Matthew Holt

POLICY: Medicaid as the route to universal insurance?

During the Dolphin Group webinar I was presenting on today, I was asked if Medicaid would become a communal buying pool that would solve the unisurance problem. I rather fliply dismissed the idea, and Scott Tiazkun, healthcare analyst, IDC Research mentioned that something like that was going on in Massachusetts. Now there have been local changes in how many people Medicaid covers — for instance Tennessee put almost all its uninsured into Medicaid in the mid 1990s and more recently threw most out, and Utah changed the way it paid for Medicaid and enrolled more people — but we’re nowhere near the Clinton plan of putting all of Medicaid, all the uninsured and most small business employees in big buying pools. So I felt fairly safe saying what I said, but I also wasn’t exactly working from the latest data in my head. (Remember this was a webinar about health plan web strategies!)

To be honest I knew that Medicaid had picked up its enrollment relative to private payers in recent years — particularly in the recent recession, and as I really hadn’t looked much at this recently, I spent a bit of time today digging. What I did know is that the restrictions on Medicaid eligibility were greatly slackened at the end of the first Bush Administration and (from memory) the numbers on Medicaid went from the mid-20 millions in 1989 to nearer 35 million in the mid 1990s (with most of the rise during to the 1990-2 recession). Then under the SCHIP (health insurance for children) program in the mid-to late 1990s, another several million kids were put into Medicaid. Now some 5 million of that 35 million were dual eligibles (poor seniors on Medicaid and Medicare) and were double counted, but nevertheless the number of Medicaid recipients has gone up quite a bit. USA today reported last week (chart lifted from their site) that the number went from 34 million in 1999 to 47 million this year.

Us_mcaid The reason they gave in a companion article was that because welfare had essentially been abolished back in 1996, states no longer gave Medicaid only to AFDC recipients, but now have the freedom to base eligibility on income. And although eligibility has toughened up and rolls have been cut somewhat in most places during the most recent recession, in general states are getting more relaxed about eligibility requirements and some states such as Minnesota and Massachusetts are actually trying to add to their rolls.

I went to look at my estimates for the IFTF/RWJ 1997 Ten Year Forecast and I then estimated mostly just on population growth that by 2006 some 35m would be on Medicaid (which equates to 40-42m if you count in the dual eligibles). So things have progressed faster than I thought. The Center for Health System Change reported that despite a rise in the number of Americans getting employment based-insurance in the boom times, that number fell from 67% of the under-65 population in 2001 to 63% in 2003, and that most of that decline was replaced by people moving into Medicaid, although the number of uninsured did rise slightly too. Clearly at the margin Medicaid is replacing employer-based insurance. But have the numbers within Medicaid really gone up quite so much?

Using some data from 1993 that CMS has available, it looks as though some 5 million children got into Medicaid (or separate but equal SCHIP programs) between 1998 and 2003, and this seems equivalent to the data that HSC used in its study. Kaiser Family Foundation (which is a wealth of information about Medicaid) in a January 2005 fact sheet said that in 2003 Medicaid covered 25 million children, 14 million adults (primarily low-income working parents), 5 million seniors and 8 million persons with disabilities. That gets us to a total of 53 million, or 48 million not counting the seniors (who are dual eligible). CMS said in 2004 using FY 2001 data that 46 million people received Medicaid services. But CMS says in another data sheet that in 2004 there are 42 million enrollees and 52 million beneficiaries. A beneficiary is someone who receives a (payment for a) service from Medicaid. Now we are getting somewhere near the nub of the issue, in that people go in and out of Medicaid often on a monthly basis.

My assumption is that the "snapshot" is the 42 million, which seems much lower than the 47 million that USA Today reports citing CMS data that I cannot find on their web site. So I suspect (but please if you know I’m wrong email me) that the USA Today number is the 42 million plus some 5 million dual eligibles (although KFF says that the number of dual eligibles is now 7 million in this recent factsheet). So overall counting Medicaid enrollement is very hard to do, as you are counting several moving targets, and it’s a question of definition.

But what Scott said this morning was that Massachusetts was looking at Medicaid as becoming a way to provide universal health insurance.1121593676_3333jpg And judging by this article in the Boston Globe, that’s what Mitt Romney, (who is the guy who made me wait 2 hours to get into the Ski Jumping at the 2002 Winter Olympics, and incidentally) the Governor of Massachusetts, is saying he’s aiming for. Enrollement went from under 700,000 in 1997 to nearly 1,000,000 in 2002, back down to nearer 900,000 in 2003 and is now moving back up near to 1,000,000.

