Reforming the U.S. Health Care System

Policy Backgrounders | Health

No. 149
Monday, April 26, 1999
by John C. Goodman & Merrill Matthews

XI. An Alternative To Medicaid

A. Creating Options For Low-Income Families

  1. Low-income families on Medicaid have traditionally faced limited options in the medical marketplace.
  2. Where Medicaid benefits have been improved, improvements have come at the cost of HMO-type restrictions.
  3. The refundable health insurance tax credit offers low-income families an alternative -- a source of funds with which to buy private insurance.

B. Integrating Medicaid With The Tax Credit System

  1. Ultimately, Medicaid should be integrated with the tax credit system.
  2. States should be allowed to voucherize their Medicaid programs, using Medicaid money to supplement funds available through the refundable health insurance tax credit to allow enrollees the full range of private insurance options.

C. Encouraging Private Insurance Alternatives To Medicaid

  1. Even without Medicaid reform, care must be taken to insure that the tax credit system does not inadvertently encourage the expansion of Medicaid.
  2. Thus the new plan allows states to receive Medicaid matching funds for a family or a contribution to a Health Care Safety Net -- but not both.
  3. In most cases the federal contribution to the Safety Net will be larger than the potential federal match as a result of Medicaid enrollment.

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