My, my. The word of the day must be “nationalization”. In his column at the Washington Post Robert Samuleson calls for nationalizing Medicaid. How do we ease the budget woes of the states?
We could nationalize Medicaid — the federal-state health insurance program for the poor. We could transfer all its costs to the federal government; in exchange, the federal government would end state aid for K-12 education and transportation. Though initially a dollar-for-dollar swap, the change would give states more control over their budgets.
Created by Congress in 1965, Medicaid is hijacking state politics. Although the federal government covers a majority of costs (typically, 57 percent), the rapid rise in the states’ share compels cuts in other programs or steeper taxes. In the past decade, Medicaid spending has increased at nearly twice the rate of states’ tax revenue, notes the Volcker-Ravitch report.
The pressures will only intensify as America ages. Although Medicaid serves primarily a younger population (half are children), two-thirds of its costs stem from the 25 percent of much sicker beneficiaries who are elderly and disabled, reports the Kaiser Family Foundation. An older America will raise these costs and squeeze states’ other services.
I have severely mixed feelings about this proposal. As you undoubtedly remember I have written incessantly on the burden that Medicaid is placing on state governments’ budgets. And I sincerely believe that the federal government is proximally responsible for the mess in healthcare, at the very least on a “you broke it, you bought it” sort of basis. On the other hand I also think that the federal government is very poorly positioned to administer the Medicaid program and that the problems with our healthcare system can’t be fixed in the context of the fee-for-service system that the federal government appears to be determined to maintain.
You might want to take a look at this handy summary of Medicaid facts and figures. For example, the state with the largest absolute number and percentage of Medicaid enrollees is California with nearly one in three Californians enrolled in Medicaid. Between its public employee benefits problems and its high Medicaid bills is it any wonder that the state has budget problems? Medicaid is a big chunk of Illinois’s problems, too, which now impeached Gov. Rod Blagojevich aggravated by expanding Medicaid eligibility.
More than 30% of Medicaid bills nationwide are, essentially, paying for nursing homes. Long-term care of the elderly is an expensive proposition, too expensive for all but the most well off to be able to afford on their own.
We really do need to consider the question of the care of the elderly more seriously. To deal with the problem in a manner that’s both sensible and humane we’re going to need to change a lot of societal attitudes which, of course, will not happen other than kicking and screaming and at the very last minute. Or later.
Yes, it seems to me it’s another example of misplaced focus on who should pay instead dealing with the root problem of health care costs.
Just a few things to remember. Medicaid is generally the cheapest carrier, paying much less than private insurers. About 1/3 goes to old folks, as you noted, about 1/3 to pregnant ladies and kids and the last third to those with disabilities. Relatively little goes to healthy adults.
Steve
The spending per enrollee for seniors, much of it for nursing home care, is larger than for other segments and rising faster. If you’re seeking to lessen the burden on the states one approach to doing that would be address the issue of nursing home care.
I’m skeptical about for-profit nursing home care particularly when we’re talking about Medicaid-funded nursing home care.
Then it really isn’t insurance is it…and that last sentence is why it is so messed up. The most important people in an insurance scheme (even for HMOs) are the healthy people. Without them you got dick.
What do you suggest? Moving it to the Federal level? Isn’t that nationalizing the problem? Any solution is almost surely going to be a variant of “passing the buck”. The bottom line is that with the baby boomers retiring and rationally not saving for things like nursing home expenses (why should they there is Medicaid, after all) we are finding ourselves in a bind.
Stupid policy piled on top of unfortunate demographics.
Here is a hint…if a policy is going to discourage savings…it might not be a good policy. Especially if that savings is for future consumption (which is pretty much what most savings is).
“(why should they there is Medicaid, after all”
IIRC, when that has been looked at, most people just dont think about the issue at all. They dont know that Medicaid will pay for long term care. In order to get Medicaid to pay, you have to have almost no savings or assets. Certainly in my daily encounters with patients, I find very few who have considered the possibility that they might need nursing home care some day.
Don Taylor writes on the issue quite a bit. The whole thing is a mess and I dont see a really good solution TBH. People just dont plan that far ahead for this kind of problem. Those in the bottom 1/3–1/2 of income dont really make enough to buy the insurance anyway. With smaller families like we have now, those resources are slim also.
Steve
Steve
Warren Mosler had an interesting suggestion a couple of years ago. I apologize for posting the entirety here, but criticism from those who won’t bother to read a link is so banal:
“Everyone gets 5,000 on January 1 each year to spend on health care.
$1,000 is for preventative care, and the other $4,000 is for all other health care needs.
If you need more than that you are covered by a form of Medicare.
At year end you get the unused portion of the 4,000 as a gift with no strings attached.
You are free to buy any private insurance or medical plan you wish.
I used those particular numbers as a reasonable starting point for discussion.
Children under 18 would be covered by Medicare and not participate in this plan. I don’t want to give parents a cash incentive to not take their children to the doctor.
This proposal is progressive because the $5,000 is worth a lot more to people with lower incomes than to people with higher incomes.
