Webster’s dictionary defines demagoguery as “appealing to the emotions and prejudices of people in order to gain political power.” This accurately describes the Democrats in Congress as Republicans discuss Medicaid reform.
Medicaid is badly in need of reform. There is no doubt of that. ObamaCare greatly expanded this second-class healthcare by about 15 million Americans bringing the total enrollment numbers in 2017 to 74.6 million according to Medicaid.gov. One in five Americans is on Medicaid.
The cost of Medicaid to the American taxpayer was $545 billion in 2015, a growth of nearly 10% over 2014. The rate of growth slowed down in 2016 but the cost grew to $574 billion. Projections for 2017 are for slower growth in federal spending but increased growth in state spending.
ObamaCare can be fairly described as mostly an expansion of Medicaid. This change in the healthcare law expanded the number of insured by 20 million, but 15 million of those were enrolled in Medicaid. This happened for two reasons:
- Expanded eligibility in those states agreeing to Medicaid expansion
- Mandates that forced previously un-enrolled eligibles to enroll to avoid a tax
Republicans have been working to reform Medicaid in the states for the last ten years. The modern era of Medicaid reform began in Indiana in 2007 under Governor Mitch Daniels who signed the Healthy Indiana Plan (HIP) that introduced consumer-directed insurance options, including Health Savings Accounts (HSAs). Two years later Rhode Island applied for a Medicaid block grant that gives states a fixed sum of money in return for Washington’s regulatory forbearance.
According to The Wall Street Journal editorial board, both programs were designed to improve the incentives to manage costs and increase upward mobility so fewer people need Medicaid. Over the first three years, Rhode Island saved some $100 million in local funds and overall spending declined about $3 billion below the $12 billion cap. The fixed block grant encouraged the state to innovate, such as reducing hospital admissions for chronic diseases or transitioning the frail elderly to community care from nursing homes.
Rhode Island joined the ObamaCare Medicaid expansion but has held “per member, per month “ spending – the category of block grant adopted by the House – to a minus 0.5% trend over the last five years without cutting eligibility or services. Notably, that measure excludes patients added under Medicaid’s ObamaCare expansion, who tend to be healthier and thus require less spending than the typical enrollee. As a result, overall per member, per month costs are falling 2.5% a year.
Even far-left liberal New York Governor Andrew Cuomo has accepted the block grants. After a scandal where federal investigators concluded the state had systematically manipulated Medicaid payment formulas to generate federal payola for more than two decades, Cuomo agreed in 2014 to a Medicaid waiver that caps “global spending” at the growth rate of long-term healthcare inflation (3.6%).
Vice President Mike Pence, formerly Governor of Indiana, updated the HIP plan with a reform called HIP 2.0 in 2015. The architect of this, Seema Varma, is now administrator of Medicaid nationally. Their insight was that able-bodied, working-age adults living near the poverty level need a different type of coverage than do Medicaid’s most vulnerable beneficiaries.
In other words, those adults with the capacity to work should be incentivized to do so and ultimately to get off Medicaid. Medicaid was never really intended for such people until ObamaCare brought them into the eligibility ranks.
The HIP plan requires enrollees to pay 2% of their income to an HSA. The first $2,500 is picked up by the state, the money rolls over, and unused consumer contributions are refunded pro rata when they leave HIP 2.0. This plan is working well in Indiana.
According to a recent audit by the Lewin Group, 70% of Hoosiers in HIP 2.0 make their regular contributions even though 85% of them are below the poverty level. If they fail to keep up their contributions they are bounced back to basic Medicaid. HIP 2.0 also is paired with skills training, job searches and career counselors to help people move from public assistance to the workplace.
These kinds of reforms are currently happening in 21 states, showing that programs with incentives to save money and provide training and job searches can lower costs and move people off the Medicaid rolls onto employer-provided or private insurance, saving money and providing improved healthcare.
The Wall Street Journal editorial board says this progress is being ignored by Democrats:
“This reform honor roll could continue: the 21 states that have moved more than 75% of all beneficiaries to managed care, Colorado’s pediatric “medical homes” program, Texas’s Medicaid waiver to devolve control to localities from the Austin bureaucracy. But liberals and the media ignore this progress as they try to frighten the GOP into doing nothing.”
Finding ways to improve Medicaid – and ultimately to move people from government healthcare to private insurance – is the next important step in fixing the problems with our healthcare system that have only been exacerbated by ObamaCare. This is the Senate’s chance to make that step.