Roberts’ “Flying Squirrel” Maneuver Takes Down the Affordable Care Act

After a four month “death watch” in the mainstream media for President Obama’s health reforms (following an ineffectual defense in March’s Supreme Court hearings), instant analysts were quick to characterize last week’s Supreme court decision as a ringing vindication of the Affordable Care Act and a big political victory for a struggling President Obama.

However, on closer reading, the instant analysts were wrong. The Roberts Court actually punched a huge hole in the law, potentially reducing its historic coverage expansion by as much as a third. In addition, the Court’s ruling will set off serious political conflict in southern and mid-western states that will ripple through those states’ health care markets, and fracture hospitals’ and health plans’ support for health reform.

Unlike the Act itself, which was almost unreadable, the Court’s opinions were written in English and will reward readers with fresh understanding of this complex law. They reveal two incommensurable philosophical positions eloquently argued and improbably bridged. There were two big surprises: Justice Robert’s apparent last minute support of the Court’s liberal wing in preserving the mandate and the remarkable decision to render the Medicaid coverage expansion optional! (Justice Kennedy, the presumed swing vote, actually supported killing the entire law).

Roberts’ switch required a breathtaking bit of jurisprudential wizardry: declaring ACA’s clearly labeled “penalty’ for refusing to purchase coverage a “non-tax” for purposes of the Anti-Injunction statute (which kept this mess from landing on the Court’s desk yet again when it’s actually levied in 2014) yet, mere pages later, declaring it a valid use of Congress’ taxing power and thus sustaining the Constitutionality of the mandate.

Robert’s maneuver was the juridical equivalent of this remarkable hop-over-the-opponent “flying squirrel” wrestling takedown.

A progressive, pro-ACA legal scholar colleague pronounced Roberts’ “yes, it’s a penalty, no, it’s a tax” construction “absolutely incomprehensible”. An outraged Antonin Scalia, who clearly expected Roberts to support killing the entire law, could only fume that the argument “carries verbal wizardry too far, deep into the forbidden land of the sophists.’

But the biggest surprise was the Court’s handling of the law’s Medicaid expansion. Many legal observers were surprised that the Court agreed to review the Medicaid expansion at all, given the long history of incremental expansions of the program. The Roberts Court found that requiring states to add between 15-20 million new low income folk to Medicaid rolls on penalty of withdrawing the state’s entire Medicaid funding was a coercive  and thus unconstitutional abridgement of states’ rights- in Roberts’ words “a gun to the head”. In this, the conservatives were joined by Justices Breyer and Kagan, for a stunning 7-2 majority. For the Court effectively to rewrite the statute to render the Medicaid expansion “optional” for states was an outcome no-one expected.

Congress leaned heavily on Medicaid’s bargain basement provider payment rates to squeeze the maximum amount of coverage out of the ACA’s limited new revenues. Yet by relying on Medicaid for as much as half of the expansion ACA disproportionately affected southern and border states with hostile Republican controlled statehouses.

The Medicaid expansion intended to partially nationalize the program, agreeing to pay for 100% of the first three years’ cost for the newly eligible, and 90% thereafter. It also ended Medicaid’s welfare-era categorical program structure (that is, covering various needy groups). ACA raised income eligibility to 138% of poverty (quadruple the present income thresholds in many southern states), adding millions of single adults not in families that formerly were excluded from coverage. It also channeled Medicaid enrollment through the newly created Exchanges, and standardized Medicaid benefit packages. The net effect: ACA compelled sharp Medicaid enrollment growth in states with historically skimpy benefits, low income eligibility thresholds or both.

Those who’ve studied the uninsured problem closely know that a huge percentage live in the southern third of the country, whose Medicaid programs have historically enrolled far fewer of their eligible populations, and whose economies were devastated by the 2008 recession. Look here for an analysis of Medicaid takeup rates by states and the reasons. There are twelve million folk presently eligible for Medicaid but not enrolled, heavily skewed toward those same southern and border states. ACA would have doubled Medicaid enrollment in many of these states. Louisiana has estimated that 48% of its residents would be Medicaid beneficiaries at full implementation.

