- The Washington Times - Friday, May 9, 2003

Medicaid reform in dire need

Sleeping giants are easy to ignore, particularly when noisier behemoths clamor for attention. Such is a tale of federal health care for the poor.

House and Senate lawmakers are feverishly designing major reforms to the federal government’s centerpiece program providing health benefits to senior citizens — Medicare. Congress hopes to improve the program, add a prescription drug benefit and put it on a path to long-term financial solvency. Yet, while these changes are vital, there is an even larger health program in need of just as much reform, but capturing far less attention — Medicaid.

Despite its stunning growth over the past decade, Medicaid is fraught with waste, complication and inflexibility. It provides its beneficiaries little to no choice, and even fewer incentives, to promote a healthy lifestyle. Medical technology and delivery have evolved with exponential speed in the past 40 years; Medicaid has not. It’s a 1965 Ford Falcon version of health care.

Reforming the Medicaid program is important at a number of levels. Empowering low-income Americans with more choices and control over health care is the first step toward improving quality and lowering costs. States also need more flexibility in managing Medicaid — poor people in Maine have different health care needs than those in Arizona. Finally, Medicaid reform is an important piece of a compassionate conservative agenda. Advocating changes in Medicaid, along with reforming education through school vouchers and instituting changes in welfare, are the building blocks of an alternative to big government, federal government-knows-best programs. Real reforms of Medicaid offer Republicans a chance to break the Democrats’ monopoly on helping the poor — a regime constructed during the Great Society that has locked many Americans into generations of poverty and government dependency.

Created in 1965, Medicaid is a joint federal-state program aimed at providing health care services to the poor, but its scope and cost are growing at unsustainable rates. Medicaid’s share of overall state budgets has more than doubled in the last 15 years, rising from 10 percent of total state spending in 1987 to 20.5 percent in 2002. It is now the largest government funded health care program. Michael Greve at the American Enterprise Institute notes that “in 2002, for the first time, Medicaid spending ($258 billion) exceeded Medicare ($230 billion). The Congressional Budget Office projects the gap to widen in coming years.”

Yet, does more money mean better health care? Like so many counterfeit promises that equate increased spending with greater compassion, the answer is clearly no. Increasingly, doctors and other providers refuse to accept Medicaid recipients because of low reimbursement and mountains of paperwork.

Reforms aimed at empowering Medicaid recipients with more decision-making over their own health care needs are a strong alternative to a federally directed program. James Frogue of the Heritage Foundation, for example, advocates greater use of waivers so states can expand programs such as the current Cash and Counseling experiment. According to Mr. Frogue, this program “evaluates how Medicaid beneficiaries [consumers] would fare in a system that allows them to buy their own personal and community-based services, assisted by a consultant, with a defined contribution from their state’s Medicaid program. Initial reports have concluded that the experiment is overwhelmingly popular.”

President Bush, in his fiscal 2004 budget, recognizes the need for state flexibility in Medicaid to ease implementation of programs such as Cash and Counseling. The White House plan, called State Health Care Partnership Allotments (SHCPA), provides states with a choice to maintain the current system or convert their allotments into block grants. Those choosing the SHCPA would enjoy much greater flexibility. This approach is consistent with plans advocated by Federalism expert AEI’s Greve. He argues that “the way to change the states’ incentive is to cap the federal Medicare share and to convert it into a block grant.”

Finally, reforming Medicaid represents a critical part of promoting a compassionate conservative alternative to the federal welfare state. Republicans should promote positive alternatives that provide Medicaid beneficiaries more control over their health care needs and expand state flexibility through block grants. No one would defend the current Medicaid system, born out of the Great Society, as an overwhelming success. These conservative alternatives will provide better services for low-income Americans.

Changing the Medicaid program will help stem unsustainable entitlement spending and assist states suffering from dramatic fiscal policy challenges. Moreover, it will also help Republicans and other conservatives interested in constructing a new paradigm to help needy Americans. Congress should no longer ignore this forgotten giant. The poor must be empowered to make choices that move them down the road toward prosperity, respect and self-sufficiency.

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