Florida’s Problem: Cutting Medicaid May Cost More

Florida is concerned that it spends too much on Medicaid. Unfortunately for policymakers, proposed cuts to Medicaid are likely to be self-defeating according to an Orlando Sentinel article. They may result in more spending as well as boosting the number of people with no coverage – especially children. Components introduced under the guise of personal responsibility –such as charging $10 per month per beneficiary or $100 for non-emergency use of the emergency department– have great intuitive appeal to taxpayers and legislators, yet can backfire in practice.

Experience from Oregon suggests that even modest, sliding scale premiums result in huge drops in coverage. A report from the Health Policy Institute at Georgetown University suggests 82 percent of those who leave coverage would be children, of whom 98 percent would be below the poverty level.

There are clear examples of emergency room overuse, but what’s crystal clear in retrospect is not always evident up front. In any case, hospitals can do their part with effective triage that sends patients to lower acuity settings or back home when patients who shouldn’t be there show up.

Florida Governor (and former hospital exec) Rick Scott, said, “If we do nothing, this program will bankrupt the state.” But one of the authors of the study, Joan Alker of the Winter Park Health Foundation attributes the growth to rising enrollment and notes that state Medicaid has done a lot better job of cost control than the private sector.

It would be great if Florida and other states could control Medicaid costs just by taking a hard line on beneficiaries. That seems to be the mood the country –or at least the Republican Party– is in. But policymakers will find such an approach won’t actually save much in the way of costs and will have a detrimental impact on public health, overall costs and beneficiaries themselves.

A less instantly satisfying –but more sustainable– approach would be to face up to the reality of the need for delivery system and payment reform, and to invest more rather than less in children.

David E. Williams is co-founder of MedPharma Partners LLC, strategy consultant in technology enabled health care services, pharma,  biotech, and medical devices. Formerly with BCG and LEK. He writes regularly at Health Business Blog, where this post first appeared.