And adding these presently eligible to the rolls would cost states not an eventual 10% but between 30-50% right away, depending on the state’s current federal matching (FMAP) rate. The Exchanges would also become an express lane for these folks onto Medicaid rolls through expedited Internet based enrollment. When Jagdeesh Gokhale examined the fiscal consequences to states of the expansion, he found that when compounded by states’ expected population growth and continued medical inflation that several key large states would see their general revenue funded Medicaid costs double between now and 2020, despite the generous federal match for the newly eligible folks.  Two of those states, Florida and Texas, contained  in 2010 a combined ten million uninsured, and all-but-bankrupt California, another 7 million..

Of course, the classic problem with Medicaid is its countercyclical effect. In recessions, states see both falling general revenues and sharply increased enrollment – a recipe for recurring fiscal crises. For states with precarious economies, the Medicaid expansion effectively fills the ship of state’s hold with tons of loose cannonballs that will roll with the storm’s waves. If states are struggling now with 53 million Medicaid beneficiaries, imagine the gravitational effect of 80+ million in the next recession!

The reaction by Republican Governors (whose Attorneys General were plaintiffs in the Supreme Court case) was immediate and predictable. Seven southern and mid-western Governors said that they would decline the expansion and eight more said they were seriously considering doing so. These fifteen states, including the aforementioned Texas and Florida, contain 40% of the nation’s uninsured.

If half of their uninsured were Medicaid eligible, and the states follow through on opting out, that would take eight to ten million people out of the coverage expansion, leaving it well short of half of the nation’s 50 million uninsured.   Though several million people between 100% and 138% of poverty would be eligible for subsidies through the Health Exchanges, the fact that they would have to pay SOMETHING as their share would likely limit the uptake to the sickest fraction of the eligible group.

Hospitals are watching these developments with mounting alarm. National hospital organizations actively supported health reform, even if grassroots hospital executives remained major skeptics. And they gave up $155 billion in future Medicare payment reductions to gain 30 million new paying patients, and consented to the reduction of disproportionate share payments (DSH) payments intended to compensate them for their bad debts and charity care.   A cancelled Medicaid expansion would place the safety net hospitals in those states at serious economic risk, who would be forced to continue relying on Robin Hood economics to keep their doors open

For several reasons, health plans will also have trouble with the newly “optional” Medicaid expansion. The only reason health plans agreed to unprecedented federal restrictions on their business practices was the promise of near-universal coverage.

Cost shifting and adverse selection will remain in full cry in the opt-out states.

How can health plans in states which decline the expansion be expected to absorb, through guaranteed issue and guaranteed renewal, the flood of adverse selection, not to mention the above discussed provider cost shifting? If the federal government enforces the rate controls in ACA, health plans could run out of cash and exit those markets. And if CMS declines to enforce ACA’s rate controls, employer health premium increases could head back north into the high teens or low twenties.

Will the uninsured join their hospital and health insurance colleagues on the battlements to prevent Republican controlled states from following through on their Governors’ threats to opt out? Not likely. Last fall, Kaiser Family Foundation found that only about half of the uninsured were even aware of the Medicaid expansion, let alone whether they would benefit from it or not. 47% of the uninsured said they did not believe health reform would improve their access to health care, and 14% thought access would actually be harmed. The Court’s Medicaid decision could end up depriving millions of economically marginal folks of benefits they did not even know they were getting.

How all this will turn out is beyond this futurist’s grasp. My crystal ball is still in the shop. This fall’s election is a far bigger risk to health reform than what the Roberts court did last week. However, the Roberts Court has thrown the intricate web of “bargains” that made health reform possible into chaos and health reform has sustained a serious blow Watching the spreading chaos is going to make it an interesting summer and fall, leading to a consequential election. Health reform is far from a done deal.

Jeff Goldsmith is president of Health Futures Inc, which specializes in corporate strategic planning and forecasting future health care trends. He is also the author of “The Long Baby Boom: An Optimistic Vision for a Graying Generation.”

