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Medicaid needs overhaul, not expansion

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By Gary D. Alexander
Thursday, Feb. 13, 2014, 8:55 p.m.

By striking down a provision of the Affordable Care Act, the Supreme Court ruled in favor of Medicaid flexibility. Rather than upholding the law's mandate requiring all states to make Medicaid a default health-care plan for more able-bodied Americans above the poverty level, the high court sided with the states that want to reform the single largest health-care and welfare program in the country.

President Obama might not consider Medicaid a broken health-care model, but the facts do. Its low reimbursement rates have not only diminished the number of physicians and specialists willing to accept new Medicaid patients but also force commercial carriers to raise prices to offset provider losses. Studies consistently rank Medicaid at the very bottom when it comes to delivery of health-care quality relative to Medicare and commercial coverage.

Meanwhile, an Oregon study found that Medicaid enrollees are more than 40 percent more likely to use emergency rooms than those without insurance, suggesting that the program holds no promise of bending the cost curve.

Medicaid expansion poses other unintended consequences. Many economists warn that lowering eligibility standards incentivizes “crowding out,” whereby individuals who would have retained their private-sector insurance without Medicaid expansion will move into the means-tested program. These states will also experience a high level of “churning,” as individuals shift back and forth between Medicaid and subsidized policies sold through the exchanges. Either way, expanding Medicaid does less to solve the uninsured problem than shift coverage among the already insured, creating headaches and costs for states and insurance companies.

Moreover, the program side that serves the elderly has a bias toward the costliest care settings — institutions and fee-for-service. Medicaid makes it easier to stick a loved one in an institution than to care for that person at home.

In essence, Medicaid isn't broken because it provides health-care services to millions of poor and indigent people. It's broken because it doesn't do it well and doesn't focus on its core obligation to those truly in need.

States are exploring creative Medicaid strategies, confirming the imperative of rethinking the status quo, including ACA-styled expansion. Arkansas and Iowa, for example, have received permission from the Obama administration to use Medicaid money to purchase private health insurance for uninsured residents who would qualify under the ACA expansion. Meanwhile, Michigan is introducing cost-sharing features when it opens up its conventional Medicaid program to the “expansion” population in April.

The proposed plan by Pennsylvania Gov. Tom Corbett goes even further. While offering a private-coverage option for the state's expansion population, the Corbett reform would also introduce modest premiums for Medicaid enrollees. Perhaps more important, it would require able-bodied recipients to at least search for work and make their benefits comparable to those of working Pennsylvanians. Moving people back into the workforce will do more for their health than a Medicaid card.

Yet until the federal government understands the difficulty of managing Medicaid at the state level — and allows the states to function as the laboratories of democracy — the most promising larger-scale reforms that empower individuals to economic independence and bend the cost curve will remain out of reach.

Gary D. Alexander, Pennsylvania's secretary for public welfare from 2011 to 2013, is a consultant.



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