D. Dowd Muska


Medicaid: Worst. Welfare. Program. Ever.

February 23, 2012

Enraged by the soaring price of gasoline? Worried that your home’s value will never return to what it was in 2006? Convinced that the national debt cannot be paid off? Frustrated over a 401(k) that’s been less-than-impressive since the fin de siècle tech bust?

Here’s one more thing to be steamed about: If you’ve got a spouse and a couple of kids, your family’s annual bill to provide healthcare for the “poor” is $5,552.

It’s an imperfect assessment, of course, given the demise of the nuclear family and the fact that a dwindling number of Americans face federal income-tax obligations. But 2010’s total Medicaid outlay, reported by the National Association of State Budget Officers, was $429 billion. Apportioned on a per capita basis, an individual’s share came to $1,388.

Funny thing: When government offers a vital-service “entitlement” to those who meet ever-more-generous eligibility criteria, demand balloons. In 1970, five years after LBJ created Medicaid, its cost was an inflation-adjusted $28 billion. Forty years later, despite a higher standard of living and an explosion of knowledge about nutrition, exercise, and healthy habits, its expenditures had multiplied by a factor of 15. (Population growth was 52 percent.)

Even in the era of fiscal atrocities wreaked by George W. Bush and Barack Obama, $429 billion is serious money. Yet the fiscal burden doesn’t fall on Washington alone. The feds “partner” with the states on subsidized healthcare. Economist Michael Bond, in an analysis for the James Madison Institute, found that during a 17-year period, Florida’s Medicaid program “increased at approximately [a] 10.4 percent annual rate versus around 6.6 percent for medical inflation generally. In 1990, [it] represented approximately 10 percent of Florida’s state budget. As of 2007, that total had increased to approximately 21 percept.” In January, Colorado’s Department of Health Care Policy and Financing told The Denver Post that an “all-time historical high” had been reached in Medicaid enrollment. The Centennial State is affluent and well-educated, but 13 percent of its residents are now on the healthcare dole.

At least the Medicaid monstrosity can’t get any worse.

Oh yes, it can.

The “stimulus” windfall that states received to maintain -- indeed, enhance -- Medicaid is gone. Obamacare, if it survives a constitutional challenge and isn’t repealed by Republicans, will dramatically expand the subsidy. And an aging citizenry is certain to swell the significant number of dollars that are devoted to nursing homes, assisted living, and in-home care. (Currently, a jaw-dropping 40 percent of the tab for long-term care is covered by Medicaid.)

No wonder states, struggling in the present and dreading the future, are grasping for lifelines:

• Utah’s stab at relief, as described by The Salt Lake Tribune, envisions “handing Medicaid over to [accountable care organizations], managed care networks that would be paid lump monthly sums per patient. If an ACO spends more than allotted for care and prescription drugs, it absorbs the loss. If it spends less, it gets a share of the leftovers -- similar to old HMOs of the ‘90s.” Earlier this year, the Obama administration signed off on the plan’s basics, but rejected other proposals. (No boosted co-pays, no vouchers.)

• The Chicago-based Civic Federation predicts that Illinois’s Medicaid costs will rise by 41 percent in the next five years. The state’s program already has $1.9 billion in unpaid bills that must be satisfied by the end of the current fiscal year. Governor Pat Quinn has announced that he “will work with the General Assembly to find a combination of liability reductions, modernized eligibility standards, utilization controls, rate reduction and reform, acceleration of integrated managed care, and coordination of long-term care programs to manage Medicaid spending.”

New Mexico Governor Susana Martinez has released her blueprint for reform. She’s asking Washington for the ability to charge co-pays for non-emergency ER visits, let adults use school-based clinics, and -- this isn’t a joke -- distribute gift cards for healthy eating.

Attempts to wrestle with runaway expenditures, whether sensible or silly, fail to grasp the underlying crisis. Several years ago, the Cato Institute’s Michael F. Cannon put the problem succinctly: “Medicaid provides average benefits twice as valuable as those available under [the] federal cash assistance program -- and to 10 times as many recipients.”

Medicaid is financially unsustainable, it crowds out private coverage, it advances the nation’s destructive culture of welfarism, and evidence abounds that it provides lousy care. But it has a massive, growing army of beneficiaries, and adamantine defenders in the political class. An ugly, protracted reckoning is inevitable.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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