States Can Avert Medicaid Cost Crisis

NCPA Study Recommends Common-Sense Reforms to Ease State Budgets, Save Programs

DALLAS (February 18, 2003) -- States could save hundreds of thousands of budget dollars spent on Medicaid programs just by becoming smarter buyers of health care, according to a report released today by the National Center for Policy Analysis (NCPA). The report also shows that even more money could be saved by enrolling Medicaid beneficiaries in employee plans and other private sector insurance.

Medicaid is the primary cause of financial problems in virtually every state, according to the NCPA report. States now spend more on Medicaid than Medicare ($280 vs. $250 billion). Yet a lot of money could be saved by such fairly simple steps as:

  • Training parents of asthmatic children to recognize symptoms and take appropriate action in their homes.
  • Encouraging patients to get telephone consultations before going to hospital emergency rooms.
  • Encouraging doctors to use appropriate medications to treat common ailments like earaches and ulcers.

The NCPA report also reveals that state governments waste a lot of money by paying providers based on costs incurred, rather than services rendered. For example:

  • In Ohio, the state Medicaid program reimburses nursing homes for 13,000 empty beds.
  • In Dallas, Medicaid pays some hospitals three times as much as others for delivery of the same services.

"We should pay for results, not costs," says Lindsey. "Cost-plus reimbursement is a lousy way to pay for health care. Private resources quit paying that way years ago."

The report also encourages state governments to seek waivers from the federal government to take advantage of more economical private sector insurance. Among the recommendations:

  • Medicaid beneficiaries should be enrolled in employer plans, with the state paying part or all of the employees' premiums.
  • Absent an employer plan, Medicaid beneficiaries should have access to some of the same private insurance options available to state employees.
  • The state should also contract with the private sector for the care of people with disabilities.

"Medicaid is costing taxpayers $1,000 for every man, woman and child in the country," said Richard Teske, another author of the report who was responsible for the Medicaid program during the Reagan administration. "Many people pay more in taxes to support health insurance for Medicaid enrollees than they pay in premiums for private insurance for themselves and their families," said Teske. "That's not fair."