29 replies »

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  2. if you charge states according to the income of their citizens(tax base) to fund this federal medicaid, wouldn’t it be the same as our already existing federal income tax? why not just have the feds(IRS) collect it directly from the citizens?

  3. I think it was Michael Lind who said that if the southern border of the USA was the Mason-Dixon line, we would have had national health insurance 50 years ago.

    Many voters in Southern and Western states take the position (rather privately) that they never wanted black people to have more children, and they never wanted Mexican people to stay around after the harvests……..so why should they pay higher taxes to help these groups?

    These states want to be inhospitable to minorities. For years the unofficial policy in these ultra-red states has been that if Minnesota and Illinois and Wisconsin and NY are going to be soft liberals and encourage minorities to move there….great!

    I remember how I used to constantly read the statement that “The USA and South Africa are the only industrial nations without national health insurance.” And I would say to myself, yes, and these are the only industrial nations which privately want to expel a portion of their citizens.

    There are some excellent technical points in all the posts above, and I want to study them……

    but I did want to add the ugly issue that I just described. In the 1960’s we saw federal policy overcome the most blatant kinds of discrimination, and the country was better for it. Maybe the same thing will happen again, I hope so.

    Bob Hertz, The Health Care Crusade

  4. Also, there are more flavors of Medicare Advantage than Ben & Jerry. Some do indeed use cost plus negotiations where they can, but they do run into the usual insurance problems with powerful market dominating providers. In my area, the biggest providers unceremoniously dumped four MA insurers when they refused to comply with dictated prices, and they got away with it. I am certain the same would be true in many places.

    As for including other benefits in Advantage that end the need for supplemental, that does happen, especially with “A” rated MA providers, but tends to be associated with higher costs, both the government premium and the premium paid by the enrollee. My mom is in one; she loves is, I am happy with it, but it costs her an added $25 a month plus the added federal payment.

    Everything you say about inefficiencies in Medicare, fraud, up coding, and so on is true. However, it is also true in spades for private insurance. Medicare is consistently ahead of the curve compared with private insurance on cost control, appropriate re-pricing, elimination of ineffective procedures, and so on. And although the instance of fraud is higher than it should be in Medicare and very well publicized, private insurance industry anti-fraud groups actually estimate that fraud is even greater in private insurance, just not as aggressively policed and publicized. The very few studies on that question confirm that.

    It is true that many Americans want choices in health care, or at least think they do. It is also true that Medicare is much more popular and well liked by its enrollees than private insurance is, a fact that holds true in every poll.

    The ACA exchange program is, of course, an attempt to create a program much like advocates of public-private insurance systems hope to see. It will be interesting to see how it works and how well it is accepted. It is also interesting to note that the same political partisans who claim to like the idea of a public-private insurance partnership are the ones who are aggressively trying to block the program, placing partisanship over their announced principles.

  5. Barry —

    I agree totally with your estimate (around 6%) of the true overhead of Medicare. However, your estimate of the overhead of self insured programs is one that ignores the costs of the self insured corporations. Added in, that drives the cost to more like 11% — still a substantial savings from the direct commercial market and a huge savings from the individual market.

    While the ACA will at least try to eliminate overhead related to underwriting by requiring community pricing, one thing we will have to watch closely is the development of cherry picking through one mechanism or another. Many Medicare Advantage insurers have gotten really good at that, but it does carry an overhead cost.

    This problem becomes much greater with any proposal to convert either Medicare or all health care to a subsidized private system, like Wyden/Bennet, Ezekial Emanuel’s proposal, or the Ryan proposal. In order to work well, they will clearly have to have variable payment based on need in order to negate the likelihood of aggressive cherry picking and dumping through formal or informal means. That in turn will require complex and aggressive underwriting, at great cost to someone, most likely the government, creating a very large overhead cost.

    Not to say it can’t be done. The Dutch do it; the Germans do it; the Swiss do it. But it does require, as you note yourself, considerable change in the way the insurance business and the health care business works in the US. Allowing — no, requiring — insurance companies and health care companies to negotiate and accept pricing through government or quasi-government agencies for care costs and for premium costs would be a whole new world, and one that many of the anti-government, anti-regulation political sponsors of these ideas would find totally unacceptable.

