Reforming Medicaid

In my last blog I discussed the inconvenient truth that expanding Medicaid does not save lives. It doesn’t even assure one of better health care. Study after study has shown that having Medicaid insurance may be worse than having no insurance at all.

The reasons for this largely boil down to one word – access. Without access to health care, any insurance is just a piece of paper; as useless as a discount coupon for bottled water to a man wandering in the desert. Unless you can access the health care you need you will be no better off than you were before.

Therefore, the obvious question is, “How can we improve Medicaid?

There are many ideas that have been put forth already. Before we discuss some of them, however, we need to understand what’s right and wrong with Medicaid.

If an insurance company came out with a new product that promised to provide health care with no deductibles, no co-payments, no primary care approvals, no limits on coverage, and no premiums to pay, you would probably say, “It’s too good to be true.” Yet that’s exactly what Medicaid looks like – on paper. It is free to those who qualify, does not require deductibles or co-pays, has no ceilings, and doesn’t require approvals. But nobody wants it.

The reason is simple. The fees paid to doctors are so low that few doctors will accept this insurance. Those that do usually practice a routine of restricting the number of Medicaid appointments so that better-paying patients are seen first. The result is long waits for an appointment even from those who will accept Medicaid. Medicaid patients figure this out quickly and respond by using hospital emergency rooms for their primary care needs even though the waiting times there can be several hours. At least they know they’ll be seen sometime the same day. In my last blog I referred to an Oregon study that showed Medicaid patients were 40% more likely to use hospital emergency rooms than those who had no insurance at all.

The solution to this problem seems obvious. Pay the doctors more! There is no question this would help solve the problem but the political challenge of finding the funds to pay for this is a more daunting task. So let’s talk about other solutions.

My suggestion is to let the patients pay more. This may seem obvious, too, but it is really more complicated. First, you must change the laws governing Medicaid (and Medicare) that prohibit the doctors from accepting higher payment from the patients than these programs pay. Today an uninsured patient can go into nearly any doctor’s office and negotiate a discounted fee-for-service rate to see the doctor. Discounts may be as much as 50% off for cash patients. But Medicaid (and Medicare) patients are prohibited by law from making any similar arrangements with their doctors.

If the laws are changed, I suggest letting patients negotiate with their doctors to pay slightly more than Medicaid pays. Some doctors would agree to accept a10% co-pay above what Medicaid pays; others would accept 20% or more. Doctors could even advertise their rates to attract more Medicaid patients – which they would do if the fees were higher. Many Medicaid patients would gladly pay 10 or 20% more to avoid the long waiting times at hospital emergency rooms. The beauty of this solution is there would be no increase in the cost to the taxpayers. This should gain bipartisan support in Congress.

There are other solutions to Medicaid. Former Florida Governor Jeb Bush initiated a pilot program in 2006 in five counties with a population of nearly three million people and a Medicaid population of 290,000. These Medicaid enrollees were allowed to choose among competing, private managed-care plans, with varying provider networks and benefit packages as long as they cover mandatory benefits. Also, enrollees were given incentives to manage their own health and to encourage healthy behavior.

Five years later the results of this study showed higher patient satisfaction at a lower cost than traditional Medicaid. These programs offer better care and access to specialists has improved. One estimate is that this pilot program is saving $161 million per year for the state of Florida. Imagine if this were multiplied by the remaining counties in Florida and the other 49 states! One estimate is that the program would save $91 billion annually while improving health outcomes and achieving enrollee satisfaction scores of 83 to 100 percent.

The State of Indiana has also tried new innovations in Medicaid. In 2007, Indiana Governor Mitch Daniels established The Healthy Indiana Plan to provide low-income families with consumer-driven health plans, coupled with personal health accounts called a Power Account. The purpose was not only to boost health coverage but to encourage enrollees to take a more active role in their health care decisions.

Those low-income families uninsured for six months or longer were enrolled in the program but asked to make monthly contributions of 2 to 5 percent of their income (up to $92). The state contributed $1100 to the account, which covers nearly three-quarters of the deductible. Preventive care is covered by the plan on a first-dollar basis (no cost to patient). Once the $1500 deductible is met there are no other costs to the patients.

About 45,000 Indianans participated in the program and 90 percent made their contributions. Satisfaction was measured at 98 percent. However, the Obama administration decided not to renew the federal waiver required to continue the program.

John C. Goodman of the National Center for Policy Analysis has other ideas. One would be to abolish Medicaid entirely and use the money instead to subsidize the integration of poor patients into the same healthcare system everyone else uses. He proposes refundable health insurance tax credits of $2000/person and $8000/family of four. These would not be cash payments but rather a voucher for purchasing health insurance. With these vouchers, low-income families could purchase health insurance from traditional private insurers. Just in case you’re worried that wouldn’t be enough, he suggests keeping traditional Medicaid available until the private market proves they can do better. He thinks most people would choose the private alternative.

Goodman has other ideas. He proposes a “Health Stamp” program patterned after the food stamp (SNAP) program currently in use for purchasing food for low-income families. This would empower these families to purchase their health care on a level playing field with other patients. Just as those who purchase their food with food stamps do so in the same grocery stores as other consumers, these families would purchase their health care from the same doctors and hospitals that accept traditional insurance.

There are over 60 million Americans currently purchasing their food with food stamps. They are welcome in every grocery store because their stamps are as good as cash. They make their purchases based on the limits of their resources but the prices are transparent and therefore they can make informed decisions. They can spend more of their own money if they can afford it. The same would be true of health stamps. This would insure that the poor can compete for health care resources with all other buyers of care.

All of these proposals would improve access to health care for low-income families. They all level the playing field for the poor by reducing or eliminating the disparity in physician payments between Medicaid patients and other patients. Doctors don’t discriminate against Medicaid patients because they don’t like them; they discriminate because their time is unequally compensated in our traditional Medicaid system. Doctors, like all business owners, must make sure they can pay their bills if they are to continue providing health care for anyone. A level playing field for the poor would insure that Medicaid patients would be just as welcome in doctor’s offices as all other patients.

Improved access to care would then achieve improved health care outcomes. That should be our real goal in reforming health care; not just expanding the number of people with health insurance.

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