrants.” 2014: 42 percent of new Medicaid signups are immigrants, their children

    1. The immigrant aspect also occurred to me.

      Strange how Shikha didn’t think to share these facts, with all her interest in immigration.

  10. So my liberal friends on fb have been posting articles like:

    New Yorker: The Shameful Republican Assault on Medicaid
    Yahoo Finance: Republicans Eye Medicaid Cuts to Help Finance their healthcare plan

    I’m not well versed in Medicaid and Medicare issues, but my first reaction is this has got to be leftist propaganda and some facts are being twisted or omitted. So, I tried to research the counter to these stories and can’t find much. That is how I found this article. How do all of you folks educate yourselves on these matters to combat the leftist propaganda, e.g. conservatives hate the poor, the blacks, etc?

    1. Some good, frequently-updated right and/or libertarian sites that will link to such stories, and either debunk them or lead you to articles or commentary that will:

      1. Thank you! I enjoy The Federalist quite a bit. Not familiar with the other two.

        How do you respond to one of the most common accusations: Republicans are anti-poor. I know it’s a very broad swipe but is there a simplistic reply that would make them pause?

        1. “. . . please consider that people can disagree over the efficacy of means without disagreeing over the desirability of ends.”

          — Don Boudreaux

        2. Point to them that the poorest (and sometimes most violent) parts of the United States have historically usually been governed by Democrats.

          They seem to think because you question statism you’re against the poor and children. The irony, of course, when you look at the results progressivism has done little to help those demographics.

          The whole GOP are ‘anti-poor’ assertion always stuck me as projection.

          1. Yet, it seems like the Dems are proposing plans and spending to help the poor and the GOP is the one shown as voting against them. So it’s easy to point to the GOP as the party that opposes the poor and helpless.

            1. Of course libertarians are anti-poor. We would be pleased to see everyone as rich as possible.
              What kind of psycho really wants to keep people poor? We disagree with right and left about the efficacy of proposals to “end poverty” not “let’s keep people poor.” If you look at an issue such as minimum wage, you see the results would be to raise the wages of some while condemning others to unemployment and poverty because their services are no longer valuable to an employer at the new minimum wage level.

              1. So why are Republican politicians so awful at responding to the Dems when they’re unashamedly leveling these charges in the middle of their press conferences and interviews?

                I lost count of the number of times that a Dem was being interviewed and bluntly accused the GOP of being against the poor, the working class, minorities, etc. and a Republican immediately follows that interview but utterly fails to respond to the accusations. Pathetic.

        3. The Foundation for Economic Education is also a good resource

  11. What shouldn’t take a lot of courage is firing someone who opposes free speech. And yet here you are still writing.

  12. I could do without the pictures of dead kids in the stupid-ass clickbait ads, Reason. For fuck’s sake.

  13. My last month paycheck was for 11000 dollars… All i did was simple online work from comfort at home for 3-4 hours/day that I got from this agency I discovered over the internet and they paid me for it 95 bucks every hour… This is what I do


  14. Most of us want to have good income but dont know how to do that on Internet there are a lot of methods to earn huge sum, but whenever Buddies try that they get trapped in a scam/fraud so I thought to share with you a genuine and guaranteed method for free to earn huge sum of money at home anyone of you interested should visit the page. I am more than sure that you will get best result. Best Of Luck for new Initiative!

  15. I would like to take this space to congratulate Shikha Dalmia on writing a solid article about how statism makes things ineffective. I’ve seen her as a hit-and-miss writer (her article on PM Modi’s demonetization scheme was excellent for instance), and in that vein it would be unfair of me to complain about the misses without recognizing the hits.

  16. I’m not sure i’de consider a “reputable source” to be a think tank with political bias. Also if the Block grant thing was to work it would need to be tied to healthcare inflation, usually between 3-5 % versus general inflation usually about 3 %. So the cost of healthcare would be progressively more than the grant would cover. Healthcare would be twice what your grant would cover based on inflation over time. Most Americans would still not be able to afford quality full coverage health insurance. The block grant doesn’t solve the healthcare problem. Only the part of the money problem and then only slowly over a period of time. We can do do better.

    1. I know this has been discussed before, but HEALTH INSURANCE and HEALTH CARE are not the same thing. This is the problem with all government run heath insurance systems, everywhere in the world.

      If you control costs by limiting reimbursement to providers while private insurance or care is still available, providers begin to avoid government patients and migrate to private patients. If you eliminate the private insurance and private care then providers migrate to other places and you can’t staff your system. You can do what the UK does and import foreign doctors who will accept your low compensation to get out of the poor conditions in their home country, but that isn’t actually viable over the long term.

      The federal government needs to get out of the insurance business.

