NCPA - National Center for Policy Analysis


August 16, 2005

The Medicaid program has deviated drastically from its original mission of covering the poorest individuals. Now some 53 million are enrolled in Medicaid, including 25 percent of all children and two-thirds of nursing home residents. Consequently, state are now looking at solutions to curb the burgeoning cost, says the National Journal.

While the federal government mandates that states cover a certain segment of the population, states enroll "optional" populations as well, resulting in increasing budget pressures. In 2001, the Bush administration responded by implementing a waiver program to allow states to cut benefits and cap enrollment for mandatory populations.

But newer Medicaid waiver proposals are meant to mirror free-market concepts:

  • New proposals would allow states to tailor Medicaid benefits to different groups, specifically targeting people on welfare, people with low incomes and people who need long-term care.
  • Former House Speaker Newt Gingrich advocates vouchers, tax credits and health savings accounts (HSAs) for the poor and uninsured depending on their income levels; in an HSA plan, beneficiaries set aside tax-free money in a private account to pay for medical expenses with a catastrophic health insurance policy for back-up.
  • In Florida, Gov. Jeb Bush is requesting a cap on federal Medicaid dollars to the state in exchange for allowing him to get out from under federal control and run the program as he sees fit.
  • South Carolina is working on a proposal to cap overall Medicaid spending and give all beneficiaries HSAs, which could be used for medical bills or to buy private insurance.

Indeed, John Goodman of the National Center for Policy Analysis argues that Medicaid is too restrictive and that federal rules "make it hard to do sensible to have co-payments or set up HSAs."

Congress will soon look at ways to cut $10 billion in federal spending from the Medicaid budget. Republicans argue that if Medicaid is to survive, it must behave more like the private system.

Source: Marilyn Werber Serafini, "Balancing Act," National Journal, August 13, 2005.


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