Politics & Policy

Medicaid, America’s Worst Health-Care Program

Progressives can’t admit it.

In July 2010, at National Review Online’s Critical Condition blog, I wrote about a University of Virginia study, published in Annals of Surgery, finding that surgical patients on Medicaid endured a 97 percent higher likelihood of in-hospital death than patients with private insurance, and a 13 percent greater chance of death than those with no insurance at all. I noted several other clinical studies that showed similar results. Little did I know that a national firestorm would ensue.

Not everyone shared my concern about Medicaid’s poor health outcomes. A number of scholars on the left expended more effort trying to debunk the UVA study, and the dozens of others that support it, than addressing Medicaid’s many flaws. Others, such as The New Republic’s Jonathan Cohn, conceded that “for certain populations and particularly in certain states, [Medicaid is] unambiguously inferior to private insurance,” all the while describing my “novel and brash” criticisms (and those of others) as a “conservative assault on Medicaid.”

Progressives recognize the real problem: If Medicaid is fundamentally flawed, it follows that Obamacare is, too. Obamacare aims to add 17 million more Americans to Medicaid’s ledgers. For this reason, some are more eager to paper over Medicaid’s flaws than to address them.

This has led to a surreal circumstance in which anything that suggests that Medicaid offers even a minimal benefit is trumpeted in the press, whereas the overwhelming literature describing Medicaid’s flaws is ignored.

Hence the avalanche of attention that has been showered upon a recent Harvard study, published in the New England Journal of Medicine, arguing that Medicaid indeed does save lives compared with having no insurance at all. The debate is over, declared the New York Times. “The new study should lay that canard [of Medicaid’s poor outcomes] to rest.”

But a look under the hood of the Harvard study reveals a different story. The authors compared three states that expanded their Medicaid programs — Maine, Arizona, and New York — with neighboring states that did not — New Hampshire, Nevada and New Mexico, and Pennsylvania. The Medicaid expansion was associated with increased mortality in Maine, and with decreased mortality in Arizona and New York. That’s hardly a definitive outcome.

Indeed, demographic differences between New York and Pennsylvania could explain the entirety of the “benefit” that the authors ascribed to New York’s Medicaid program. Yet the authors’ conclusion — that Medicaid saves lives — hinges entirely on the comparison of New York with Pennsylvania. Without it, the authors would have shown no difference in outcomes between those with Medicaid and the uninsured, because the results in Maine and Arizona would have canceled each other out. I don’t expect that major American newspapers would have trumpeted such a result.

The study lacked rigor in other ways, too. The Harvard economists looked only at county-level data about mortality and Medicaid; they had to make assumptions about which patients had enrolled in the program, and when. The extensive clinical research showing Medicaid’s poor outcomes, such as the UVA study, has reviewed millions of individual patient records to learn what happened to specific patients with specific forms of health insurance.

Medicaid’s problems are not that hard to understand. Medicaid is the largest line item in most states’ budgets, and it continues to grow at a faster pace than tax revenues. In theory, the program is jointly run by the states and by the federal government, so states have the ability to rein in costs. But in reality, Washington bureaucrats veto most reforms that states seek to make in their Medicaid plans.

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.

Avik RoyMr. Roy, the president of the Foundation for Research on Equal Opportunity, is a former policy adviser to Mitt Romney, Rick Perry, and Marco Rubio.


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