Cost of Medicaid in Critical Condition

Posted September 23, 2005 at 2:38pm

“Medicaid Providing Viagra to Rapists, Sex Offenders in New York, Other States.”

“Tennessee Cuts 300,000 from Medicaid Rolls.”

“100,000 Missourians Lose Access to Medicaid Benefits.”

These headlines are more than a sample of the latest bad news on Medicaid; they are the symptoms of a health system that is on life support. Medicaid has done a remarkable job in the 40 years since it was organized, but today it is in a full-blown financial crisis.

The federal-state partnership that is Medicaid now covers more than 50 million people, from low income seniors to single mothers and their children. Medicaid has prolonged the lives of millions over the years, yet there is some confusion about what it is. Many think of Medicaid as a twin of Medicare, the retirement health care program that is financed by workers from money earned during a lifetime of work. Medicaid, in contrast, is a welfare program for the poor that is funded by state and federal taxpayers.

Health care costs are rising for everyone, but the cost of Medicaid is proving unsustainable. It isn’t as if taxpayers aren’t already doing their part. Federal and state tax expenditures on the program have risen 56 percent over the past six years. Medicaid now costs more than $300 billion a year, and total spending will top $4.5 trillion over the next 10 years, according to the Centers for Medicare and Medicaid Services. At the state level, Medicaid is now the biggest part of every state’s budget, exceeding even the cost of educating children. Analysts predict Medicaid, if permitted to continue growing at its current rate, eventually will absorb 100 percent of all state revenues.

What’s behind spiraling Medicaid costs? According to the governors, led by Virginia Democrat Mark Warner and Arkansas Republican Mike Huckabee, the reasons are as diverse as the program’s beneficiaries. Health care costs are up across the board. The graying of our population is another cause. Some employers are dropping health coverage and some workers prefer free Medicaid coverage to paying premiums for company health plans, anyway.

Fortunately, the nation’s governors — Republican and Democrat alike — have shown tremendous leadership, offering a number of initiatives to rein in spiraling costs while stretching Medicaid dollars to better serve their people. As Congress works this fall to reform Medicaid, these recommendations from the National Governors Association will guide our efforts.

More flexibility to provide better services. Medicaid offers cradle-to-grave coverage, but one size does not fit all, and governors want the ability to tailor their programs to the beneficiaries. Simply put, what might work well for seniors in Florida may not help toddlers in Oregon. States should have greater flexibility to better target scarce resources and offer coverage that better meets each patient’s needs, like those health benefits offered by state employee and large private plans.

Root out waste. The government routinely overpays for prescription drugs. In fact, last year our committee learned that Medicaid once paid $5,336 for a prescription that only cost the pharmacist $88. Until we revamp Medicaid’s drug purchasing system, we’re throwing away money that could be used to treat patients.

Promote personal responsibility. Right now, states can charge a co-payment of no more than $3, but senseless Medicaid rules prevent them from collecting even that small amount. What happens then is hardly a surprise. Offered free health care, beneficiaries predictably don’t give much thought to the cost of that care. The consequence is that people take sniffles and ear infections to the emergency room, where any kind of health care costs the most. Health subcommittee Chairman Nathan Deal’s (R) Georgia district presents a typical example: In one year, $5.6 million in Medicaid funding was spent on treating non-emergencies in one ER alone. Granting states the option to collect modest co-payments, where appropriate, will raise cost awareness and encourage visits to clinics instead of ERs.

Target fraud and abuse. Increasingly, some seniors who worked all their lives to gain wealth suddenly transfer or just hide assets in an attempt to become “poor.” That’s because by achieving poverty, they become eligible for free nursing home care. As The Wall Street Journal noted earlier this year, just enter the phrase, “Medicaid estate planning” into any Internet search engine and you’ll be overwhelmed by offers from the 5,000 members of the National Academy of Elder Law Attorneys and others. “It’s penny-wise and pound-foolish not to consult with an elder law attorney to seek guidance through the process,” advises one attorney. “When you retain us, we will prepare a comprehensive plan to restructure your assets to meet Medicaid program requirements.” To these lawyers, “Medicaid is the primary payer of long term care,” as one put it. In fact, Medicaid was and is supposed to help the poor, not to support lawyers and the people who can afford to hire them. Congress must encourage long-term care insurance and other incentives for those who are not impoverished, but winking at abuse is no longer an option.

It’s also important to recognize the critical role Medicaid is playing to meet the health care needs of Hurricane Katrina’s survivors. In no way will our legislation undermine that care. However, as Mississippi Gov. Haley Barbour recently told me, Hurricane Katrina actually increased the need for Medicaid reforms. In light of the increased health care costs imposed by Katrina, governors are now desperate to get the flexibility they need to manage this program. Indeed, we need these reforms to ensure Medicaid will be there as a safety net in the future for many of these same Americans.

In many ways the changes we propose and the criticisms of those proposals echo the welfare reform debate of 10 years ago. Opponents were as vicious as they were wrong. Just before the House voted to approve that bill, one Congressman called the measure, “Downright lowdown. …What does it profit a great nation to conquer the world, only to lose its soul?” he wondered. Added another, “My president — he’s a winner. And the kids are the losers.” History proved otherwise.

Common sense reform will ensure that Medicaid can save and prolong millions more American lives for years to come. Without it, the safety net will rot away.

Rep. Joe Barton (R-Texas) is chairman of the Energy and Commerce Committee.