As two great philosophers have noted, itâ€™s odd to see Republicans touting low Medicaid reimbursement rates as an argument against health reform. These arguments make little sense on the policy merits. These arguments make little sense given the political history of health reform. These arguments make little sense when one considers Republican governors desire for greater leeway in cutting Medicaid budgets, which would likely make these problems worse. Forbes Avik Roy and the Atlantic‘s Megan McArdle are right, however, that Medicaid often pays below average cost, sometimes below marginal cost, too. Donald Taylor and Greg Anrig have advanced creative proposals to address these issues by partially or wholly federalizing Medicaid.
In some states, a credible case can be made that an empty bed is more profitable than a bed occupied by a Medicaid patient. (There is an option value to the available empty bed, among other things, that must be considered in the mix.) There’s much argument about the specifics and the potential for Hollywood-style accounting across different hospital units. Yet the basic argument has disturbing validity. (Primary care raises related but different reimbursement concerns that may hasten patient migration into Federally Qualified Health Centers.)
At many academic medical centers, profit margins are determined by the extremes of the distribution. The weird thing is: The most and least-profitable patients are often people with the same conditions. The complicated cancer patient with great insurance is a profit center. His medically identical counterpart on Medicaid (or, of course, who is uninsured) may be a financial disaster. This disparate pattern makes the access dilemma even more complex and divisive than it would otherwise be.
Some states have structured Medicaid to provide a more viable economic foundation of safety-net care. Here in Illinois, we’ve had a set of stunning bipartisan governance failures that fail to do that, possibly with worse to come. The blocking and tackling of public management, budgeting, etc. have been done very poorly.
I wish there were greater political penalties for such failures. Bad governance reinforce a generalized, enervating cynicism about the value and the possibilities of government. The resulting harms do not seem to produce effective accountability or effective institutional reforms that would more reliably produce better outcomes. At the national level, too, we live in a very partisan moment in which the actual craft of government is not particularly understood, rewarded, or valued. That’s really discouraging.