  6. Pat S –

    Medicare’s administrative costs are significantly understated because some of its functions are performed for it by other government agencies. For example, the process of enrolling in Medicare is handled by the Social Security Administration. The rent for the offices occupied by CMS employees is paid by the General Services Administration. It’s funding is provided by the Treasury Department and collected by the IRS. Fraud cases are investigated by the Office of the Inspector General. On a fully allocated basis, Medicare’s true administrative costs are closer to 6%-8% than the widely touted 3%. The upper single digit number is about in line with what well run self-funded employer plans pay insurers to process claims and provide a network of hospitals, doctors, imaging centers, labs, etc. Moreover, under the PPACA, once fully implemented in 2014, private insurers will no longer be spending a lot of money on medical underwriting and the exchanges could displace most of the broker commissions in the individual market.

    In Germany and Switzerland, insurers negotiate with providers as a group in each region to maximize their bargaining clout. We could do that in the U.S. as well if insurers were given an anti-trust exemption to allow it. Within Medicare, MA plans, I’m told, pay providers Medicare rates plus or minus 2% or so and seniors who opt for MA plans don’t need to spend $200 or more per month for a supplemental plan.

    I remember reading in Health Affairs a year or so back that the actuarial rating for standard Medicare is only 56% because there is no out-of-pocket maximum limit on Part B services, there is a $1,000 or so deductible for each hospitalization and Part D has the infamous doughnut hole because, to meet budget constraints, it had to offset the cost of a low deductible which was intended to sprinkle benefits over as many enrollees as possible so they would perceive it as a “good value” relative to the premium they had to pay.

    For all its supposed efficiency, there is widespread fraud in both Medicare and Medicaid beyond clever upcoding by doctors and hospitals. Innovation has not been a strong suit. Medicare didn’t even offer a prescription drug benefit until 2006 while private insurers offered it for decades. Medicare tends to be reactive in response to costs that far exceed estimates and then Congress often won’t let them follow through on policies like the SGR that was supposed to offset higher than expected volume of services with lower payments to providers for each service rendered.

    In the end, most Americans prefer to have some choices even if it costs a bit more rather than be stuck with a monolithic one size fits all government dictated benefits package.

  7. Wyden/Bennet, and all other models using vouchers or “premium support” to subsidize purchase of private insurance using public money run aground on three hard facts:

    1.) Overhead in private insurance is substantially higher than in Medicare and Medicaid. This means that a significant fraction of spending is removed from the process of actually providing health care and used up in overhead.

    2.) Medicare historically is much more effective at setting prices paid to providers and hospitals. Private insurers pay substantially more. Again, this is money that decreases the ability to actually provide care.

    3.) Medicare is historically much more effective at controlling health care cost inflation than private insurance.

    This is not to say that it is absolutely impossible that private insurance could deal with all of these problems — in fact in the mid-90’s during the heyday of managed care private insurance briefly pulled ahead of Medicare in numbers two and three. However, they quickly stopped doing that when managed care encountered significant pushback.

    Unfortunately, the approach private insurance has used for cost control since that time is significant cuts in the actuarial value of insurance, mostly by sharp increases in deductibles and co-pays. Even more unfortunately, this approach mainly works by transferring costs to the enrollee, with studies showing that enrollees usually prove to be very poor at making good choices as to how to spend money they have at risk. This is not surprising, since patients rarely have the information base and often do not have the time luxury to acquire that information when they are buying health care.

    Private insurance programs supported by government supplements for low income people do work very well in many other countries, but they work because government or quasi-government agencies impose controls on insurers, providers, and hospitals that are orders of magnitude more strict than are likely to be acceptable to the politicians and thinkers in the US who tend to endorse voucher and subsidy systems.

    And yes, I am aware that this argument potentially applies to the exchanges and supplements under the ACA. That part of the ACA represents a very interesting test of the effectiveness of premium support programs in the US, with its designers hoping that cost controls in Medicare and through the IPAB will give cover to private insurance so that cost controls spill into the private sector from the public, which has been the way cost control has worked for most of the history of Medicare, and that actuarial value issues will be dealt with through the requirements for listing on the exchanges.

