Medicaid Debate N.Y. Times Editorial

March 14, 2005 Medicaid in the Cross Hairs

Everyone seems to be howling about the cost of Medicaid, and no wonder. Spending on the health care program for the poor has been exploding, up from about $200 billion in 2000 to more than $300 billion at last count. State governments, which share the costs with the federal government, were hit with the bill just as the economic downturn hit their revenues. And the Bush administration, awash in red ink, wants to cut costs.

The biggest problem with Medicaid is that it has been deputized to do a lot of jobs it wasn’t originally created for. Intended as a health insurance program for families on welfare and people with disabilities, Medicaid has gradually been stretched to cover for Congress’s failure to deal with the millions of low-income American workers without health insurance, and the refusal of Medicare to pay for long-term nursing home care for the elderly.

It’s understandable that the states (and in New York, the localities, which pay for part of the program) want to control this fiscal albatross. And while this page has deep disagreements with the current budget priorities in Washington, both the White House and Congress have a responsibility to get a handle on Medicaid’s rising costs. But the effort should account for three important points:

Medicaid is performing a critical service that the public supports – making sure that poor children get proper medical care, that working families have health coverage and that old people get quality care. The driving force behind the recent upsurge in costs, according to an analysis by researchers at the Urban Institute, was a big increase in the number of people enrolled. The wobbly economy left more workers with incomes low enough to qualify for Medicaid and fewer employers offering affordable health coverage. That is hardly an indictment of Medicaid. The program was doing what it was meant to do, filling a gap for people in real need.

There is a difference between real spending cuts and simply moving the bills into a different account book. People’s health needs won’t disappear just because Medicaid stops paying for treatment. People will turn instead to hospital emergency rooms, adding to the huge burden of charity care at hard-pressed medical institutions. Medicaid itself is the ultimate victim of cost shifting. A great deal of its cost is due to Medicare’s failure to cover some vital services for the elderly – particularly nursing homes. As a result, people of modest means routinely impoverish themselves on nursing home bills, until they qualify for Medicaid. When Medicare begins paying for prescription drugs for the elderly, states will continue to provide the bulk of the money for coverage for the elderly poor. Congress insisted on that to keep down the cost of the new program.

Despite loose talk about Medicaid providing Cadillac services when a Chevy would do, the program is extremely parsimonious in big ways. Most of its beneficiaries are in health maintenance organizations that are often shunned by better-off Americans. It typically pays hospitals and doctors far less than Medicare or private plans, making many doctors unwilling to accept Medicaid patients. Its spending per enrollee has increased more slowly than private insurance spending, and it delivers care more cheaply than a private plan. It’s a pretty safe bet that few of the critics talking about overly generous benefits would be willing, in real life, to exchange health plans with a Medicaid recipient.

That said, there are problems with Medicaid that need to be addressed. Sordid Medicaid mills sometimes hustle patients through at a rapid clip or charge the program for services not rendered. Middle-class people sometimes hide or transfer assets or income, often quite legally, to qualify for nursing home benefits. Many states have used outrageous accounting tricks to gain millions of dollars in federal matching funds to which they were not entitled.

Such abuses can and must be curtailed, and the Bush administration deserves credit for trying. But eliminating fraud and closing loopholes will barely make a dent in the overriding problem – the inexorable rise in Medicaid costs that is restricting the ability of states to finance other vital services, such as education and transportation.

In seeking to reduce the cost of Medicaid, it will be crucial to look hard at long-term care, which soaks up roughly a third of total Medicaid spending. In a rational world, those costs would be paid by Medicare, and the fact that Medicare is already in deep, deep financial trouble is no reason to continue forcing the states to pay.

It is long past time for a serious national discussion about how best to handle an aging society’s needs for long-term care for victims of Alzheimer’s, Parkinson’s and other ailments that require constant medical or custodial care beyond what the immediate family can provide. We don’t argue with fiscal conservatives who say that the government should clamp down on people who shift all their assets to their children in order to make Medicaid pay for nursing home care. Citizens have a responsibility to pay their own way as much as possible. Working with the private insurance market to make sure people can get coverage for old age, and making it as automatic as buying car or home insurance, could make a big difference.

Meanwhile, without a broad plan for long-term care, it would make little sense to cut deeply into Medicaid, the default funder of services needed by our aging society.

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