We currently live amidst a Medicaid masquerade, where many unintended consequences of this government entitlement program go unnoticed or are simply ignored.
North Carolinians see that over 1.8 million of their fellow state residents receive Medicaid benefits, and over 67% of this population receives care through Community Care of North Carolina (CCNC), the questionable "gold standard" of Medicaid managed care organizations (MCOs).
But North Carolinians do not recognize that a whole lot of their taxpayer dollars ($14 billion annually to be precise) does not satisfy the entitlement program’s insatiable appetite. North Carolina’s citizens now face the burden of a $248 million overrun, recently announced by the state’s Department of Health and Human Services. The $135 million increase in the anticipated shortfall dates back to Governor Perdue’s 2012 Administration where there was a miscalculation of total federal funding.
Diagnosis
Medicaid’s ineffective utilization of its unpredictable budget is a parasitic disease to taxpayers and beneficiaries. Fortunately, the problems within Medicaid have been diagnosed.
Fiscal Sign: Medicaid’s Federal Match Rate
The state and federal governments jointly fund Medicaid. The amount of federal funds distributed to a state depends on the state’s economic condition. In other words, the poorer a state, the more federal dollars it receives. This is known as the FMAP (Federal Medical Assistance Percentage), or the federal match rate. Currently, North Carolina’s federal match is 65.51% for FY 2013, the 17th highest in the United States. North Carolina taxpayers contribute about 36 percent of the state’s Medicaid spending.
The federal match creates perverse incentives within a state’s Medicaid budget because it operates on an open-ended annual contract. States tend to spend more Medicaid money because they know Washington will rescue them at the end of every fiscal year. The absence of a federal cap removes financial responsibility and drowns state budgets in a sea of "red."
Physical Symptom: Oregon Health Insurance Experiment
Medicaid proponents argue that insuring more people through Medicaid will not only reduce unnecessary and costly Emergency Department visits but also yield positive health outcomes.
Until now, the definition of "positive health outcomes" has remained questionable. A monumental study, known as the Oregon Health Insurance Experiment (OHIE), finally provides the public with concrete answers to the ongoing questions about health outcomes. Results imply that Medicaid is the epitome of wasteful spending; the government program did NOT improve enrollees’ health, and emergency department admissions numbers did not significantly change.
In 2008, Oregon conducted a Randomized Control Test to monitor differences in health outcomes between the uninsured and Medicaid populations. 10,000 Oregonians won a "lottery" to be able to enroll in Medicaid. Researchers then compared the health outcomes of 6,387 low-income adults who actually did enroll in the program with 5,482 who were not selected. The four major health measures evaluated amongst both experimental groups were elevated blood pressure, high cholesterol, elevated hemoglobin levels, and long-term cardiovascular risk.
As expected, utilization of services and health expenditures increased amongst enrollees. While the number of diagnoses and prescriptions also increased, no change in positive health outcomes was observed. Specifically, researchers found that those who received Medicaid increased their annual health care spending by $1,172, or 35 percent, over that of those who did not receive Medicaid.
Advocates, however, still preach the weak argument that enrollees who self-reported their health to be good or better rose from 55 percent to 68 percent. However, two-thirds of the improvement in self-reported health occurred almost immediately after enrollment, before any increases in medical consumption. The authors posit much of this could reflect ‘an improved overall sense of well-being’ rather than ‘changes in objective physical health.’"
Time for A Real Change
Taxpayers dish out almost half a trillion dollars each year to Medicaid. Clearly, the program is not working. Study results did disclose, however, that Medicaid patients feel less "financial strain." Perhaps Avik Roy, Senior Fellow at the Manhattan Institute and Forbes Contributor, says it best: "…if relieving financial strain is all we are trying to do, we’d be better off giving poor people the cash and letting them spend it how they choose."
*Stay tuned to read more on how Medicaid can be cured via the prescription of Consumer-Driven Medicaid.
