The Twin Horrors Of Medicaid: As Costs Go Up , It Harms Patients More. Can Congress Finally Fix It? – Forbes

A BIG STUMBLING BLOCK to getting a health care reform bill through the Senate (the House of Representatives passed one in May) is Medicaid. This is surprising, given that the program is probably the worst-designed health insurance system in the history of the Free World, ballooning in costs while providing clients with increasingly lousy care. Properly fixing this program would save substantial amounts of money and provide patients with better outcomes.

Medicaid was enacted in 1965 to replace and beef up state programs to help the indigent get medical care. Medicaid would make all of these efforts virtually uniform–becoming, in essence, a one-size-fits-all program. The federal government would pony up half the costs, the states the other half. But even though the states shared the tab, Washington dictated the rules. States managed the program but couldn’t make any changes without getting “waivers” from the Department of Health & Human Services. In addition to covering low-income earners, Medicaid was expanded over the years to help pay for seniors who have no assets and for long-term care for people with disabilities.

House Speaker Paul Ryan, speakingĀ at a May 25, 2017 news conference about the Congressional Budget Office’s scoring of the GOP’s health-care legislation. (Zach Gibson/Bloomberg)

Costs immediately spun out of control. There was no fixed budget, and spending went to whatever medical bills were submitted. The only way governors could contain costs was to reduce the reimbursement rates for health care providers, which is what happened. Around one-third of physicians no longer take on new Medicaid patients. It’s no surprise that a perverse incentive took hold: Consultations were skimped on, as these were not reimbursed, but tests of all sorts–many of them medically unnecessary or even harmful–skyrocketed. Moreover, since most of any savings a state achieved would go to Uncle Sam–Washington now pays 63% of total Medicaid expenses, local governments only 37%–the spur to rein in ever rising costs and take on political heat is obviously de minimis. After all, the biggest employers in most states are hospitals, and their lobbying clout is immense.

Shockingly, reputable studies have found no difference in the health outcomes of people on Medicaid and those who have no insurance.

Nonetheless, Obamacare substantially expanded Medicaid by relaxing the eligibility rules. Under the Constitution, Washington couldn’t force the states to go along. So Obamacare offered what many governors found to be irresistible bait: The feds would pay 100% of the costs of covering these new people until 2016, phasing down to 90% by 2020 (19 states refused to bite for fear that future sharing formulas would be scaled back and they’d be left holding a heavy fiscal bag). Medicaid’s rolls expanded by 11 million, rising to a total of 75 million people. Costs soared, while the quality of medical care deteriorated, as more and more providers refused to accept Medicaid patients. More money, worse care–quite a feat, that!

House Republicans want to rein in Medicaid’s runaway costs by, among other things, gradually rolling back much of the Obamacare eligibility expansion of Medicaid funding, starting in 2020. More important, they would give states more leeway in making changes to the program. In return states would get a set amount of funding per person, which would grow by a fixed formula, instead of being open-ended, as it currently is. States could also choose to receive a block grant, that is, a chunk of money from Uncle Sam that would provide a fixed amount of Medicaid funding and remain unchanged.

Republican governors, and, no surprise, Democratic ones as well, are worried that the House bill would mean devastating cuts to beneficiaries, because its changes would slow the growth of Medicaid spending.

Their fears are overblown. It’s puzzling, to say the least, that they can defend a program that is ever more costly, increasingly ill-serves its beneficiaries and is riddled with fraud–the Government Accountability Office has found that more than 10% of the program’s payments are “improper.”

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