Medicaid is in the news every day. People, politicians, policymakers, providers, and payers are expressing points of view ranging from kill it to expand it. Unfortunately, most people are not well informed about what Medicaid is. I would like to help on the informing part of the issue by describing what it is, how it works, who qualifies, how much it costs, and some policy choices I see. This is a very complex subject, so I will lay it out in bite-sized posts. Consider this first post as a backgrounder. If you want to dig deep into the subject, I recommend visiting The Center on Budget and Policy Priorities. They have done a good job of providing nonpartisan research on Medicaid issues.
To put Medicaid in perspective, it is important to appreciate its enormity. For fiscal year 2016, Medicaid spent $553 billion, more than a half-trillion dollars. Nearly one-third of the spending was in California, New York, and Texas. Actual expenditures ranged from $500 million in Wyoming to $80 billion in California.
President Lyndon B. Johnson signed a bill into law in 1965 which created two new government programs: Medicare and Medicaid. Both programs are overseen by the Centers for Medicare and Medicaid Services of the Department of Health and Human Services. Medicare is a the federal health insurance program for people who are 65 or older. It also includes certain younger people with disabilities, and people with permanent kidney failure requiring dialysis or transplants. There are four main parts to Medicare. Medicare Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. Medicare Part B covers certain doctors’ services, outpatient care, medical supplies, and preventive services. Medicare Part C is offered by private companies which contract with Medicare to provide Part A and Part B benefits. Medicare Part D provides prescription drug coverage. If this sounds complicated, it is simple compared to Medicaid.
Medicaid is a public insurance program which provides health coverage to low-income families and individuals, including children, parents, pregnant women, seniors, and people with disabilities. Nearly 10 million low-income seniors and people with disabilities, often dubbed as “dual eligibles”, are enrolled in both Medicare and Medicaid. The part about Medicaid not well understood is the funding is split between the federal government and the states. Each state operates its own Medicaid program within federal guidelines. Because the federal guidelines are broad, states have a great deal of flexibility in designing and administering their programs. As a result, Medicaid eligibility and benefits vary widely from state to state. A number of states have gotten waivers allowing them to innovate, reduce costs, and increase quality of care.
Medicaid is really important because it covers roughly one out of five Americans. If America is going to compete with much larger countries such as India and China, it needs to have a healthy population. The problem is the high cost of American healthcare, between 50 and 100 percent higher per capita than other countries. As I detailed in Health Attitude, this is not because our healthcare is 50 to 100 percent better, to the contrary. If the Federal government reduces funding for Medicaid, which seems likely, there are five choices the states have to cope. I will discuss more in future posts.
Raise taxes or reduce budgets in other areas
Reduce Medicaid benefits not required by Federal law
Limit coverage for high-cost enrollees
Provide healthcare education and promote personal responsibility
Reduce waste, fraud, unnecessary tests and procedures, and reimbursements to providers
To put #5 in perspective, the cost of Medicaid is approximately a half-trillion dollars per year and growing. The estimated cost of unnecessary tests and procedures is somewhere between one and three times that much. The challenge is reducing unnecessary tests and procedures takes money from special interest groups, which have extremely powerful lobbying. Lack of tort reform generates billions of dollars for plaintiff lawyers and hundreds of billions for unnecessary tests and procedures. The pharmaceutical industry has virtual control of congress and can set drug prices at any level they want. In other words, the problem is not just Medicaid. The problem is the cost of delivering healthcare. Read more about Medicaid and Medicare policy choices in Health Attitude: Unraveling and Solving the Complexities of Healthcare.
