A Proposal to Fix Medicaid

In 1965, President Lyndon Johnson signed into law legislation that officially brought the United States government into the business of providing health care.  There were two major new programs created.  Medicare was an insurance program for all individuals over the age of 65, and it would be paid for by paycheck deductions that would be matched by employers.  No senior who worked, or his spouse, would lack health care.

The genesis of the second program was that America was a great and compassionate country, and we should not turn our back on those who cannot help themselves.  We would “aid” them until, if possible, they could get back on their feet and take care of themselves.  The new welfare program was named Medicaid.

Medicaid is often referred to as health care insurance for the poor, but that is a misnomer.  Insurance, by definition, means individuals (or groups) pay premiums to an insurance company that then spreads the risk of future possible costs over the entire population of payers, allowing for affordable individual protection.  Medicaid is a welfare program, where underprivileged individuals pay no premium and receive “free” government-subsidized health care.

Originally, the underprivileged group eligible for Medicaid was defined as having income at or below the poverty level.  The federal government had broad rules that governed Medicaid administration and provided 50% of the funds.  The states were responsible for the other 50% of funding and implementing the program.

In 1997, Congress passed the Children’s Health Insurance Program (CHIP).  This program was added to the Medicaid program and covered children who lived in homes with incomes up to 200% of the poverty line without health care insurance.

In 2010, Obamacare was passed and expanded Medicaid eligibility to 130% of the poverty level.  The federal government would initially shoulder 100% of the cost, and over five years, subsidies would move down to 90%.  Obamacare sign-up on USA.gov was made easy, and as an unintended consequence, millions of Medicaid-eligible Americans who had not bothered to enroll in traditional Medicaid filled out the computer form and were automatically signed up for Medicaid.  The average monthly Medicaid enrollment in 2010 was 56.5 million.  By 2023, it moved up to 91.5 million, or a post-Obamacare thirteen-year increase of 60%.

Total Medicaid spending in 2023 was $910 billion and is projected to be $1.2 trillion by 2031.  The federal share is around 69%, or $840 billion.  At the federal and state levels, this amount of spending is not sustainable.

The only way to get control of federal Medicaid spending is to establish the Medicaid cost per state and every year “block-grant” the money to each state.  The amount would be indexed to inflation and adjustable depending on the increase or decrease of a state’s Medicaid population.  The federal government would back away from micromanaging the program, and States would be given broad discretion on how to determine eligibility and administrate the program.

In 2017, when the now deceased Senator McCain famously cast the deciding vote to stop any Obamacare changes, the bill in front of him was not a true repeal; it was to establish Medicaid state block grants and to get control of the massive Obamacare increase in Medicaid federal spending.  Blinded by his hate of President Trump, Senator McCain violated his campaign promise to begin the repeal and replacement of Obamacare.  If America is to ever rein in federal Medicaid spending, block grants must happen.

It is up to the states to innovate and drive the needed change to make Medicaid viable.  The first essential action is to force America’s health care providers to clean up their own houses.  All licenses for hospitals, surgical centers, RediCare facilities, freestanding imaging centers, private cancer centers, cosmetic centers, physicians, dentists, oral surgeons, physical therapists, and podiatrists will be contingent on accepting Medicaid.  Nonprofit hospitals will lose their tax-exempt status if they do not accept all Medicaid patients, and hospitals in rich communities that do not treat a State-determined percentage of Medicaid patients would pay into a fund to subsidize the hospitals that do.  If any of the health care providers do not treat a state-determined percentage of Medicaid patients, they too will owe an assessment.  Most private medical specialists shunt high-paying private insurance and cash-paying patients to outpatient facilities, in which they have a financial interest and consequently reap huge profits, and all the while, the money-losing Medicaid patients are pushed on hospitals to absorb the loss.  A 10% Medicaid profit assessment on all the facilities that do not treat a state-determined percentage of Medicaid patients would be appropriate.  A similar 10% on-profit assessment on all RediCare facilities, standalone imaging centers, and any other health care-providing entities that do not treat a state-determined percentage of Medicaid patients would finish the health care professionals’ medical house clean-up.  All revenues from these new Medicaid health care assessments would be used to help fund the Medicaid program.  These changes would make state Medicaid budgeting viable, because whatever money is available will determine the rates the providers would take as payment and because their licenses are dependent on accepting Medicaid.  The patients would have to be seen, and the providers would have to accept the payment.

As with the rest of the health care system, Medicaid prescription drug costs are out of control.  Pharmacy Benefit Managers (PBMs) are contracted to negotiate prices with the drug companies, manage the drug distribution, and in doing so extract massive profits.  The negotiation process PBMs use is opaque, and there is little hope for cost accountability until their behind-the-scenes activity, which purportedly justifies massive profits, is made transparent.

With the medical providers’ house cleaned up and a national focus on reining in PBMs, the states can turn to make the needed adjustments to Medicaid eligibility and management.

Medicaid benefits are a gift from American taxpayers to the underprivileged with the caveat that the recipients need to honor that gift and make a good-faith effort to better themselves and work.  Able-bodied Americans who choose not to work need to lose their eligibility.

Besides work, other requirements can be placed on Medicaid eligibility.  All recipients would be required to have a primary care provider (no primary care, no Medicaid) and be part of a managed care system.  The days of Medicaid patients neglecting their health care, viewing their Medicaid card as a free government no-limit health care credit card, and using expensive emergency rooms as their doctor would be over.  The primary care provider would give basic medical/preventive care and arrange referrals to specialists (like most Americas with private insurance), and under the new rules, the specialists could no longer refuse to see these patients.

If changes like those outlined in this piece are not implemented, the entire health care system will collapse, devoured by the beast, which will morph into government socialized medicine, destined to extend wait lines, bureaucracy, and ineptitude.  The elites will receive health care at private clinics and enjoy their safe gated communities, while all the rest of America lives in the cold, dangerous shadows of socialized bankruptcy.

Now is the time for change!  Now is the time to get this right!

Image: Pkd2016 via Wikimedia Commons, CC BY-SA 2.0.

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