NCPA - National Center for Policy Analysis


September 28, 2006

Medicaid, the joint federal-state health care program for the poor and near poor, is the largest single expenditure by state governments today.  At the rate the program is growing, it is on a course to consume the entire budgets of state governments in just a few decades, says the National Center for Policy Analysis (NCPA). 

America is on the leading-edge of a consumer-driven health care (CDHC) revolution that will transform private health insurance and care delivery.  A number of states are undertaking initiatives that inject CDHC principles of competition, choice and control into Medicaid.  Among the ways this can be done:

  • Give patients control of some of the Medicaid dollars spent on their health care by establishing Health Opportunity Accounts that enrollees can use to pay for some health services, providing them financial incentives to consume health care wisely.
  • Allow enrollees to enroll in employer-sponsored plans where they work using Medicaid funds to pay the employee's share of premiums and/or allow them to purchase private health insurance directly.
  • Create financial incentives for people to purchase long-term care insurance instead of relying on Medicaid.

More fundamental reform will require federal legislative changes, says the NCPA.  One might assume that the federal contribution to state Medicaid programs is based on each state's poverty population.  Yet, this is not the case: 

  • New York has 8 percent of the nation's poverty population, but gets 12.9 percent of all federal Medicaid dollars.
  • By contrast, Texas has 10.3 percent of the nation's poor, but receives only 6 percent of federal Medicaid dollars.

Ideally, Congress should distribute federal funds in block grants based on each state's poverty distribution and allow the states full discretion over their use, provided they are spent on indigent health care, says the NCPA. 

Source: John C. Goodman, Michael Bond, Devon M. Herrick and Pamela Villarreal, "Opportunities for State Medicaid Reform," National Center for Policy Analysis, Policy Report No. 288, September, 2006.

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