NCPA - National Center for Policy Analysis


December 20, 2005

Florida will spend a record $15.5 billion on Medicaid this year -- 24 percent of the state budget. With reforms, the state expects to cut spending growth to 6 percent a year compared with 13.5 percent a year over the past five years, and it will do so "with better health-care outcomes," says Gov. Jeb Bush.

The hallmarks of the Florida reform are consumer choice and competition. Each participant will be assigned a premium with which to purchase coverage for basic and catastrophic care from a menu of state-approved options. Many private companies already offer similar options to their employees, as does the federal government, which allows workers to select from a list of competing private plans.

For critics who argue that competition won't work for the sick and disabled, Florida has an innovative answer: risk-adjusted premiums.

  • Under the new legislation, someone with a serious illness or disability will receive a higher premium than a generally healthy person.
  • The aim is to encourage private insurers, HMOs and local networks of physicians and hospitals to compete for their business.

Gov. Bush points to two other innovations:

  • Patients who follow the medical plan laid out for them by their doctors -- take their medication, stop smoking, have their children vaccinated -- will earn extra money that will be deposited in flexible-spending, health savings accounts.
  • They can use that money for services not covered under their basic plan or to purchase more expensive coverage.
  • That financial cushion will also help participants shift to the private health-care sector, if they return to work.
  • So too will a feature allowing recipients with jobs to use their state-funded premiums to buy employer-provider health insurance if they prefer.

Source: Editorial, "Sunshine for Medicaid," Wall Street Journal, December 20, 2005.

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