Medicaid Innovations to Improve Care Lower Costs


America spends a lot on healthcare. According to the Centers for Medicare and Medicaid Services (CMS), in 2015 National Health Expenditures (NHE) rose 5.8% to $3.2 Trillion, or $9,990 per person and accounted for 17.8% of the Gross Domestic Product (GDP). (2016 data is still unavailable)

The breakdown of the 2015 NHE is as follows:

  • Medicare spending grew 4.5% to $646.2 Billion – 20% of NHE
  • Medicaid spending grew 9.7% to $545.1 Billion – 17% of NHE
  • Private health insurance spending grew 7.2% to $1.072 Trillion – 33% of NHE


What has been the impact of ObamaCare on National Health Expenditures?

The Affordable Care Act (ObamaCare) was passed in 2010 with the promise that it would “lower the cost curve” of NHE. In fact, the cost curve has accelerated.

The above graphic shows the annual growth of National Health Expenditures was declining in the years 2002 through 2009 (before passage of ObamaCare) and leveled off at about 3.8% from 2009 through 2013 (before implementation of ObamaCare). But since the implementation of ObamaCare, the rate of growth of NHE has escalated to 5.8% in 2015 and CMS now projects a growth rate of 5.6% for the rest of the next decade.

This graphic shows clearly that ObamaCare has failed to bend the cost curve down as President Obama promised. Just one of many broken ObamaCare promises.

What can be done to get more value for the dollars spent on Medicaid?

The main reason that ObamaCare failed to bend the cost curve down is the growth of Medicaid spending. Roughly speaking, ObamaCare added about 20 million Americans to the rolls of the insured. Most of this growth came from Medicaid expansion (15 million). This is reflected in the growth of Medicaid spending (9.7%) which exceeds both Medicare and private insurance growth. The American taxpayers now pick up the tab for $545 Billion to pay for Medicaid.

Medicaid is a poor value providing poor access to healthcare and only between 20 and 40 cents on the dollar by some studies. It has the poorest healthcare outcomes of all, even poorer than those who are uninsured according to an ongoing study called the Oregon Healthcare Experiment. With such a large expense and such poor outcomes, something needs to be done about Medicaid.

Justin Haskins and Michael Hamilton of the Heartland Institute suggest the government should create Health Savings Accounts for every Medicaid patient and put $7,000 in them every year. With this money the poor would purchase private health insurance and pay for the cost of prescriptions, copays, deductibles and other related medical expenses. Enrollees could share that $7,000 with a sick spouse, sibling, parent or child. This would spend $511 Billion of the $545 Billion annual expense.

The average annual premium last year for an (overpriced) Bronze plan on the ObamaCare exchanges was about $3,100 for a 30 year-old, $3,500 for a 40 year-old, $4,900 for a 50 year-old, and $7,400 for a 60 year-old. Therefore, all but the oldest eligible for Medicaid could easily afford to purchase private health insurance with some left over for other medical expenses. This would improve their access to healthcare and undoubtedly their healthcare outcomes, too.

Once they reach 65 they will be eligible for Medicare. For those between 59 and 65 who need more help, the government could use the remaining $34 Billion to assist them as needed. Pre-existing conditions would be covered for a period of transition until a determined sunset date. That would assure continuous coverage without penalty unless people failed to purchase a private health insurance policy.

The beauty of this plan is that it puts the patient back in control of their healthcare expenses and gives them access to private physicians and hospitals. They can grow their HSA accounts by choosing wisely when and how to spend their healthcare dollars. This incentivizes patients to make good healthcare and lifestyle choices because the money saved is their own. Perhaps with these changes we can actually “bend the cost curve” down while improving the quality of healthcare for the poor.

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