By and large, the Department of Health and Human Services blocks states from curtailing eligibility for Medicaid, and the 1965 Medicaid law prevents states from raising co-pays or deductibles for many services. So states are left with one option: paying less to doctors and hospitals.
In many states, Medicaid pays doctors a fraction of what private insurers pay. In 2008, in California, a doctor made 38 cents on a Medicaid patient for every dollar he made seeing a privately insured one. In New Jersey, a doctor made 33 cents. In New York, 29. And states continue to decrease Medicaid physician fees, because it’s the only lever they have.
As a result, most doctors choose not to see Medicaid patients, because they can’t keep their practices alive if they do. That, in turn, makes it hard for Medicaid patients to get doctor’s appointments for annual checkups, routine care, and even urgent medical problems. A 2011 study published in the New England Journal of Medicine found that many doctors refuse to see Medicaid children complaining of seizures, uncontrolled asthma, and even broken arms.
A study by two MIT economists found that three-quarters of physicians receive lower fees for treating Medicaid patients than they do for the uninsured, because the uninsured pay in cash for routine health expenses. Cash is hassle-free. Medicaid, on the other hand, requires doctors to fill out tons of time-consuming paperwork, and if they make any errors at all in their form-filling, they risk being denied payment after the fact.
It may well be that Medicaid does offer a modest benefit to some people at the bottom of the income ladder. But it’s also true that Medicaid offers worse health care to the millions of low-income Americans who today enjoy high-quality private insurance, and often lose that coverage when states expand Medicaid. Most important: Is a “modest benefit” the standard we expect of a program that costs taxpayers $450 billion a year, squeezing out spending on education and national defense?
Before we expand Medicaid, we should reform it, by handing the program fully over to the states, or directly to the people it is meant to help. Those who claim to care most about the poor should be at the forefront of reform, instead of doubling down on the broken status quo.
— Avik Roy is a senior fellow at the Manhattan Institute and the author of The Apothecary, the Forbes blog on health-care and entitlement reform. He is a member of Mitt Romney’s Health Care Policy Advisory Group. You can follow him on Twitter at @aviksaroy.