Unbiased Analysis of Today's Healthcare Issues

Reshaping Medicaid

Written By: Jason Shafrin - Jun• 12•06

Medicaid currently covers 55 million poor and disabled Americans; these 55 million individuals have much change to look forward to.  In February of this year, the President signed the Deficit Reduction Act (DRA)of 2005.  According the Kaiser Family Foundation, the act will reduce federal spending on Medicaid by $39 billion between 2006 and 2010, while giving states more freedom to administer their Medicaid as they please.   An article in today’s Washington Post (“States’ changes reshape Medicaid“) gives a variety of examples of how states are implementing the changes.  To generalize, the executive director of the National Governors Association stated that “additional co-pays and small reductions in benefits” will be implemented in order to avoid “pushing hundreds of thousands of women and children off the rolls.”  Specific examples of changes are:

  • Kentucky will group Medicaid recipients into 4 categories: the general population, children, the elderly and the disabled, and will vary benefits depending on one’s group.  According to the Louisville Courier-Journal (“Changes…“) many of Kentucky’s 700,000 Medicaid enrollees would be switched to managed care plans.  Some patients would “be charged a $50 copayment to go to the hospital and will be limited to four prescriptions per month.”
  • Florida plans to privatize all of Medicaid, allowing patients to choose between a variety of private health plans.  According to the NY Times (“U.S. gives Florida…“) Medicaid would shift from a defined benefit to a defined contribution entitlement where those eligible would receive a fixed risk-adjusted dollar amount to be used towards purchase of health insurance.  Also, “Medicaid recipients can ‘opt out’ of Medicaid altogether and receive subsidies to help pay the employee’s share of the premium for employer-sponsored health insurance.”  This is similar to the idea of vouchers proposed by Victor Fuchs (see my February 6th post).
  • South Carolina is planning to give its 850,000 Medicaid recipients access to health savings accounts according to the Carolina Journal (“Plans are laid for Medicaid“).  The newspaper reports that “Each would be able to deposit a subsidy adjusted for age, sex, and physical condition into his HSA, from which he could withdraw funds to purchase an approved private health plan, pay for services with cash, or some combination.”
  • According to the Heartland Institute, Oklahoma has approved a risk-adjusted defined benefit amount which they could place in their health savings account or use towards purchase of insurance. 

It is likely that many of these programs will decrease waste and give consumers more choice, but it is possible that the poorest poor will be worse off.  We need see how these programs are actually implemented, however, in order to determine their full impact.

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