Medicaid Endangers Lives; Block Grants Can Save Them

Democrats and their enablers in the media are hyperventilating about the GOP’s drive to cap federal Medicaid funding with a series of “block grants” to the states as part of their replacement plan for Obamacare.

25 million people could lose health insurance,” blared the Washington Post. NBC grimly pronounced that the GOP plan “would take insurance from 30 million people.” The Chicago Tribune wailed that “Millions of lives are in Paul Ryan’s hands.”

If Facebook is looking for “fake news” to flag, it can start here. House Speaker Paul Ryan’s plan is no cause for alarm. By freeing states to experiment with new ways of caring for low-income patients, the proposal will likely make Medicaid more effective — and less costly.

Obamacare expanded Medicaid to Americans earning up to 138 percent of the federal poverty level, or $11,880 in 2016. And most of the net growth in insurance coverage in the last few years has come from Medicaid. According to a recent analysis by the Heritage Foundation, the number of Americans with insurance grew by 14 million between 2013 and 2015. Of those 14 million, nearly 12 million obtained coverage through Medicaid.

So, are those 12 million low-income Americans in danger of losing their coverage if Ryan’s reform plan is enacted? Not even close.

According to a study by Jonathan Gruber — one of Obamacare’s chief architects — the surge in Medicaid enrollment has little to do with the law’s Medicaid expansion. About 70 percent of new Medicaid enrollees were eligible for the program before Obamacare became law. They just had never signed up.

In other words, they qualified for the program pre-Obamacare. And they’ll still qualify for it after Obamacare is repealed.

Eligibility for Medicaid may be more curse than blessing, though. In terms of actual health outcomes, patients with Medicaid don’t fare any better than those who have no insurance at all.

A landmark two-year study of Medicaid outcomes in Oregon concluded that program enrollees showed “no significant improvements” in health when compared to a similar group of uninsured patients — even though Medicaid beneficiaries spent more on health care.

Another study found that major surgical patients on Medicaid were 13 percent more likely to die in the hospital than those without insurance. Similarly, colon cancer patients on Medicaid were found to experience more surgical complications and have higher mortality rates than the uninsured.

At a cost of $500 billion a year, Medicaid delivers remarkably little bang for the taxpayer’s buck. What’s more, in the current model, the federal government agrees to provide at least $1 dollar in funding for every dollar states put toward Medicaid. The more money states spend, the more federal matching funds they receive. So there’s little reason for states to limit the program’s growth.

There are better ways to insure low-income Americans — and Ryan’s block-grant alternative is at the top of that list.

The chief benefit of Ryan’s approach is that it lets states decide how to spend their Medicaid funds. Currently, state officials cannot make any changes to their Medicaid programs without going through a lengthy waiver process and obtaining federal approval. If a state with high obesity rates wishes to implement a nutrition counseling program, for instance, it can’t move ahead without government say-so. The same is true for a state that may want to explore new options for addressing the epidemic of opiate addiction.

A block grant system acknowledges that patients in Pennsylvania might have different healthcare demands than those in Arizona. When states have the ability to tailor their programs to the specific needs of their low-income populations, they can do a lot more to improve health outcomes. And by providing each state with a fixed amount of funding, a block-grant approach strengthens the incentives for states to reduce costs where possible.

Just look at a recent experiment in Rhode Island. In 2011, the state convinced the federal government to grant flexibility to its Medicaid program. Last year, the state was able to save $11.1 million in hospital expenses and $8.3 million in nursing home spending with a new funding model that offers healthcare providers bonuses for delivering higher quality care. This year, Rhode Island expects to save $100 million while simultaneously expanding access to care.

Or consider Indiana, which was granted a Medicaid waiver in 2007. The state’s current Medicaid model — known as Healthy Indiana Plan — provides patients a high-deductible health plan paired with a tax-advantaged health savings account, known as a POWER account. A combination of state and individual POWER account contributions cover the patient’s first $2,500 of health expenses, and then the insurance plan covers the rest.

Enrollees receive financial rewards for using preventive services. But the plan imposes a co-pay when patients use an emergency room for care available at a primary-care office. Not surprisingly, these reforms have helped increase the use of preventive care among program enrollees while reducing reliance on costly emergency rooms.

Patients like it. The program boasts an 80 percent patient approval rating.

Under a block-grant model, such Medicaid success stories would be far more common.

Attempts to treat Ryan’s Medicaid proposal as a threat to current beneficiaries have the situation backward. The current Medicaid system is the real danger to low-income patients. A block-grant strategy would rescue Americans from a dysfunctional program — and save money in the process.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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