    Medicaid was chosen for low income people under the ACA since using private insurance and paying the high percentage of the costs needed to make private insurance affordable for low income people would have cost hundreds of billions more over the 10 year CBO projection periods.

    BTW — the public option is not Medicaid. The public option is/was Medicare, dude. The public option was opposed by the insurance industry because the cost setting power of Medicare was felt to give too much advantage to the public option, raising the concern that most customers would gradually or not so gradually migrate to the public option.

  8. I think at least twelve states opt out, including Florida and Texas.
    And the states that opt out will then sue to prevent the “back up” national exchange from “populating” their Medicaid programs. . .

  9. Our Country flourished where others collapsed because we understood that the less Government is involved with our lives the better we are. Unfortunately for the last several decades we have looked for Government to fix our daily problems. What have we created in the process? A system in which feeds upon its self. Find Problems then take from the ,many to fix the symptom. The Problem with Health Care is the increased cost of the dream of living with out Health Problems. People spend their life savings in the attempt to Live longer when their money runs out they now look at everyone else. The cure that is proposed to cure the symptom of rising health care will actually cause health care cost to go up. Nothing is being done to actually reduce the cost. What happens after we take everyone else’s money?

  10. I think in the short game most of those states will quietly take the money…turning down free money just doesn’t make sense. The longer game is that the rejection of Medicaid and the Exchanges by the Red states leads us closer to a single Federalized program. Which, as health care is now officially a tax, is what we should have anyway!

  11. Too true. And Wyden/Bennet also took out the unions and the employers from the equation both of whom turned on them for doing it instead of backing it as an “out ” from a business they shouldnt be in! Incredibly short-sighted.

  12. Barry–

    Just a P.S.– If you give poor children 1-18 the services they need (dental and vision care wtihout co-pays, drug counseling, mental health services, etc.– all of which are included in “essential benefits” under the ACA) , they
    are not that inexpensive to insure.

    Many children living in poverty suffer from a variety of physical and mental problems due to poor pre-natal care, poor nutriton, and living with the
    pressures of poverty– pressures that make the adults they live with depressed, angry and unpredictable.

    Cuomo was right– Medicaid should be a federal program. But there will
    not be a swap. We can’t trust the states with k-12 education or, for that
    matter with transportation. I can count on the fingers of one hand the number of states who do a good job with state programs. Some can’t afford to do a good job. In other cases, state government politicians are on the take. (Look at the number of governors and state legislators who have been indicted in
    recent years.)

    States should contribute to a federal Medicaid program based on their abillity to pay– i.e. their tax base. By that I mean the tax base that they could have if they chose to tax it. In other words, in calculating what they can afford, you would look at incomes in the state, even if it didn’t have a state income tax ..

  13. Jeff–

    You tend to assert, without citing evidence. . . .

    First, on what the Medicaid expansion will cost states, I’m afraid you exaggerate.

    The expansion will actually SAVE states money –the money that they now spend helping hospitals cover unpaid bills.

    “Numbers from the Urban Institute show that states would spend $90 billion less on health care from 2014-2019 under the Affordable Care Act. This is because of the savings from uncompensated care and certain Medcaid eligibles rolling into programs with higher levels of federal support. In some states, they will actually save money from carrying out the full law, including opting into the expansion.”

    “Wisconsin could save as much as $3.7 billion from 2014-2019

    * Iowa could save as much as $1.9 billion from 2014-2019

    * South Carolina could save as much as $678 million from 2014-2019

    * Indiana could save as much as $1.7 billion from 2014 to 2019

    * Nevada could save as much as $443 million from 2014-2019”

    Secondly, on the power of hospitals and their lobbyists, :

    “The American Hospital Association and other national industry groups endorsed the health care reform law, calculating that more insured people would make up for $155 billion in lower Medicare payments over a decade.
    A smaller Medicaid expansion would be bad news for hospitals, especially in states like Florida and Texas with large numbers of uninsured people, according to Sheryl Skolnick, a health care equities analyst at CRT Capital Group in Stamford,

    (Skolnick, is a WAll Street analyst, is very good. I quoted her more than once in Money-Driven Medicine. She understands how $$$ drives what happens, both in politics and in industry.)