However, this is all a long way from saying that Medicaid is going to be the cure for uninsurance. There are two main reasons why.

First, most of the people going into Medicaid are effectively leaving employer-based insurance rather than moving from being uninsured to having Medicaid. Of course there may be people moving from being uninsured into Medicaid as featured in the USA Today story, but overall their places in the ranks of the uninsured (which is itself an extremely fluid population) are being taken by an equivalent amount of people losing employer-based insurance. So the overall number of uninsured is not being changed by this increase in Medicaid enrollment, other than the uninsured number would be much higher than the current 45 million (snapshot), had it not happened.

The second reason is the relative makeup of Medicaid and the uninsured. KFF also has a great fact sheet on the unisured.  Only 20% or 9 million of the 45 million uninsured are children, leaving 36 million adults, of whom 80% are in some type of work, or have a family member working. Medicaid now only covers 14 million adults. That means that Medicaid would have to double enrollment overall and nearly quadruple it amongst low-income adults to get rid of the uninsured, and given that half of those uninsured adults are over 35 and thus somewhat expensive, that would cost plenty.

This is just not going to happen in the current fiscal and political environment. So even though getting some of the working poor onto Medicaid is a good thing, it’s disingenous to say that Medicaid is going to be the solution to the uninsurance problem.

What we should so with the Medicaid population is move it en masse into some type of universal insurance pool, with the uninsured, and a bunch of other people.  But no one in Congress with any clout is going to be touching that with a ten-foot pole, and while Bush has noticed that health care is an issue, we all know this his "solutions" aren’t.

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17 replies »

  1. To be fair to Ron, we did have a session about making his posts HSA free a while back, and the consensus was to let Ron keep on being Ron!

  2. Abby,
    Are you saying that I should stop saying that Group Health Employee Plans terminate sick employees if they get too sick to work 30 hours per week?
    HSA-free zone huh? You’re a hoot.

  3. What Mitt Romney advocates is barely relevant to the debate in Massachusetts. There’s a veto-proof Democratic majority in both houses, and it looks like Romney won’t be running for re-election. He hasn’t officially announced anything yet, but he did write an op-ed saying that he thought that Roe v. Wade should go and abortion policy should be returned to the states. Hardly a popular position in Massachusetts.
    I haven’t heard much from Romney advocating for Medicaid expansion. His current thing is to require people to buy stripped-down policies.
    There is a coalition of groups called MassAct which is trying to expand MassHealth considerably. They are hoping to get the legislature to act, but they are organizing behind a ballot initiative. There are 4 proposals on the table.
    Their goals are
    *Expanded coverage for low-income individuals and families through MassHealth.
    *Providing assistance to middle income, working individuals and families to purchase insurance.
    *Offering assistance to small businesses to help them pay the premiums for their employees.
    *Requiring employers to either provide health coverage or pay a fee to the state.
    *Creating a new state quality/cost leadership council
    The pay or play thing could be challenged under ERISA, but they are structuring it as a rebate for spending on healthcare, and businesses with annual payroll less than $50K are exempt.
    There is some talk of cutting the free care pool assesment on suburban hospitals to get them behind it. They also want to raise the reimbursement rates. The thinking is that the private patients are covering the cost of current MassHealth patients, and that this is driving up the private insurance rates forcing more people into uninsurance.
    The executive director of HealthCare For All, the lobbying group behind the effort, has his own blog, Healthy Blog which is worth checking out. Their ACT page has links to other reform efforts.
    They plan to pay for this through the employer assesment and by raising the cigarette tax.
    Can we stipulate that both cancer and depression are deadly, and therefore a fortiori, cancer and depression are a deadly mix. The Health Care Blog doesn’t need to be an HSA-free zone or anything, but please drop that particular line.

  4. Matthew, I said give the poor the amount of their deductible in their HSA. It’s still a lot cheaper than paying for over-priced dangerous Medicaid to politically connected insurance companies.

  5. Very good Eric. Some want to eliminate the tax deduction for job based insurance. I don’t think that will happen and there really is no need. If we give individual health insurance consumers the right to deduct their insurance, the group employee health plans will fold anyway.
    Liberals see no need for individuals to be able to deduct the cost of their insurance. Liberals always support Group Health Plans.
    HRAs are ok if you want your balance stolen at retirement. HSAs are much better because, 1) you get tax free interest, 2) you keep the money for retirtement healthcare expenses. Always remember, HSA funds that are never taxed will last longer in retirement.
    My son just took his insurance test in Nebraska. During his state approved training they predicted 40 million HSAs in America.
    President Bush said, “Hopefully, when I’m an old guy my HSA will be bulging with money.”

