Tag Archives: Medicaid
America’s system of health care safety nets is an inadequate, balkanized, inefficient, unfair, unsustainable monstrosity. And that’s on a good day. Its two main components—Medicaid/CHIP for the poor and Medicare for the elderly and disabled—spend nearly a trillion dollars annually to cover 110 million people. And both are growing like topsy. In tandem with the equally doomed employer health insurance system, the safety net feeds an insatiable appetite for overpriced, often-inferior medical care that is bringing the entire system to the brink of insolvency. And the Affordable Care Act (ACA) promises to make it worse by adding yet another 15 million underfunded Medicaid enrollees and by creating a new subsidy entitlement for families making up to $88,000 a year—arguably creating our first-ever middle-class welfare program that, according to James Capretta, brings “middle-class Americans into permanent dependence on the federal government for their health care.”
Correcting the Basic Problem
Employers to the Rescue?
In Part 1, I explained how the only way hospitals have been able to survive their money-losing Medicare and Medicaid patients has been to charge higher rates to private payers. That’s why private insurance now costs $1,788 more per family than it would if the government paid the same provider prices as everyone else. Moreover, health reform’s promised addition of 15 million new Medicaid patients, along with billions of dollars in lower Medicare payments, will drive the demand for private subsidies even higher. Additionally, as the current 27 million individually insured begin transitioning to the insurance exchanges in 2014, their continued ability to pay higher hospital charges is doubtful. Ditto for the 17 million uninsured who are expected to sign up for exchange insurance. Indeed, under health reform, exchange insurers may need their own external financial assistance. That leaves only private, employer-based insurance to pick up the slack by paying ever higher hospital prices. That, too, is unlikely to happen.
MEDICAID, MEDICARE, AND THE INSURANCE EXCHANGES
The new health reform law’s central message to America’s hospitals is a classic good news/bad news story. First, the good news. Hospital exposure to 46 million uninsured Americans showing up in their ERs is about to drop by two-thirds over the next several years. Medicaid alone is predicted to take on 15 million of them, as the states—with temporarily enhanced federal assistance—expand eligibility to cover all non-seniors who fall below 133 percent of the federal poverty level ($24,350 for a family of three). And assuming the individual insurance mandate survives likely court challenges, another 17 million uninsured will be required to buy subsidized private health insurance through new state health insurance exchanges beginning in 2014. This adds up to 32 million people who hospitals will no longer have to treat for free under the federal EMTALA law and their own charity-care policies.
The most contentious issue in the current congressional health reform debate seems to be whether the government should offer a public health insurance plan for the uninsured. It’s a bad idea that will only further destabilize our already unsustainable health care system. Here’s why.
If a public plan’s premiums are set at sufficient levels to allow the plan to be financially self-sustaining, it will be too expensive for most uninsured people to afford. That’s because (1) adverse selection (the tendency of sick people to sign up for individual insurance coverage in greater numbers than healthy ones) will drive rates to unaffordable levels, and (2) the government’s tendency to require unnecessary benefits will drive premiums even higher. The most commonly promoted way to avoid this is by applying direct government subsidies. The resulting below-market premiums will then make government insurance affordable. But it will also make private insurance uncompetitive, creating a rush to the government plan by not just the sick uninsured, but by small employers, people with individual insurance, and even large employers eyeing an opportunity to get out from under their increasingly unaffordable self-insurance programs.
While some critics may applaud this move toward a single-payer system, the fundamental problem remains that such a public program will only worsen out-of-control medical cost inflation—short of outright government rationing of expensive care as done in Canada and Great Britain. The arguments that increased prevention and electronic medical records will lower costs are myths (see my earlier posting “Will Prevention and EMR Save Money?”). Industry insiders have long known that prevention virtually always costs more than it saves, and the adoption of computer technology takes decades to yield savings.
The hard reality is that increased top-down government intervention in American medical care has thus far failed to deliver universally available, affordable care. Exhibit A: Medicare will be bankrupt in eight years. Exhibit B: Medicaid has become a black hole for state and federal budgets. A public health insurer will just as assuredly fail to perform, whether run by the feds or outsourced.
There is an alternative, but it lies in root-and-branch reform of the American insurance system to enable the combination of regulated markets and social safety nets to meet the health care needs of all Americans. Do stay tuned.