Perhaps no public policy issue is more vexing to policymakers and more of a concern to average North Carolinians than health care: the cost, access to care, health insurance. Now, many people are covered by employer-provided policies. Others actually go out and buy their insurance in the private market, on their own. But in North Carolina, more and more people are becoming eligible for Medicaid as the eligibility parameters are expanded beyond the original intent of the program, which was supposed to cover the medical care for the poor. Carolina Journal Radio’s Donna Martinez recently discussed the topic with John Locke Foundation fiscal policy analyst Joseph Coletti. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Martinez: Joe, let’s start by giving a general overview of exactly who is covered by Medicaid in North Carolina. And we should make clear, we are talking Medicaid, not Medicare, which is the program for the elderly.
Coletti: Right, Medicare is strictly federal, for the elderly. Medicaid is combined, federal and state. In North Carolina, the counties get to kick in 5 percent of the total cost [15 percent of the non-federal share], too. [The state will take on this share, along with a portion of county sales tax revenue, over the next three years under the recently passed state budget]. It was originally intended to be for the poor, as you mentioned. And now, it covers the poor, disabled, blind and elderly, poor kids, poor parents — a number of groups. It covers women with breast cancer and cervical cancer. And every few years, there is an expansion. Every time that the government has more money, either the federal government or the state government, they decide this is a perfect opportunity to make more people eligible for Medicaid. And in North Carolina and in other states, there is also the State Children’s Health Insurance Program (S-CHIP), which in some states is part of Medicaid. In North Carolina, it is its own program, but that also expands eligibility up to higher income levels for children.
Martinez: So, in terms of kids, Joe, it’s not just covering poor kids? It’s actually moved out well beyond that?
Coletti: It’s moved out. So far, if you are in a family of four and you’re earning $40,000, you qualify for S-CHIP. And if you have a child over a certain age, if the child is under six years of age I believe, then they qualify for Medicaid. That leads to some other problems — of people choosing S-CHIP who can afford insurance for their family, who get insurance through their employer, but then opt out of that because they can get free insurance for their child. Whereas, with most employer plans, you still have to pay for your dependents.
Martinez: And Joe, it’s interesting you would bring that up because you have been writing about this issue for a couple of years now. And you bring this [point] up — that you believe the state’s policy actually puts a disincentive in place for families to go out and access their own healthcare coverage because it becomes advantageous to them to have the state — in other words taxpayers — provide their healthcare. And recently there was a report from the Congressional Budget Office that you noted has, indeed, now said, “Yes, Joe Coletti, you have been correct when you have said this.” Tell us about it.
Coletti: Well, the Congressional Budget Office took a look at who, across all states, what kind of insurance coverage people had before their children joined the S-CHIP program. In North Carolina, it’s called North Carolina Health Choice. And they found that somewhere between 25 percent and 50 percent of children on S-CHIP previously had private health coverage. So, that means that the parents were opting to drop their private coverage for their children and take the government coverage. And we’ve seen that in North Carolina. Wd did it a little bit different way, but we took a look at how people got insurance in 1999. And in that year, 69 percent of people got insurance privately through their employer or on their own, 19 percent through the government, and about 12 percent were uninsured. Now, S-CHIP and Medicaid are supposed to help people who are uninsured. That’s the whole purpose of it.
Martinez: Not people who were insured.
Coletti: They’re too poor to be able to afford insurance. And in the five years after Health Choice was introduced, private insurance fell by 4 percent — four percentage points. It was down to 65 percent. Government insurance — Medicaid and Health Choice — went up five percentage points, and un-insurance only fell by one percentage point. So, that means that just as at the federal level they have found that this happens across all states, in North Carolina, we see that people are moving from private insurance into the government program.
Martinez: So Joe, bottom line is a program that was created or intended to try to help people who are uninsured has not actually done that, or has done that to a very small degree. What’s happened is, it’s simply shifting people out of insurance — either provided by their employer or something they’ve bought on their own — into a government-provided healthcare for their kids.
Coletti: Right.
Martinez: And in fact, in the recently passed N.C. House budget, Joe, there is also a provision that does an expansion of a subsidy that takes us further down this road. Tell us about this.
Coletti: Well, as I mentioned, Health Choice and Medicaid cover up to $40,000 for a family of four — 200 percent of poverty. The idea that’s in the budget now, that both the governor and the House have had in their budgets, and so I’m hoping that the Senate finally figures out this isn’t a good idea, is to provide subsidies on a sliding scale downward from $40,000 to $60,000, from 200 percent of poverty to 300 percent of poverty. Right now, if you make more than $40,000 for a family of four, you all of the sudden have to pay the complete freight on your own for the insurance. This would be that you get subsidized all the way up to $60,000, some amount. And so, this makes more children eligible, it costs the state about $3.5 million more per year, in the first year, and, it gets people on to Medicaid and Health Choice. While it looks like a great program, it is a really bad program because they pay doctors poorly, and so you have much less access to care than you can through the private market. [The final state budget set aside $368,000 to study the program, NC Kids’ Care, in 2007-08 and provided $7 million to fund the program in 2008-09].
Martinez: Well, Joe, here is what I think is interesting about this new subsidy for up to 300% of poverty, which, as you said, family of four, that would be income of $60,000 a year — well into the middle class. It seems to me, and I’d like to know if you agree or disagree, that this is leading us down a road toward universal government-provided healthcare.
Coletti: That’s the whole intent — to take small steps toward universal health insurance or health payment. As we’ve seen from other countries, having insurance doesn’t mean that you are going to get care. And right now, we do have universal care, in some form, through emergency rooms, and so, that is the intent. And when you get up to $60,000, that’s the median income for a family of four. So, we truly are at the very center of the middle class. We’ve got up to 50 percent of the families in the state qualified for this.
Martinez: So, this is no longer covering the poor in North Carolina. This is the middle class, the average family in North Carolina.
Coletti: Right.
Martinez: Very interesting. Joe, there are different proposals about trying to move the issue of healthcare in a different direction, trying to give people more options and responsibility on their own, rather than going down the government-provided road. One of those is health savings accounts. Give us a quick overview, if you could, of how health savings accounts are working in this country.
Coletti: Health savings accounts are becoming more popular, both at the employer level and in the individual market because health insurance is becoming more expensive. You are trying to get more people to pay for some amount on their own, and that is what a health savings account does. It goes to a high-deductible policy. You pay—you set aside money, like an IRA, for healthcare, and then you withdraw that money, tax-free. You put the money in tax-free, you take it out tax free. Well, you’ve already paid taxes on it; it’s kind of like a Roth IRA. You put the money in, but then you can withdraw tax-free, and pay for whatever healthcare you need.
Martinez: And, basically, you have a low premium, a high deductible, and then you have this investment account.
Coletti: Yes.
Martinez: A lot more people are trying that approach in this country, and we will see if that continues to grow, or if the North Carolina trend of moving down the government-provided road takes hold even more.