  6. Wow, we’re busy today — 2 posts while I was writing mine. Eric — I am very suspicious of that “premiums down 15%” number from eHealthinsurance, as they dont state the other parts of the equation, that is, what’s the average deductible people are getting and how aggressive is the medical underwriting on those plans becoming. I am trying to get them to answer…

  7. Spike- you are right in the current environment (we must have posted simultaneously) that- all things being equal, not much will be saved (if any). The essential piece that is implicit in the HSA promoters’ plans- though rarely articulated– is the concept of personal responsibility and ownership over one’s own healthcare.
    To wit– one specific example and one general example:
    #1: 40 year old man plays basketball with his child on Sunday- on Monday knee is somewhat swollen and sore. Goes to orthopedist on Thursday. Doctor is suspicious for a “cartilage tear”. Fact- many with cartilage tears do better than fine with just time and an exercise program. In the current HMO environment– the $10 copay covers it all– so the patient says “I really want the MRI now to know if its torn, because I have a vacation coming up and want to be able to hike”. In the HSA world– the patient knows that it is his $700 that will be spent on the MRI– so perhaps he takes the very reasonable advice that he should modify activities and then begin a specific exercise program over the next 4-6 weeks to see if he improves. This is where the savings occur.
    #2: Diabetes and heart disease are- by far- the two most expensive diagnoses (cost to healthcare system)– if people understand that their health and their healthcare dollars belong to them– hopefully we can begin to instill in the public the unbelievable cost savings to themselves- both dollars and quality of life- that healthy living can have on these conditions (which may or may not be completely of their choosing).

  8. Ron, I’ve missed you!
    Spike & Tom, Ron is kind of a one note tuba on the HSA issue…no one from the high deductible plan side has successfully answered the question about where does the money come from to pay for care for the sick if everyone only has a high deductible plan (i.e. the 80/20 rule)….but I may have another response to that if I can con Eric into doing some work….
    However, I agree with Ron (mostly) about what a mess Medicaid is, and I don'[t believe in expanding Medicaid as is to all (which appears to be what the Repubs interviewed by USA Today are advocating). What I do believe in is creating a universal insurance pool (but whatever means we come up with) and putting Medicaid recipients into it with essentially everyone else.

  9. Spike, after the deductible the HSA insurance pays 100%, including drugs. Now Medicaid is charging co-pays so it’s cheaper for the poor. Plus, Medicaid is very dangerous. If you are on Medicaid and get diagnosed they terminate you if you start making a dollar. With individual insurance the poor can’t be terminated because they find some employment. That is much safer spike. Same with SCHIP for children. If a child become diagnosed they are terminated on their 19th birthday. Come on spike, terminating a young girl with no hair because of cancer, just because they reached their 19th birthday is depressing. We all know depression and cancer is a deadly mix.
    Spike jump on board Republican healthcare reform so the poor will have the security of individual insurance purchased in the free and open market. Sure the big insurance companies with government contracts will be a bit upset, but who really cares.
    Besides a healthy child, like most children, would show up on their 19th birthday with a big fat HSA balance, all tax free. Now that would be a caring Nation for the Country’s poor children.

  10. Tom- I would like you to expand on your pay-or-play plan- I will grant you that in the current environment, large and small companies are involved in a perverse balancing act around health benefits. As you are aware, companies currently have a serious disincentive to give many employees adequate hours of work per week– the primary reason is the cost of health benefits.
    Here is a several step proposal:
    1. Make the cost of health benefits a line on your W-2. This means you know at the end of the year how much of your compensation package is health benefits. (This does not need any legislative action.)
    2. Then, after the companies are on record for 1-2 years, eliminate the business tax exclusion for health benefits– companies no longer see a tax benefit for providing benefits– but all employees should see that their total compensation should not change because it would appear as a pay cut that could not be hidden.
    3. This should accompany a personal tax deduction for health insurance. Much like the earned income tax credit, low wage earners could actually get a tax credit for purchasing insurance.
    4. HSAs- meaning you decide if you want to spend your health dollars on OTC cold medicines (not covered by anyone), your prescribed benzodiazepine (eg Valium) that will not be covered under the new Medicare drug plan– will help solve many of the problems (remember avg cost down 15% this year for HSA plans)– ought to be expanded and have certain changes made.
    5. If you wish to keep business in the game, give them incentives to pay directly into HSAs and also expand HRAs (eg HRA money does not expire unitl employment ends)
    6. Finally, in this incremental approach, the system (including deductions, medicare and medicaid) would be replaced by universal tax credits for healthcare ( a much more egalitarian approach– because high wage earners currently get a much higher tax break for insurance than low wage earners).
    I encourage any and all criticism (and praise) for this approach…

  11. Ron, your solution doesn’t do anything. It’s just shifting money around and providing even more incentive for poor people to avoid healthcare until the situation is truly dire.
    What happens once the $1000 deductible is exhausted? Who pays for it then? Wouldn’t Medicaid? Why would overall costs go down just because the people are in an HSA.
    In fact, all that’s happening is that not only are you still spending the same amount on poor people (maybe more because of the disincentive to seek preventive care), you’re also losing $1000 per year for each healthy person.
    I feel like I’m taking crazy pills. Is there a flaw in my reasoning that someone besides Ron can point out?