  17. I’m not sure how to approach this article. An old saying comes to mind “Statistics don’t lie. Statistician do.” Now I’m not saying the author is deliberately lying, but may be comparing apples to oranges in some cases. For example the phrase “”Gruber compared the health outcomes of both groups and concluded that Medicaid “generated no significant improvement in measured physical outcomes” for diabetes, high cholesterol, high blood pressure, and even mortality rates.”” I think there are more than two groups here, which would invalidate much of the basis for this article. Groups include (1) those who have access to Medicaid and don’t use it. (2) those who have access and actually use it. (3) Those who are not on Medicaid and utilize clinics, hospital emergency and other types of health care. (4) Those not on Medicaid and don’t use any health care. I don’t know about you but to me it looks like this article is mixing up their fruit. On a separate issue, since the average life expectancy of American’s is declining (even those with private care and even though the US has the most expensive health care in the world) it would be interesting to compare the selected diseases listed above to private care groups.

  18. Medicaid expansion is probably the most popular aspect of ACA. It probably won’t go anywhere, although the GOP might make tweaks here and there.

    When a house is built on sinking sand, you don’t have to engage in argument with people who INSIST it won’t fall. You just fold your arms and say “just watch”. Almost everything the law’s critics warned about the insurance mandate part became true – the glitchy rollout, coverage affected by mishandling information, the death spiral, loss of insurance coverage that you liked etc.

    The medicaid expansion will endure longer because he feds can print more money and kick the problem down the road. But given just how many people can sign up for it, at some point small to mid sized states will starting feeling the pain. You can’t forget about millions of people on medicare, who might have to share resources with hordes of people if hospitals start taking medicaid patients.

  19. I heard an interesting free market approach that insurers were successfully creating before Obamacare crushed it (specifically in California).

    30 year old Jane doe is offered coverage for 5000 in premiums a year with all the state mandated benefits (to be sure tons in Cali). They also offer her “guarantee to cover at any point in the year” (ie Pre existing conditions) for exactly 1/5 the cost of her quoted premium. So for 1k she gets no benefits but if she does get cancer, she purchased the “insurance” to buy the given policy.

    For younger poorer people over the 100% threshhold this would be a great option as well as the dreaded “pre existing conditions”. Jane would pay her 2 $100 visits to the minute clinic and be guarenteed coverage in case the need did arise. She would also not go to an optomolist for her “dry eyes” or a podiatrist for expensive insoles bc she happened to favor high heels. These things she would pay for and thus make better choices. I believe too if this grew the pharmaxeuticL companies and device companies would lose such massive consumers that prices for things would inevitably fall.

    Government would surely mess such system up by trying to create it but here is wishing we could all start from scratch!!!

  20. “Medicaid is arguably the civilized world’s worst health insurance program.”

    But that is nothing compared to calling Medicaid an insurance program.

    “Medicaid’s massive footprint would be acceptable if the program offered quality care at affordable prices.”

    No, it wouldn’t. A massive footprint consisting of the government robbing Peter to buy Paul some “free” healthcare is an abomination. A small footprint would only be marginally better.

    JHC Reason editors why do you keep printing this twit? She’s not merely non-libertarian, she actively packs her arguments with plainly anti-libertarian assumptions. She makes Suderman look positively Rothbardian.

    But maybe that’s the point.

  21. Most of us want to have good income but dont know how to do that on Internet there are a lot of methods to earn huge sum, but whenever Buddies try that they get trapped in a scam/fraud so I thought to share with you a genuine and guaranteed method for free to earn huge sum of money at home anyone of you interested should visit the page. I am more than sure that you will get best result. Best Of Luck for new Initiative!

  22. Ryder . I just agree… Amanda `s story is something… last monday I got a top of the range Alfa Romeo from having made $5127 this last 5 weeks and-in excess of, 10k lass-month . it’s by-far my favourite-job Ive ever done . I started this four months/ago and pretty much straight away started bringin home over $74, per-hour . hop over to this site
    ??????O????????????-+__+_+_+ -*-*-*-*-*-*???????-

  23. RE: Reforming Our Awful Medicaid Program Requires Massive Doses of Political Courage
    Republicans don’t know how to roll back Obamacare’s massive expansion of this lousy program.

    Here’s an idea.
    Repeal all of Obamacare and de-regulate the healthcare industry so the market place can lower prices.
    Oh wait.
    That makes sense.
    My bad.

  24. “This arrangement would give patients a good reason to shop more prudently.”
    So, just going to ignore that this almost never happens and that hospitals are notoriously tight-lipped with giving out cost estimates before treatment?

    1. Let’s also not forget that (while there are exceptions) the vast majority of people who receive Medicaid benefits do so because they have a proven track record of being poor decision makers.

      It’s practically axiomatic – you do not end up on public assistance because you are competent at making meaningful (health, wealth, etc.)decisions well.

  25. If and when the progressives or Chavistas get back into power, they will focus on drastically expanding Medicaid and forcing everyone onto it. Count on it. And no, Obamacare will morph into something even more insane that it already is, but it’s not going away. The GOP lacks the political will, and libertarians lack the ability to increase their ranks and provide a viable alternative to Republicrats, but they can whine.

  26. Well regardless, people need health care. States like Utah have been dragging a dead horse trying to expand. If people are having problems, it’s okay to talk to experts like Don’t go through the government, talk to someone who knows the ins and outs of the program and who actually want to help people who need it.

Please to post comments

Comments are closed.