Republican efforts to reduce Medicaid spending are getting a great deal of attention, mostly negative because of the human factor of people losing their coverage. Medicaid is a problem, but most people don’t know much about it. Here are some facts.
Should we fix it or leave it run as is?
Medicaid started in 1965 to help under age 65 low-income individuals. It’s a joint state federal program with states determining benefits under federal guidelines and rules. On average the federal government pays 57% of the cost, but it varies by state and can be much higher.
Under the ACA most states expanded eligibility and as a result Medicaid enrollment has increased substantially. In those states that did not expand Medicaid some individuals are trapped between eligibility for the ACA and Medicaid, earning too much for one and too little for the other.
Under the ACA the federal government pays 100% of the cost for newly eligible beneficiaries and after several years this will reduce to 90% increasing the burden on states. However, the expansion of Medicaid and in fact Medicaid itself reduces the uncompensated care costs that burden the health care system, especially hospitals in lower-income areas.
Unlike Medicare, there is no dedicated tax for Medicaid, the states and federal government pay for this program from general revenue, there are no limits on Medicaid spending. As you can see below, costs and enrollment have increased substantially over the years, especially in the last three years. Medicaid competes with other programs for funding, especially at the state level.
As you can see below, at the beginning the cost per enrollee was $222, today it is over $8,042 yet if you apply health care inflation to the 1966 amount it would be only $3,911.25 in 2016 dollars. Yet Medicaid pays only about 60% of what Medicare pays which pays much lower than private insurance. This and other issues makes it difficult for patients to find a doctor accepting Medicaid.
According to the National Conference of State Legislatures:
Fraud, abuse and waste in Medicaid cost states billions of dollars every year, diverting funds that could otherwise be used for legitimate health care services. Not only do fraudulent and abusive practices increase the cost of Medicaid without adding value – they increase risk and potential harm to patients who are exposed to unnecessary procedures. In 2015, improper payments alone—which include things like payment for non-covered services or for services that were billed but not provided—totaled more than $29 billion according to the Government Accountability Office.