NCPA - National Center for Policy Analysis

Dealing With Medicaid

October 1, 1997

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.


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