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Expanding the Medicaid Status Quo Is Not Health Reform



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In June, President Obama warned that “it is not sufficient for us simply to add more people to Medicare or Medicaid to increase the rolls, to increase coverage in the absence of cost controls and reform. . . . If we don’t get control over costs, then it is going to be very difficult for us to expand coverage. These two things have to go hand in hand. . . . We can’t simply put more people into a broken system that doesn’t work.” The following week, the president stated, “For the government, the growing cost of Medicare and Medicaid is the biggest threat to our federal deficit.”

Unfortunately, Congress has ignored the president’s counsel by proposing to add as many as 14 million more people into Medicaid and the State Children’s Health Insurance Program (SCHIP) under the guise of “reform.” Under the latest Senate Finance Committee proposal, nearly half of the newly insured population will go into Medicaid or SCHIP.

Yet, as Medicaid shows, access to a government program is not access to health care. Medicaid reimburses health providers only about 80 cents on the dollar. As a result, about 40 percent of physicians do not accept Medicaid patients. Any state Medicaid director in the nation will concede those who are on Medicaid face barriers to access; limiting access or delaying care are forms of rationing. Moreover, the perverse incentives in the program have caused Medicaid recipients to use the emergency room at twice the rate of those with private insurance and see medical and surgical specialists at half the rate of those with private insurance.

Even more troubling, Medicaid recipients have worse health outcomes. As Dr. Scott Gottlieb pointed out earlier this year, “Accumulating medical data shows that Medicaid recipients’ poor health outcomes aren’t just a function of their underlying medical problems, but a more direct consequence of the program’s shortcomings.”

So why is Congress expanding Medicaid despite the president’s concerns of putting more people into a broken system — one which yields poorer health outcomes? The answer is surprisingly cynical even for Washington: It’s cheaper — at least on paper.

Washington politicians find a Medicaid expansion appealing because it is a federal program which states help pay for. States pay on average 43 percent of Medicaid’s cost. Congressional Budget Office (CBO) accounting says Medicaid coverage is the cheapest way to provide coverage — it can push costs onto the states, thereby lowering the price tag at a federal level.

However, most states cannot afford their current share of Medicaid costs. Some states spend more on their share of Medicaid than they do on k-12 education statewide. Accordingly, the Senate Finance Committee proposal has invented special matching rates (including 100 percent for the Majority Leader’s state — a taxpayer funded subsidy to his re-election campaign, some have argued) to mute the governors’ protests. Before the bill leaves the Senate floor, there will be more special backroom deals to be struck. States will be pitted against states. But even if the federal government picks up most of the cost for the new enrollees, the enormous price tag of expansion would merely shift from the state to federal level.

The members writing the bill behind closed doors are so obsessed with getting a good CBO score, they are forgetting about quality. In education, this is called teaching to the test. With health-care reform, they are legislating to the test (CBO). Yet, getting the right score doesn’t guarantee success in the real world. Congress is not only ignoring current problems in Medicaid, but is setting the stage for greater costs down the road — lower-quality health care costs more in the long run.

Americans should pay attention to two eligibility standards in the debate over expanding Medicaid. “Retro-active eligibility” means a hospital can get paid for treating a person, even though that individual had not enrolled in Medicaid at the time of service — if they are later found to be Medicaid eligible. “Presumptive eligibility” is the idea that anyone who shows up at a hospital or doctor’s office is presumed to be eligible for Medicaid. These provisions are not only budget-busters, but both are loopholes designed for defrauding the system that could allow illegal aliens or anyone else to get health care paid for by taxpayers, whether or not they are truly eligible and in need.

Expanding Medicaid status quo does not “fix what’s broken and build on what works” as President Obama has promised to do. It merely enshrines the status quo. The American people must ask, isn’t there a better way to do this?

There is an alternative, The Patients’ Choice Act, which I introduced in May along with Senator Richard Burr (R., N.C.) and Representatives Paul Ryan (R., Wisc.) and Devin Nunes (R., Calif.). Our plan would not build on a broken and bankrupt program. Instead, the vast majority of Medicaid recipients — over 40 million moms and kids — would be enrolled in high-quality private insurance plans, regardless of pre-existing conditions. This change and a few others would effectively remove the stigma from Medicaid and empower recipients with real access to care and the ability to choose their doctor for the first time. Instead of going broke, states would save about $960 billion over ten years.

We know the status quo is unsustainable. “Reform” should mean real improvement, not more of the status quo. It is time to start on real reform.

—  Tom Coburn, M.D., is a U.S. senator from Oklahoma and Dennis Smith is a senior research fellow in Health Economics at the Heritage Foundation.



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