Medicaid Needs Reform

Dealing With Medicaid

The Medicaid program has become a true middle-class entitlement, and its fast growth threatens the fiscal health of the federal government and the states over the next 20 to 30 years, according to a recent study from the Reason Public Policy Institute.

  • About 37 percent of children up to 5 years of age, and another 20 percent of children between 6 and 14 are covered by Medicaid.

  • About one-third of all births in the U.S. are paid for by Medicaid -- and the proportion is closer to half in some states.

  • Over 32 percent of all Americans over 85 are covered by Medicaid.

  • Medicaid now pays over 50 percent of all nursing home costs in the U.S. and at least part of the bill for 68 percent of all nursing home residents.

Analyst John Hood, president of the Locke Foundation, contends that as the elderly population has continued to grow and Medicaid costs have skyrocketed, the program has become a demographic time bomb. He offers suggestions for reform tailored to each of Medicaid's four constituent groups -- the uninsured poor, the disabled, poor children and adults, and the elderly.

Some of his recommendations:

  • Resist expanding Medicaid coverage to the uninsured poor and tighten eligibility guidelines for the uninsured and disabled.

  • Replace current programs with vouchers and medical savings accounts -- which will achieve better quality care, while allowing states to control costs.

  • In the case of the elderly, enforce asset transfer laws and encourage individuals and families to make plans for their own long-term care needs.

Source: John Hood, "Solving the Medicaid Puzzle: Strategies for State Entitlement Reform," Policy Study 233, October 1997, Reason Public Policy Institute, 3415 S. Sepulveda Boulevard, Suite 400, Los Angeles, CA 90034, (310) 391-2245.

Medicaid Needs Reform

As governor of Arkansas, Bill Clinton led the fight to reform the Medicaid program. Yet as president he has vowed to veto any fundamental reform of the program, such as giving the states block grants. Reform is desperately needed:

  • Medicaid is so clogged with federal regulations and mandates that it fails to meet the health care needs of low-income Americans.

  • The president's budget proposes to increase federal spending on Medicaid by 74 percent between 1996 and 2002.

  • It also continues to require the states match the federal funds, which means the states will have to provide an additional $50 billion annually for Medicaid.

On the other hand, block-granting the program would give the states flexibility in administering Medicaid, resulting in a level of innovation and effectiveness never achieved by the federal government.

Under the current system governors must beg the federal government to deviate from the rigid Medicaid structure. Despite that, the states are leading the way to improving service delivery. In Virginia, for example,

  • More than 300,000 Medicaid family members are enrolled in the state's managed care program, which uses primary care physicians and quality controls to improve preventive care and contain costs.

  • In January 1995, the state began offering the option of voluntary enrollment in a health maintenance organization (HMO) and 77,000 are now participating.

  • The state is pursuing a Medicaid waiver to help low-income uninsured workers obtain low-cost health insurance.

  • And state agencies are developing a Medical Savings Account plan to provide primary and acute care to the working poor as well as those now eligible for medical assistance.

Congress and state governors recognize that the program doesn't work well. The states are already making the program more effective and expanding coverage, and Medicaid reform offers an opportunity not only to save taxpayers money, but also to improve the quality of care.

Source: George Allen (Governor of Virginia), "States Have Answers on Medicaid," Washington Times, January 9, 1996.

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