    “Getting the Medicaid expansion in place has already become the ‘number one priority’ for the Texas Hospital Association, says John Hawkins, the senior vice president for advocacy and public policy at the organization.”

    Just how powerful are these lobbyists? Far more powerful than grass-roots
    Tea Party activists who “hate poor people” (a.k.a. “rednecks”)

    Tea party activiists have loud mouths. Hospitals have money and create jobs that States desperately need.

    Moroeover,as Lyle Denniston points out the “scotusblog.com” a website sponsored by Bloomberg Law, the notion that “most of the country is stubbornly committed to the Tea Party’s wish to limit the power of the federal government,” is a “media narrative”– a false fiction that sells newspapers, like the myth that the Supreme Court would strike down the Affordable Care ACt–or at the very least, overturn the mandate. .http://www.scotusblog.com/2012/07/the-narrative-of-judicial-intrigue

    In addition, governors won’t be making the decision on taking Medicaid money alone. In most states, the state legislature will have a say. Governors who ignore the lobbyists and legislators are likely to lose their next campaign for re-election.

    Finally Medicaid was far from an an “afterthought. ”

    I suggest taking a look at Paul Starr’s “The Social Transformation of American Medicine.”

    There,he explains that in 1958 a Congressman from Rhode Island proposed a modest program that wouldl cover hospital care for the elderly (an early version of Medicare) The AMA opposed the idea, but there was a groundswell of support among the public. Stil, no legislation.

    In 1960 Congress finally responded by passing a substitute measure introduced by two of the most powerful members of Congress Sen. Robert Kerr and Wilbur Mills, chairman of House Way & Means. The Kerr/ Mills
    program extended federal support for WELFARE medicine programs int the states” This was the first incarnation of Medicaid– in 1960–hardly in the “final days of the Medicare debate ” (which took place 5 years later in 1965)

    Under Kerr -Mills, “the benefits were subject to few limits, with the federal government providing 50% to 80% of the funding. ..” As you say,poorer, mainly Southern states would receive lavish funding.

    But, Starr reports, “few states took advantage of the program.” Southern states were not interested in helping their poor Three years after Kerr-Mills, just 5 large industrial states were virtually the only states taking advantage of the funding.

    Four years later, in 1964, President Kennedy was supporting a Medicare plan, but it would cover only hospital servcices–not physicians. Then, the AMA came up with its own “Eldercare” program– to cover doctors’ services.

    At that point, Wilbur Mills decided to expand the legislation: “In an ingenious move,” Starr reports, he proposed combining three proposals in “a three-layer cake”: the first layer was the Democrat’s plan for covering hospital care for seniors; the second layer was the AMA plan (by then supported by Republicans) to cover physicians care’ for seniors; the third layer was what Kerr-Mills had set out to do–it created Medicaid.

    If Medicaid was an “afterthought” so was covering doctors’ services under Medicare.

    Southern states insisted that Medicaid pay doctors and hosptials substantialy less than Medicare. (Medicare would cover mainly white patients; few African Americans lived to 65 in the South.)

    I’m not quite sure what point you were trying to make by saying that Medicaid was an “afterthought” though perhaps you were expressing your attitude toward Medicaid and the importance (or unimportance) of the program.

    I would aruge that Medicaid is essential — and expansion is essential– though ideally ultimately Medicaud will be federalized. (See my comments above)

  14. Maggie –

    While I understand and appreciate the conceptual appeal of federalizing Medicaid, I still think it would have to be a separate program from Medicare because Medicaid is means tested and Medicare isn’t. I also think it would be helpful if there were an equivalent to Medicare Advantage (Medicaid Advantage) to enhance the potential for innovative solutions to control costs or offer a range of approaches so people could choose a plan that best meets their needs.

