Medicaid Mess

The one entitlement that outspends all other social spending combined -- but how can it be fixed?

The states see rising costs of Medicaid rolling toward them like a giant fog. This health spending for low-income Americans already is the single largest component in state budgets, at 21.8 percent, the National Association of State Budget Officers (NASBO) reported.

Many states, therefore, are scrambling to find ways to salvage their budgets before the destructive toll of ObamaCare strikes full force in 2014. That’s when 20 million more will be added to the rolls by ObamaCare. The states may well be rescued, however, if the national health overhaul is declared unconstitutional.

Meanwhile, some states may seek waivers or opt out of Medicare altogether for fear of going bankrupt. Florida could be the first state to leave the program. The main author of a plan to redo the state Medicaid program said Feb. 15 if the federal government rejects the state’s proposal for a waiver, Florida may put in place its own pared-down version. State Sen. Joe Negron said that Medicaid was expected to cost Florida $22 billion in the fiscal year that begins July 1.

Because Medicaid is financed jointly by federal and state money, opting out altogether would mean losing the larger share of federal funds. Negron said Florida would use its own share of Medicaid money to provide benefits to “those on Medicaid we believe are the most vulnerable,” according to a Jacksonville Times-Union story.

Texas state Rep. Bryan Hughes said Medicaid already consumes 26 percent of his state’s budget. Included in that total are payments covering half of all births in Texas and two-thirds of all nursing home care. Hughes said ObamaCare threatens state sovereignty.

Medicaid reform should permit states—as the laboratories of policy ideas—to experiment with more innovative and workable designs for health care for the poor.

“Medicaid’s a black hole,” said Rep. Bill Cassidy, (R-LA), a physician, in a Feb. 9 interview. “It does not provide access because it pays so poorly, specialists, for example. But despite paying so poorly It’s bankrupting the states and...the care it does provide is below quality. And so it’s the antithesis of where we want to be with reform.”

The state expenditure report of the NASBO stated that fiscal 2009 and 2010 represented two of the most difficult years for state fiscal conditions since the Great Depression. The report said the combination of a loss of Recovery Act funds [the stimulus package] and the continuation of depressed levels of tax collections “are likely to result in the perpetuation of challenging fiscal conditions for fiscal 2012 and beyond.”

The Actuarial Report of the Fiscal Status of Medicaid projects the enrollment of patients to reach 78 million in 2019, with an average annual increase of 4.5 percent. In 2012, 54.8 people will be enrolled in Medicaid with a total expenditure of $456.4 billion. The state portion of payments will be $196.5 billion.

In 2014, the enrollment will jump to 67 million patients at a cost of $564 billion, $224 billion of which will be state payments. And by 2019, the 78 million enrollees will cost a total of $840 billion. The states’ share will be $327.6 billion.

The cost breakdown, as calculated in the Actuarial Report listed the following breakdown of where the bulk of the Medicaid money is spent: 40.6 percent for nursing home care, 34.7 percent for home health care, 17.1 percent for hospitals, and 8.3 percent for drugs.

A letter to governors from Secretary Kathleen Sebelius of the Department of  Health and Human Service Feb. 3 attempted to wipe salve on the worried brows of governors. The letter contained recommendations and pieces of advice. But it was even more an effort to tell the governors how lucky they were to have the benefits of all the technical provisions of the law to make paying Medicaid costs easier if not much fun.

“States may add or increase cost sharing,” she said, adding the words so favored by bureaucrats relishing their power: “within reason.” Sebelius also wrote: “We also are working with states to ensure they have accurate information about drug costs in order to make prudent purchasing decisions—as if governors couldn’t make “prudent” decisions by themselves.

She acknowledged the “error rate for Medicaid is 9.4 percent,”  some $33.7 billion “paid inappropriately.” Maybe “scandalously” is a better description. She said reassuringly, however, that the President “is committed to cutting the error rate in half” in 2012.

What a relief.

Sebelius also said her Department plans to reduce health costs by improving patient safety not only in Medicaid and Medicare but “throughout the private health care system”—obviously further fiddling with our private health care.

In an article last year, Reason Magazine said: “Imagine a government-run health care program” with severely limited access, uncontrollably rising costs, and often worse health outcomes than having no insurance at all; “it already exists, and it’s called Medicaid.”

Medicaid, the article explained, was originally intended “as a bulwark against further government intervention” in health care. But instead of heading off added government intervention, it became a vehicle for expansion. Medicaid outspends all other welfare programs combined.

Soon, it may overtake even out-of-control Medicare.