Fixing Medicaid

Published January 1, 2003

One of the reasons most states struggle with balanced budgets is the escalating cost of Medicaid.

Medicaid costs rose 13 percent in 2002 and by an average of 9 percent a year since 1997. States now spend $280 billion on low-income care in Medicaid and $250 billion on senior care in Medicare–a $30 million difference for a much larger population.

That’s almost $1,000 for every man, woman, and child in the country–or $4,000 for a family of four. Many taxpayers pay more in taxes to fund health insurance for the poor than they pay for private health insurance for themselves and their families. Left unreformed, Medicaid could bankrupt every state in about 20 years.

If ever there was evidence that government-run health care–sometimes called single-payer or national health care–does not work, this is it.

To help address cost issues, the Bush administration has created a plan that encourages more state flexibility. Giving states a chance to be smarter buyers of health care could potentially save millions of budget dollars.

In order to take advantage of free-market techniques and opportunities, states need to apply for a federal waiver, called a HIFA (pronounced “high-fa”), which stands for Health Insurance Flexibility Act.

Arkansas, Florida, and New Jersey already have obtained HIFA waivers. The evidence shows the Bush plan has been highly successful.

IT’S YOUR HEALTH is written by Conrad Meier, senior fellow in health policy at The Heartland Institute. This program is produced as a public service by Radio America. Meier passed away unexpectedly on March 18, 2005.