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Life Health > Health Insurance

Why Medicaid for all regular folks is not heaven

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Some really smart, admirable people are now looking at the problems with the Affordable Care Act public exchange program and saying that simply offering a Medicaid buy-in program might be a cheaper, easier way to get people covered.

I think that’s like trying to use malaria to cure Zika. Maybe it would work, but it doesn’t seem like a prudent thing to do.

One problem is that, in spite of studies that show how wonderful Medicaid coverage is, we all know that doctors and hospitals often hate taking Medicaid. 

The bigger Medicaid is, the less capacity providers will have to offer Medicaid plans the kinds of loss-leader rates the providers now offer them.

Another problem is that, in the long run, people in programs such as Medicaid have less real power than other patients to use their consumer power to improve the quality of health care and health coverage. Even in areas with two or more managed Medicaid plans competing for people’s business, the underlying message is that the enrollees are relying on the fine generosity of their fellow citizens and ought to be happy with what they get, even if what they get is awful.

And I think a third, bigger problem is that Medicaid plans look great now partly because Congress is in such bad shape.

Congress is too blocked up to do anything much to fix the ACA public exchange system, the ACA insurer risk management programs, or the ACA health insurance market rules, but it’s also too blocked up to do much to cut Medicaid funding.

Existing federal rules also give state Medicaid program managers much more freedom than commercial plan managers to hold down costs by limiting how much care they cover. In September 2014, for example, after the ACA had already prohibited commercial plans from imposing annual or lifetime benefits for essential health benefits on non-grandfathered plans, Pennsylvania’s Medicaid plan was proposing a limit of eight radiology tests per year for new, high-risk Medicaid enrollees, and a $450 annual limit for the new high-risk enrollees’ lab work fees.

In other words: Congressional gridlock means that a commercial individual plan may face ferocious competition from a Medicaid plan that can hold its costs down by using cost-control measures that would be illegal for a commercial plan to try.

Related: Health care will always be a business not a right

Celebrating how great Medicaid plans look when compared with commercial individual plans is really celebrating a policymaking failure that tilts the playing field in the Medicaid plans’ favor.

If Congress were working better, it could easily fix that problem by applying the ACA rules to Medicaid, or by giving the issuers of the commercial individual plans the option of using the Medicaid rules.

Finally, the ultimate problem here is that both the Medicaid program and the ACA individual market are both just puppets on a string.

Policymakers in Washington have no respect for the financial integrity of either program, the needs of the commercial vendors operating in either program, or the idea that they ought to try to operate in a transparent, predictable way. If one party ends up with the ability to enact legislation in 2017, that party could turn either program upside down with one big bill, and cost insurers and agents billions of dollars, with no more care than if they had voted to name the daisy the national flower.


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