Medicaid and health choice

Medicaid in North Carolina desperately needs patient-driven reform. State and federal expansions of Medicaid in the last 20 years have helped make it the fastest growing portion of the state budget.

North Carolina already has one of the most expensive Medicaid programs in the Southeast. Needed reforms go beyond cracking down on abuse and implementing a preferred drug list. Without reform, the state must either reduce the number of services covered or reduce the number of people eligible for Medicaid. With patient-driven reform, most enrollees can help reduce costs by making decisions about their own care.

Key Facts

Recommendations

  1. Seek a block grant. State policy should not be held hostage to the whims of politicians in Washington, D.C. North Carolina should seek a block grant that would give the state more freedom to reform Medicaid.
  2. Use funds for premium support, not government insurance. Despite its expense, Medicaid pays providers less than private insurance and leaves customers with less choice. The state should provide risk-rated subsidies to Medicaid recipients that can be used to purchase private insurance, with the option to continue coverage after they lose eligibility.
  3. Offer patient-controlled accounts. Medicaid dedicates significant resources to monitoring and approving health expenses, but fraud and abuse remain major problems. Individuals with private sector health savings accounts have been more active in managing their health and had lower costs than those with traditional insurance. Medicaid patients could find similar savings. If the state allowed recipients to keep these accounts, the benefit could offset the high effective marginal tax rate that results from losing benefits.


Analyst: Joseph Coletti
Director of Health and Fiscal Policy Studies
919-828-3876 • jcoletti@johnlocke.org