    The incremental costs to the federal government of taking over the states’ share of Medicaid costs would be very high at a time when the federal budget is already far out of balance. If that were contemplated, we would probably need to engineer a swap so that the states took on most or all of the current federal share of K-12 education costs as well as transportation costs in exchange for being relieved of their Medicaid cost burden.

    That all said, I remember listening to a talk by former NY governor, Mario Cuomo, many years back when he made the point that state and local officials were “on the firing line” to deliver services implying they were more accountable to their constituents than federal officials are. After his talk, I asked him if, in light of that point, whether or not he thought that state and local government should have a greater taxing and spending responsibility as a percentage of total public sector spending. His answer was that there should be a reallocation. He would take education and transportation if the feds took over Medicaid.

    Finally, the great majority of Medicaid beneficiaries are women and children but they account for less than 30% of the dollars spent on the program. The big money is spent on the aged, blind and disabled (ABD) population. These are, by and large, not the people who are being denied eligibility by complex state rules, but trying to mitigate the cost of serving this population will require completely different strategies from serving young women and children. Children between age 1 and 18 are actually quite inexpensive to insure.

  15. Barry–

    Here is a good article on merging Medicare and Medicaid: http://www.newamerica.net/publications/policy/the_next_priority_for_health_care_federalize_medicaid

    “Merge” is actually a misleading word, medicaid would be “federalilzed”
    and many of administrative functions of Medicare could be expanded to
    include Medicaid. Having the states administer Medicaid is simply
    As the author points out: “Federally run insurance programs like Social Security and Medicare are vastly more efficient and effective than federal-state counterparts like Medicaid and unemployment insurance. Economies of scale, uniform national rules, and the inability of 50 state governments to each do mischief to the programs have demonstrably led to far superior results for national social insurance.”

    As Ezra Klein wrote when commenting on the paper thisi “would be a huge step forward.”

    ineffecient. .

  16. Maggie –

    I don’t see how Medicare and Medicaid could be merged into a single program when eligibility for Medicare is not means tested but it is for Medicaid. Besides, there has been a lot written recently about the enormous cost of providing care for the 9-10 million people eligible for both programs (dual-eligibles). The needs are very different for this group. The duals whose care is primarily paid for by Medicaid mainly have to do with long term care (nursing homes, home health care, etc.) while those whose care is paid for by Medicare need acute (hospital based) care. These include patients with congestive heart failure, COPD, ESRD, cancer, etc. Historically, care provided to these people was unmanaged, uncoordinated, often duplicative and very expensive. Numerous states experimenting with various manage care approaches are more likely to ultimately find ways to better control these costs than a one size fits all federal program will.

  17. Hospitals, even the for-profit ones, are not powerful enough by themselves to force Governors protecting their right flanks to opt-in. Hospitals, nursing homes and physicians rarely collaborate at the state level, and unlikely to be effective here.

    Medicaid is not a jobs program. It’s supposed to be purchasing services on behalf of the poor and near poor, and does a terrible job of same. The larger program would have been financed largely by further reductions in hospital, physician and nursing home payment, shrinking the percentage of providers that will take new Medicaid patients.

    If you go back and read the legislative history of Medicaid, it was an afterthought, added in the final days of the big Medicare debate. It already seriously tilted the fiscal playing field toward the south by giving them (on the pretext of poverty) far higher matching rates. It was a miracle that these states got to the level of coverage they got to, given the lack of commitment in many of them to caring for their largely minority poor populations.

    The temporary increases in Medicaid payment for primary care services still leave the program’s physician payments far below an adequate level to preserve access for the population, and conveniently expire before the expansion.

    Talk to some physicians about Medicare’s “superior IT”, then run . . . fast.

  18. Jeff– You ignore how much states will save thanks to the Medicaid expansion. See this article in yesterday’s NYT “Could States Save by Expanding Medicaid? ” It points out that states now contribute to hospitals helping them to cover the unpaid bills of the poor and uninsured.This is just one way states will save.

    ,You also ignore all of the jobs that will be created by Federal Medicaid money flowing into the state,–hospital jobs, jobs in labs, jobs in pharamacies as more people receive care. And you overlook the impact of the higher fees that Medicaid will be paying healthcare providers under the ACA — about 30% higher.

