More on Medicaid

The Cato Institute’s Michael Cannon and I published pieces over at Kaiser Health News presenting on Medicaid and safety-net care. KHN bills this as a debate. It’s more a chance to see our starkly different perspectives. Readers can decide which viewpoint they find more compelling.

I would emphasize a few points. These aren’t new points, but they bear repeating.

There is no Medicaid fiscal crisis. People lump together Medicare, Medicaid, and Social Security into one bucket, which we label the “entitlements crisis.” The first, Medicare, is on a truly frightening economic and political expenditure path—a path intimately related to our overall rise in health spending. Overall expenditures for Medicaid and Social Security are much more manageable. Sure, Medicaid expenditures are growing, not because the program is overly generous or inefficient, but because the need for these services has grown. Per person, Medicaid expenditures are markedly below the cost of private coverage. These expenditures have been rising at a lower rate than the rest of the medical economy. This relatively restrained spending trajectory is expected to continue over the coming decades.

The federal government pays almost 60 percent of the Medicaid tab. The Congressional Budget Office projects that combined federal spending on Medicaid, CHIP, and the new expenditures for health insurance exchanges will rise by about 2 percentage points as a share of GDP by 2035. These are not frightening numbers. Medicaid may be the most disciplined sector of our health care economy.

Medicaid brings real burdens on state governments, which are poorly-equipped to bear the fiscal load. The absolute worst way to address these burdens is to shift costs and risks onto these very governments. Republican governors seeking to block-grant the program are handing a ticking bomb to their successors. The block grant mechanism also provides dangerous plausible deniability to both states and the federal government for the resulting service cuts.

The sound bite case for block grants is that governors need greater flexibility. How they would use this flexibility is another matter. Medicaid is already flexible. According to the Center on Budget and Policy Priorities, about 60 percent of state Medicaid spending consists of expenditures to cover people or to reimburse services that are not required under federal law. Given Medicaid’s low per-person cost and its relatively restrained projected cost growth, there’s little room to comfortably cut.Safety-net services are already shoestring operations. Under-funded and stressed, they have many shortcomings. I’m sure there are many ways to improve them. There is no way to meet the Ryan Plan’s extreme spending reduction targets without shifting costs and risks onto the states, covering markedly fewer people and services, or further underpaying Medicaid providers.

Some commentators argue that these changes would not hurt the poor. On one version of this argument, expanded Medicaid merely “crowds out” private coverage that people would have otherwise bought. So constraining Medicaid eligibility won’t be as painful as liberals believe. Of course, public insurance displaces some private coverage. The best analyses, such as CBO’s, address these concerns. These analyses indicate that restricting Medicaid eligibility would result in the loss of insurance coverage for many, many people. Analyses of prior Medicaid and CHIP expansions, by myself and others indicates that such coverage significantly reduced families’ out-of-pocket expenses, particularly when the eligible individual has a costly injury or illness. Reversing such policies would bring opposite effects.

Medicaid and related safety-net services are being hammered right now. And the people directly affected are conspicuously marginalized in deciding what to do about it. It’s sickening to see the contrast between policy debate about health care for seniors and policy debate about the low-income, aged, and disabled people who rely on Medicaid.

The Ryan budget plan radically proposed to turn Medicare into a defined-contribution voucher program. That’s a terrible proposal. Yet from the jump, it sought to treat the elderly rather gingerly. It exempted Americans over the age of 55–who just happen to provide much of the Republican electorate. That didn’t work. As it became clear that seniors hate this idea, proposed Medicare vouchers were put into the deep freezer.

Not so regarding actual and proposed cuts to both Medicaid and safety-net services. Many of these cuts are happening right now due to state policy decisions and changes to the federal budget. They are not in the deep freezer. In part this contrast between Medicare and Medicaid reflects the obvious political calculation among conservative and moderate lawmakers. In part it reflects politicians’ and commentators’ personal distance from the issues and the populations in play.

How many of the people who really matter, politically, have sat on either side of the counter in some welfare office, county hospital, or public health clinic? People who press the need for an “adult conversation about entitlements,” tend to be conspicuously comfortable and safe. They are not 81-year-old parents gutting it out to care for a disabled son. They are not 32-year-old single mothers bringing their children along as they clean someone else’s home. They are not caregivers for an intellectually disabled adult trying to find a dentist after their state Medicaid program drops dental coverage.

There’s growing human pain out here, but it’s happening far away from the people who most matter in deciding what we might do about it.

Comments

  1. says

    Whether you call it a “fiscal crisis” or not, Medicaid is in crisis. The Federal Government has simply been doing what you criticize Ryan’s plan for doing – offloading the costs on to the states. Every governor (and every county executive, for that matter) knows that medicaid costs are killing his or her budget. The big money is going to long term care costs. Medicare doesn’t cover them, and too few people privately insure. Medicaid eligibles wind up in nursing homes as wards of the state and middle class seniors are advised by their attorneys to spend down their assets in order to become medicaid eligible. There are lots of things wrong with medicaid, and many ways to address some of the inefficiencies. But until someone figures out what to do with the big elephant in the room, LTC costs, I expect to read little but the kind of obfuscation in your article. And don’t tell me about the CLASS Act, which will do less than nothing to relieve this problem. That one was a pure fraud. If Ryan has done nothing else, he has at least pointed out the irrationality of continuing down the current path.

  2. kathleen says

    One thing that would help would be for Long Term Care insurance to be made tax deductible, for everyone, to provide an incentive to purchase this important coverage. The current financial advice is to avoid this purchase unless you have assets to protect, because Medicaid will take over such costs, and indeed, that is the financial incentive.

    To provide a tax deduction, or maybe even a tax credit, for LTC premium payments would save taxpayer money in the long run, while rewarding people who take responsibility for their own care, and as with student loan interest, this tax benefit should not be limited to those who itemize their deductions.