Medicaid: Heads or Tails?

There are two sides to every coin. Take the $338 billion one known as Medicaid.

On one side—call it ‘heads’--the 31-year-old federal-state program pays for health care for 55 million poor and disabled people. It serves more folks than any other single U.S. health program, more even than Medicare. Medicaid covers services from doctor’s visits to hospital stays to rehabilitation and more. In fact, Medicaid pays for over one-third of all births; approximately 40 percent of U.S. long-term care expenditures; and is the primary payer for publicly provided mental health services. It covers services for people who otherwise would likely go without--low-income working parents, low-income elderly, poor pregnant women, the disabled, and poor children. Nearly half of Medicaid beneficiaries are children.

Because the rural population is disproportionately older, sicker and poorer, and has less employer-provided health insurance, the importance of Medicaid in rural America is even more pronounced. According to a Rural Policy Research Institute report, in 2002 nearly 15 percent of rural residents were enrolled in Medicaid versus 11 percent of urban residents. Likewise, 10 percent of rural elderly versus 8 percent of urban elderly got Medicaid benefits.

In addition to serving rural patients, Medicaid is also critical to maintaining our nation’s rural health care system…and rural communities. According to the report, as the source of health insurance coverage for so many rural residents, Medicaid is an all-important source of revenue for rural providers. Those dollars help keep open rural doctor’s offices, hospitals and nursing homes that would otherwise be hard-pressed to stay in business. That, in turn, helps rural communities survive by providing residents, workers and employers with must-have health care and by having those dollars turn over and multiply within the local economy.

On the tails side, $338 billion is a mighty tempting target for budget cutters, especially in the program-slashing frenzy of Washington these days and in state capitals where Medicaid takes up an average of 22 percent of budgets, more than any other single budget item save for public education. What’s more, the cost of Medicaid has been increasing rapidly—more rapidly than state revenues.

Not surprisingly given its name, the Deficit Reduction Act passed and signed into law last December landed on tails. The act cuts federal Medicaid expenses by $43 billion in the next decade. It also allows states to cut their Medicaid expenses by restricting benefits and forcing Medicaid beneficiaries to pay premiums and/or co-payments for services.

Now, I admit there’s something to be said for the rationale behind DRA. States should be given latitude to better fit programs to the local context. And people ought to bear more responsibility, financial and otherwise, for their own health—if they are able.

But when it comes to Medicaid beneficiaries, that’s an enormous if. That’s why we have Medicaid: to take care of those who aren’t able to take care of themselves. Do we really want to further unravel the safety net that helps those in need? Do we really want to add to the 48 million uninsured in this country? Should rural Americans, who already bear the brunt of so many budgetary cuts and misguided policies, be further penalized?

Compassion aside (which is where it seems usually to be these days), what of the true costs of the changes? A report by the non-profit Families USA rightly calls the approach “penny-wise and pound-foolish” and cites research showing that “even moderate levels of cost-sharing cause low-income people to delay or forgo needed care, even if seeking care early on could prevent serious and costly complications down the road.” The report cites Congressional Budget Office findings that most of the savings of cost sharing will come not from collecting revenue but from decreasing use of services.

Finally, the cuts seemingly ignore the economic benefits generated by Medicaid. According to Families USA, $98 billion in Medicaid expenditures by the states in 2001 returned nearly three times that, $279 billion, in increased goods and services. Based on such numbers, one might well call Medicaid an investment rather than an expense.

I can’t help but wonder if such considerations were part of the DRA’s formulation…or if it was simply a toss of the coin.