  12. Sorry Tom you are wrong. Conservatives want tax credits for the poor to purchase low cost HSA insurance in the free and open market. Medicaid in Iowa has just passed an HSA option, the first state to do so.
    Buy the poor low cost HSA insurance with a $1,000 deductible then the state deposits $1,000 in their tax free HSA. This would still slash the costs of Medicaid. If the poor get sick they have the money to pay their deductible and if they don’t get sick they can save the money with tax free interest or put the HSA funds in mutual funds, at their option.
    You better bone up on conservative Republican healthcare Tom. Governor Jeb Bush just signed tax free HSAs a a new option for Florida state employees. Florida is the first state to do so. Democrat Howard Dean wants a single payer system much like Canada’s unconstitutional socialized medicine. See the difference?

  13. Hmm. Not sure what HSAs would do for the poor. Interestingly, the Cato Institute (and other conservative analysts as well) objects to converting Medicaid into an HSA-based program, noting that the government would have to put money into a personal savings account, which would then become a potent incentive to stay in Medicaid and turn down private insurance. But if that’s not the solution, we still have all those poor people who get sick a lot. Or is their welfare less important than our free-market principles?

  14. Medicaid is pitiful, get real. The New York Times reported that Medicaid costs $10,600 a year, per person in New York. What would the family of 5, I just enrolled in Michigan for $190 a month on HSA insurance, cost if those New Yorkers had their way — $53,000 a year!!!! —
    Federal tax payers are paying half the bill!!!!!!
    You are so wrong Matthew, tax free HSA enrollments are exploding. I predict 4 million HSAs by the ’06 election and 15 million by the ’08 Presidential election.
    Poor uninsured people all over America are paying taxes so New Yorkers can defraud all of America and put 4.2 million poor on over priced dangerous Medicaid insurance at over $10,000 a pop, without full and proper discloser, the bums. Hillary should say she’s sorry to the American tax payer. It is being reported that 40% of the cost is fraud and abuse. Please, don’t consider making Medicaid UNIVERSAL, it’s pathetic.
    Call your Republican ’06 candidates and insist that they list on their websites their steadfast support for Republican healthcare reform and tax free HSAs. A bunch of these bozo’s running for governor refuse to say, tax free HSA. It makes my blood pressure boil.

  15. Great analysis. Now let’s spell out the implications a little. While analysts and state Health Department officials have been fretting about whether this or that coverage expansion will cause “crowd-out” of private insurance, employers in low-income communities have been dropping coverage – not because of Medicaid availability, but because the employers can’t afford it anymore.
    I always hate to say “if this trend continues…”, because who really knows if a trend will continue? But this one certainly will. So Medicaid will increasingly become the default insurance coverage for low-income Americans. There are three obvious policy responses. One is to reverse the trend by cutting off Medicaid coverage, e.g., the Mississippi approach. That’s the default. A better solution would be Matthew’s, which is to create a universal insurance pool.
    A third response would be to find new revenue streams for Medicaid instead of cutting it. How about the employers who are dropping coverage? They’re profiting from not having to provide coverage (or providing it on such onerous terms that take-up approaches 0%, e.g., Wal-Mart). Perhaps it’s time to revisit pay-or-play.
    Yes, yes, all the good ideas are DOA in the current Congress and Administration. But the American public won’t have any reason to vote their representatives out of office unless they know that good ideas exist that could respond to their most urgent needs and are being ignored. So let’s have some good ideas and then tell people about them.

  16. Another reason that medicaid is not the solution is that reimbursement is so low, and the administrative hassles so great (recently >5 phone calls and much more than one hour of phone time for a teenager with a fracture that obviously needed surgery; also can involve a similar amount of hassle and several weeks to get physical therapy approved) that few physicians are willing to see very many medicaid patients.
    Reimbursement is a serious problem- both the rate and the time to payment, which can sometimes be many months (one “computer glitch” caused nearly a year before payment for a femur fracture treated with surgery).