NCPA - National Center for Policy Analysis

Medicaid in Crisis

May 18, 2011

Unsustainable spending growth, enormous crowd out of private coverage, perverse incentives that discourage work and financial planning, and cost control mechanisms like low provider payment rates that limit access for enrollees and contribute to a low quality of care have left Medicaid in crisis, says Brian Blase, a policy analyst at the Heritage Foundation.

  • Between 1990 and 2010, national Medicaid spending increased from $72 billion to over $400 billion.
  • Federal spending alone has increased from $40 billion in 1990 to an estimated $271 billion in 2010.
  • At the state level, Medicaid spending has increased four times faster than elementary and secondary education spending, five times faster than higher education spending, and nine times faster than transportation spending over the past two decades.
  • Several states reimburse Medicaid providers at extremely low rates, some lower than one-third of commercial rates.
  • Medicaid also requires an enormous amount of paperwork with lag times for payment twice as long as those for Medicare or commercial insurance.
  • Moreover, the denial rate for Medicaid claims is three times that of Medicare and commercial insurance.
  • As a result, only about half of all physicians accept new Medicaid patients.

Washington can no longer afford to kick the can down the road on serious Medicaid reform.  Its unsustainable spending, inferior access to quality care, massive crowd out of private coverage, and perverse incentives that discourage work and financial planning all underscore the need for fundamental Medicaid reform, says Blase.

Source: Brian Blase, "Solving the National Medicaid Crisis," Heritage Foundation, May 6, 2011.

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