The Leaflet: How to Fix Medicaid

Published April 27, 2017

The House of Representatives is expected to try and repeal and replace parts of the Affordable Care Act (ACA), and regardless of the results, states will have decisions to make –  especially when it comes to Medicaid. According to the Kaiser Family Foundation, in states’ fiscal year 2015, Medicaid , in state fiscal year 2015 expenditures made up an average of 19 -percent of state general fund expenditures. Thirty-two states have chosen to expand their Medicaid programs under the ACA.

The phase-down in the federal government’s Medicaid matching rate over the next couple of years will put even more financial pressure on the states. There are also concerns about Medicaid recipients’ access to care and the health outcomes experienced compared to those with private insurance.

Justin Haskins, Michael Hamilton, and Sam Karnick of The Heartland Institute have proposed the “Personal Health Care Safety Net Medicaid Fix” as a potential solution to the Medicaid problem. It would put $511 billion of the $545 billion spent annually on Medicaid in the hands of patients. The plan would do this by depositing $7,000 per year in a health savings account (HSA) for every adult and child enrolled in Medicaid. Recipients could use these HSA dollars to buy private health insurance and other eligible health care costs, including deductibles, prescriptions, and copays. Funds left over at the end of each year could be rolled over into the following year, allowing individuals to build a personal safety net, and families could share the funds between one another, making them less dependent on expansive government services.

In an op-ed published in the The Wall Street Journal, Haskins and Hamilton writes, “Most recipients would probably use the funds to buy private health insurance, many for the first time. The average annual premium last year for an (overpriced) bronze plan on the ObamaCare exchanges was about $3,100 for a 30-year-old, $3,500 for a 40-year-old, $4,900 for a 50-year-old, and $7,400 for a 60-year-old. After that, at age 65, Americans qualify for Medicare.”

In a Research & Commentary, Matthew Glans notes, how  “Medicaid has long used taxpayer dollars inefficiently. A report from the Department of Health and Human Services (HHS)found the average cost of the ACA’s Medicaid expansion enrollees was nearly 50 percent higher in fiscal year 2015 than the levels HHS had projected the previous year. In 2015, Medicaid expansion enrollees cost an average of $6,366; HHS had predicted it would be $4,281. HHS also reported Medicaid spending reached $554.3 billion in fiscal year 2015, which is 5 percent higher than its projections. This is not surprising; the increased federal funding incentivized states to increase enrollment and boost payment rates.”

Instead of waiting for federal changes to ACA, states should begin seeking waivers from HHS to innovate and reform their Medicaid programs in a way that can save money and lead to better health care outcomes. The Medicaid Fix would be a step towards empowering those most in need with access to quality health care, and not simply health insurance coverage, and it would help family members take care of one another so they are less dependent on costly government services that trap people in poverty.

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