Medicaid Cuts and the March Toward a Charity Model of Care

By Frank Pasquale
In Medicaid
June 30, 2011
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pasquale3Last week, Nic Terry compiled a list of current threats to Medicaid funding. As he noted then, Medicaid coverage is increasingly becoming meaningless for those seeking specialist care. Though more people are slated to enter the program, policymakers are unlikely to fix these flaws before they arrive. To the contrary, “physician reimbursement will decrease, and hospitals are looking to cross-subsidize some of their Medicaid patient expenditures from the privately insured.” Something to remember next time we hear about how imperative it is to cut public health expenditures: there is an inevitable pressure to “rob Peter to pay Paul.”

The budget drama narrative has so far focused on Republican efforts to further slash (or end) Medicaid, and Democratic resistance. But now even the Obama Administration is showing signs of reverting to form and endorsing a patina of Medicaid coverage without its substance. It is now too scared to even try to assess the full extent of the access problem. Like “death panels” before, the buzzword “spying on doctors” ended a promising program to measure the relative difficulty of getting access to care using different forms of insurance.

Obama officials are also engaged in more troubling substantive capitulations. Consider this CBPP report:

An Obama Administration proposal that’s on the table for budget negotiators would reduce federal Medicaid expenditures by reducing the federal share of Medicaid and CHIP costs, shifting costs to states and likely prompting states to cut payments to health care providers and to scale back the health services that Medicaid covers for low-income children, parents, people with disabilities, and/or senior citizens (including those in nursing homes). . . . The proposal would replace the various matching rates at which the federal government reimburses states for their costs in insuring people through Medicaid and CHIP with a single “blended rate” for each state. A state’s blended rate would be set at a level that provided the state with less federal funding than under current law, thereby saving the federal government money.

Abigail Moncrief has noted that states “are statutorily required—and should be judicially required—to pay a reasonable price for the services they buy” by the Medicaid Act’s equal access provision (42 U.S.C. 1396a(a)(30)(A)). But the Obama Justice Department is apparently complementing the budget team cost cutters by arguing that the Supremacy Clause does not “provide[] a cause of action for an injunction to enforce” the equal access provision. As Steve Vladeck observes, this is “a shift in policy that, if endorsed by the Supreme Court, would make it all-but-impossible to enforce the equal access mandate–one of the most important statutory requirements of the Medicaid program.”

Put it all together, and you have what bloggers Joan McCarter and Digby call a serious reversal for the President:

I don’t think anyone expected the Democratic leadership and the president to walk away from their own hard fought health care reforms before they even had a chance to be implemented. . . . I did think they would have wanted to give their legacy issue a chance to be implemented in full at the beginning, so they could continue to brag about bringing health care to 30 million uninsured Americans if nothing else. . . .But as the president says, in these tough times the government has to tighten its belt just like all American families. I guess he must realize that one of the things American families have had to cut out is their health insurance. So much for that legacy.

Perhaps a “balanced solution” to the budget debate is impossible now. But let’s at least acknowledge where we are heading with the endless Medicaid cost cutting. Much of the developing world has what is essentially a “charity option” for the very poor: they have nowhere near the purchasing power necessary to buy care, but have to rely on the kindness of strangers or NGO’s. We are not imminently headed to that level of catch-as-catch-can care for all of the Medicaid population’s problems: very urgent problems will continue to get attention due to some combination of EMTALA and Medicaid funding. But for many other types of issues, we may need to rely more and more on a combination of cost-shifting and charity. One model is the Global Eye Foundation in India, where “more than 80 percent of the surgeries that the model hospital performs are free of cost to the patient.” When you hear establishment economists talk about increasing the “competitiveness” of the American labor force, and fighting rising health care costs, remember that moving to a developing world model of care is one powerful way of achieving those ends.

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