It also utilizes competitive market forces to help contain costs by maximizing personal choice and tapping into America’s unparalleled ability and enthusiasm to shop.
It doubles available doctor patient time as doctors would have to discuss costs with their patients instead of with insurance companies.
It reduces the Medicare administrative burden for current Medicare participants as they would be on their own up to their first $5,000 of expenditures.
The cash back incentive serves to minimize overuse.
It is fiscally responsible as the total medical costs to our nation will fall dramatically even as available doctor/patient time dramatically increases.
It is a populist, bottom up solution for universal health care with appropriate incentives to minimize abuse, corruption, and fraud.
Everyone is free to select their doctors.
The government is not involved in the doctor patient interaction up to the first $5,000 dollars, and all are free to not use the Medicare option if they so desire.
Tax increases are not appropriate as the spending related to this proposal will not only not be inflationary but will serve to reduce prices and costs. In fact, the deflationary and competitive aspects may even lead to a tax cut to sustain aggregate demand.
This progressive proposal is more than consistent with core Tea Party and traditional populist Democratic values:
It reduces the participation of government in the actual health care process.
It employs competitive market solutions.
It increases personal freedom.
It works from the bottom up.
Additionally, this proposal removes all of the unfair financial burdens of health care from the States, and removes health care costs as marginal costs of production from small and large businesses alike. “
Ben,
Interesting idea, but how do you pay for it? $5k for 230 million adults, plus the cost of Medicare above what it pays now is a huge chunk of change.
steve,
And that’s why we’re fucked. “Cheapest” isn’t cheap.
Dave,
I am reminded of my own Mom at the mention of nursing home care. The lousy facility she was put in to die when Medicare refused rehab care was somewhere around $2k a month 7 years ago. We couldn’t move her for several weeks because the facility had an infectious outbreak. We finally got her into a good private rehab facility which was $3.5k a month but by then it was too late and she died within a week. Skilled nursing care is extremely expensive. The Medicare facility was a terrible place – crowded with an overworked staff trying to manage a bunch of dying people. I promised myself I would blow my own brains out before I end up in a place like that for my last days.
” I promised myself I would blow my own brains out before I end up in a place like that for my last days.”
This is long term health care planning for most people.
Steve
Ben,
With everyone getting $5000 to spent on health care, both preventative and other, where is the oversight that this money will indeed be spent on health care, and not just absorbed in a household’s general expenses? After all, when this preset amount is used up, you indicated that these people would automatically go into medicaid for their medical needs, anyway. So, where is the incentive to keep this allotted money just for medical purposes? It’s their’s as an non-monitored gift, right?
I like that plan. I would take my $5000 and move to India or Thailand.
Moesler’s idea is not too far off of what Arnold Kling has suggested in the past. Basically you it works like this:
1. You have to buy health care (100% coverage, if you ignore those who don’t get it on religious grounds).
2. You get a voucher for said purchase (it could depend on things like income, family size, etc. And you could structure it so “work always pays”–i.e. people wont want to turn down a better paying job to keep the value of their voucher high).
3. You go out and buy insurance.
4. If you get a plan that covers your needs, but leaves some of the voucher left you get to keep (some of) it.
No more health care benefits via employers so no more incentive to “gold plate”. Plus there are built in incentives to reduce getting too much insurance and also to help promote economic growth.
The only draw back is that you’d have the possibility of separating equilibria vs. the current pooling outcomes. For those who are sick or have pre-existing conditions that could be a problem. Of course, there could be ways for people to aggregate themselves, but not sure how that would work.
It would probably help with the sustainability rising cost aspect of health care. It wouldn’t be the “silver bullet” but it would be a move in the right direction…which of course is why it will never ever happen. If you have a great policy idea….forget it. Everyone is going to hate it, even those who should love it.
@Andy
Mosler is arguing the Treasury should just credit the accounts of every American and the Federal Reserve provide the reserves necessary to clear the payments. Basically what the government already does when it spends.
Think about it: when you pay your taxes the government changes the numbers in your account. If you had $7000 and owed $2000, the IRS changes the 7 to a 5. The federal government isn’t actually receiving anything from you. In the same manner when government spends it changes the digits in the recipient’s account upward, never actually sending anything out. It just makes what it wants on a computer screen or by printing numbers on a paper check.
Ben,
Ok, what would be the effect of all those credits which would amount to $1-2 trillion per year? Is that sustainable?
@Andy
It depends on whether Mosler’s belief that competition created by greater individual choice would actually drive costs down. I’m not sure that non-medical experts can have sufficient understanding to make good economic choices regarding treatment, but I don’t see why putting insurance companies into a market where they have to fight each other for customers can’t work. Germany and Switzerland use a system where insurers get bonuses the more enrollees they have, creating an incentive to undercut competitors with better services.
A major problem with Medicaid is people taking advantage of the program. I see it all the time at the office. When people roll up in their nice SUVs, with their iPhones, smoking their cigarettes then hand us a Medicaid sheet, it just infuriates me. To expand it would be asinine. There need to be stricter regulations on what we already have.