RALEIGH – Two of the most-watched experiments in state-level Medicaid reform are about to begin. North Carolina policymakers should be watching closely to identify good ideas to replicate and bad ones to avoid.
In Florida, June will bring the start of “Empowered Care,” a new Medicaid system created by federal waiver in two pilot counties. Part of the plan offers Medicaid recipients the ability to choose from among benefit packages – rather than being restricted to a single government-mandated health benefit – as well as to use their taxpayer-provided subsidy to buy into an employer-sponsored health plan rather than staying in Medicaid itself. There is a savings-based component as well. If recipients maintain a consistent record of preventative health practices, they will receive deposits into health accounts with which they can purchase additional services.
Nearer to home, in South Carolina, Gov. Mark Sanford’s “Health Connections” program is coming soon. Citing new federal authority from a provision of the 2005 Deficit Reduction Act, the Sanford administration is moving ahead with its program to provide most of South Carolina’s 850,000 Medicaid recipients with access to health savings accounts. Each would be able to deposit a subsidy adjusted for age, sex, and physical condition into his HSA, from which he could withdraw funds to purchase an approved private health plan, pay for services with cash, or some combination. Included in the plan is a network of state-compensated enrollment counselors to advice Medicaid recipients about their options.
I’ve been cautiously optimistic about the prospects of the Florida and South Carolina models for Medicaid reform. The root problem here (and in the formally private but government-sheltered health marketplace, too, I hasten to add) is that patients do not perceive any financial incentive not to consume medical services, or at least to consume medical services more efficiently than they do when the services appear to be free. By offering Medicaid patients more choices, including the choice to buy less-expensive care and save the unspent funds for the future, reform initiatives may help control spending growth over time.
But for today, let me emphasize the caution over the optimism. Too many conservative advocates of Medicaid reform couch their advocacy in terms such as “enrolling in private health plans will remove the stigma from patients on Medicaid” and “choice is better than cutting Medicaid reimbursements to providers, which limit recipients’ access to the best doctors.” These may be effects of a reform, but they shouldn’t be thought of as goals or even as necessarily positive.
Repeat after me: Medicaid is welfare. Medicaid is welfare. Medicaid is welfare. It is a forced redistribution of resources from those who earned them to those who did not. There may be good reasons to defend Medicaid as a concept, or to imagine some kind of more-limited program to replace it, but they must recognize that Medicaid is an arm of the welfare state. As such, no one should consider it a “right” for Medicaid recipients to have access to the very same doctors, devices, and treatments as those who pay their own way. The Cato Institute’s Michael Cannon is right to worry that reforming Medicaid with the wrong goals in mind could actually cost taxpayers more money. With HSAs or other choice-based mechanisms “making benefits more attractive, more eligible people would likely enroll in Medicaid (only about two-thirds of those eligible sign up at present) and would stay enrolled for longer periods,” Cannon writes.
Now I’ll turn the optimism back on. The current system is unsustainable. Let’s try something new – cautiously.
Hood is president of the John Locke Foundation.