NCPA - National Center for Policy Analysis


August 3, 2005

Florida spent $14 billion on Medicaid in 2004. If expenditures continue to grow at current rates, Medicaid would account for 60 percent of the state's budget by 2015. However, Gov. Jeb Bush has a cure -- a consumer-driven program that fundamentally alters Medicaid's power equation. It would allow consumers to allocate their own health care, instead of bureaucrats doing so on their behalf, say Regina E. Herzlinger (Manhattan Institute) and Tom Nerney (Center for Self-Determination).

The private sector has already enrolled more than three million employees in similar consumer-driven health care plans. Results are encouraging, say Herzlinger and Nerney:

  • The health insurer UnitedHealth Group found that current enrollees in consumer-driven plans made intelligent changes in health care utilization relative to their past behavior, such as reductions in costly emergency room visits and substantial increases in the use of health information sources.
  • Aetna discovered that while more than half of one employer's 13 percent cost reduction was caused by changes in consumer behavior, sick enrollees (such as diabetics) continued to seek appropriate care, and preventive services increased.
  • Indeed, McKinsey & Company found improved care for victims of chronic diseases in consumer-driven plans.

Enrollees like these programs too:

  • For example, 83 percent of employees of the supermarket chain Whole Foods voted for a consumer-driven health plan in preference to old managed care plans.
  • After three years, the firm's health care costs increased by only 3.3 percent annually, while turnover plummeted.

Some members of Congress decry plans that include freeing the federal chokehold on innovative state Medicaid programs. Bad mistake. The best cure for Medicaid's budget woes -- and the best medicine for its beneficiaries -- are market-based innovations by prescient governors, say Herzlinger and Nerney.

Source: Regina E. Herzlinger and Tom Nerney, "Medicine for Medicaid," Wall Street Journal, August 2, 2005.

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