The fastest growing program in state budgets threatens the fiscal health of states, and the physical health of poor people.
And if left unaddressed, Medicaid—that well-intentioned Great Society program to provide for the health care needs of poor people—will bankrupt the states or create even more pressure for them to ration care.
The federal government will spend about $177 billion on Medicaid this year—a four-fold increase since 1990. States will spend a little less than that, about $156 billion.
Some states have tried to pay for Medicaid increases by raising taxes. Tennessee’s Legislature in the late ‘90s, for instance, attempted to install an income tax for the first time in its history, all to pay for its swollen TennCare program (a program, by the way, based on the model put forth by the Hillary Clinton task force on health care). But residents of the Volunteer State would have none of that and managed to defeat those proposals several times.
Other states are changing eligibility requirements, reducing payments to providers, increasing co-payments or rationing care. For example, many states are trying to save money by restricting the kind of drugs and treatment poor people can receive.
But there is a way out using Health Savings Account, which were recently made available to the under-65 population.
Medicaid could become a high-deductible policy, or enrollees could be given a private sector high deductible policy. The state would also deposit a fixed amount on money in their HSA.
They could then use that money for their routine health needs until they reached their high deductible. After that, the catastrophic insurance would take over. But the money in the account would belong to them, so they would have an incentive to get value for their health care dollars.
By giving these consumers the power to spend their health care dollars wisely, Medicaid spending would decline – relaxing the financial pressures on the states. More importantly, health care quality and satisfaction for the poor would improve.