    Pat S.– Yes, these southern states have made it difficult for people who are
    eligible for Medicaid to apply by making application forms complicated, providing little assistance for those applying,and little pubicity. (Washington & Lee law professor Timothy Jost has talked about this.)

    In other words these states have done the wrong thing for many years, and now are complaining that the Exchanges will help those who are eligible for Medicaid sign up–forcing them to do the right thing.. (Your analogy to the brothers who murdered their parents is a good one.)

    But I disagree as to whether Governors will refuse the funding. Tea Party types who “hate the poor” are not nearly as powerful as the media suggests. They may have loud voices, but hospitals
    have $$$ and and they create jobs. (In our society, money trumps virtually everything else.)

    In the South, many of those hospitals are for-profit– which means they pay local property taxes, making them extremely powerful. Hospitals, labs, pharamacies and the many others who will benefit from an expansion of Medicaid will insist that governors take the money– or lose in the next election.

    See Aarronn Carroll’s post on this blog

    Bobby G– Good question!

    M2012– The best solution, I think, is to merge Medicare and Medicaid, into a federal program with each state contributing to that porgram according to its abiity to pay. A complicated formula, but it could be done.

    As the post notes, the expansion already moves in the direction of turning
    Medicaid into a federal program.
    The law moves in that direction both by promising to fund the expansion of Medicaid and by guaranteeing that going forward, Medicaid will pay doctors and others who provide preventive care for Medicaid patients 30% more than they do today. (Medicaid will be paying the same fees as Medicare–Today, Medicaid pays roughly 30% less, part of the legacy of racism that goes back to the days when Southern Senators tried to prevent the passage of Medicaid in the first place.)

    That’s additional money that will be flowing into the states, creating more jobs.

    Ultimately, many observers think that Medicaid & Medicare should be merged into one federal program. Economies of scale, and the federal govt’s superior IT would make this a much more efficient program.And given discrimation against the poor, combined with discrimination against minorities in many states, it would also be a fairer program.

  19. working on it. . . not enough room in this blog posting. Watch this space.

    I was a Wyden Bennett fan, which would have replaced Medicaid with the same private coverage as everyone else, and moved us away from employer based insurance through a universal refundable tax credit.
    Medicaid has reached its sell by date and needs to be replaced by something more substantial.

    But you saw what happened to the two: Bennett was defeated in his Utah party convention for collaborating with Wyden, and Wyden has been ostracized for daring to collaborate with Republicans.

    Shame on both of them OR shame on our rapidly decomposing society.

  20. Stepping back a little…so assuming that we want to take the US towards a healthcare system where everyone is covered

    1) What would be the (other) way that we do that?

    2 Given the inequities between states, wouldn’t this disproportionate strain on certan states be inevitable?

    3) How could we get past the issue of expanding federal government or is that also something we just have to accept, much like other major social and financial legislation that was not always uniformally agreed upon (ie civil rights, medicare, social security, etc)?

  21. “How can health plans in states which decline the expansion be expected to absorb, through guaranteed issue and guaranteed renewal, the flood of adverse selection, not to mention the above discussed provider cost shifting?”

    Great point, Jeff. We’re going to see a very interesting cascade effect and a market unlike any we’ve seen before.

  22. It seems that the central proposition here is that the poverty laden red states have contrived somehow to discourage extremely poor people who make fractions of the poverty level income to not choose to sign up for Medicaid despite being eligible under even the extremely draconian standards of the red states. The costs of having those people join Medicaid will overburden the state budgets, even though the federal government will carry at first all costs and then almost all costs of the actual ACA Medicaid expansion.

    This all sounds a bit like the old case of murdering both your parents and then pleading for mercy on grounds of being an orphan. After years of indulging in lord knows what tricks to penalize poor people for their foolish choice of being born in the red states, they now are bemoaning the fact that the tricks will no longer work.

    I do happen to believe that the red state politicians will most likely refuse the Medicaid expansion, despite the fact that their health care systems will be knocked for a loop. Penalizing people for being poor is red meat in those states.