The catch phrase "Privatizing Medicaid" that is currently being thrown around by the media is misleading.
A number of states, most notably Arkansas, Ohio, Wisconsin, and Florida have proposed methods of "privatizing" the optional Medicaid expansion dollars through which the federal government agrees to fully fund, for the next three years, the provision of health coverage to low-income citizens up to 138% Federal Poverty Level (FPL). For more on this, see the health care policy proposals in the John Locke Foundation’s latest book, First In Freedom.
However, these seemingly "unique" proposals of how best to utilize federal expansion dollars are nothing new. In a recent Washington Post interview, GWU Medicaid policy expert Sarah Rosenbaum says, "Keep in mind that states have been using Medicaid to buy managed care plans since the beginning of Medicaid. The whole notion of this as a conceptual breakthrough for Medicaid feels a bit off for me."
Arkansas and Ohio wish to divert their federal Medicaid Expansion dollars into the health insurance exchanges that are to be implemented by either the federal government or the states themselves beginning in 2014. In other words, Governors Mike Beebe (D) – AR and John Kasich (R) – OH are expanding their health insurance exchanges. New Medicaid-eligible enrollees will receive Medicaid benefits through the states’ health insurance marketplace.
Governor Scott Walker of Wisconsin is taking a slightly different approach by scaling back Wisconsin’s state-wide Medical Assistance program, BadgerCare, from 200% FPL to 100% FPL. Walker seeks to bridge the gap by enrolling the new Medicaid population with income from 100-138% FPL on the insurance exchange.
Meanwhile,Florida Governor Rick Scott plans on distributing his state’s Medicaid Expansion money among its five managed care pilot programs.
Privatizing Medicaid: Not What It Seems
As private insurance companies operate within the health insurance exchanges, they cannot be defined as truly "private" entities. Because these insurance companies must abide by strict government regulations, private insurers operate under "managed competition." In their book, Healthy Competition: What’s Holding Back Health Care and How to Free It, Cato Scholars Michael Cannon and Michael Tanner define managed competition.
One step removed from government management of the health care marketplace is ‘managed competition’. That idea would leave the provision of health care in private hands, but would create an artificial marketplace run under strict government control.
The Bottom Line
It is possible that the expanded Medicaid population will have to contribute a cost-share of 2% towards the exchange to receive Medicaid benefits. Despite the notion that such citizens may finally have a thin layer of "skin in the game," the rise in premiums will only continue.
The Congressional Budget Office projects that each additional Medicaid enrollee who receives coverage through the exchange will cost the federal government an additional $3,000 over gaining access to the original Medicaid program. This figure would increase the cost of the exchanges by 13-14%.
Throwing federal money at an already broken entitlement system is not an effective means to a desired end. Medicaid Expansion is simply a short-term budget fix. Only ten states would stand to save any money at all, and even in those, it would be an insignificant amount, due to the fact that their Medicaid programs are already bloated. A major question states should be asking themselves is what happens when this money runs out?
Christie Herrera of the Foundation for Government Accountability describes Medicaid Privatization as, "A poison pill no other state would want to swallow."
Despite the warning, Pennsylvania wanders down Temptation Road. Governor Tom Corbett has been flirting with the idea and is scheduled to meet with Kathleen Sebelius, Secretary of the Department of Health and Human Services, on April 2nd.
Three Years of Unintended Consequences
This week marks the third-year anniversary since the unfortunate implementation of the Patient Protection and Affordable Care Act on March 23, 2010. It looks like states are either still searching for affordable provisions within the legislation’s 2,700 pages of false promises — or steering down the wrong path in thinking they have found an affordable solution.
North Carolina is one of the 18 states saying no to the optional Medicaid Expansion. Governor Pat McCrory takes the rational approach by choosing to first tackle much-needed reform within North Carolina’s own broken Medicaid system. Such problems include wasteful spending, overutilization of services, and unnecessarily high administrative costs.
