Medicaid Reform: It’s All About Paying Providers
Health care services cost money. Often times, a lot of money. This fundamental truism captures the challenge facing Congressional Republicans as they consider coverage of low income populations as part of their so-called Repeal and Replace effort.
The Medicaid program covers more people than Medicare but spends less on health care services (MACPAC 2016a, MedPAC and MACPAC 2017). Additionally, Medicaid pays substantially less for health care services than private sector insurance plans (MACPAC 2016a). Recent growth in Medicaid spending is primarily due to growth in enrollment (MACPAC 2016b). State Medicaid programs depend on the altruism of the medical profession to provide health care services at a lower rate, which can be below cost. This leads to Medicaid beneficiaries often having less access than those covered by private insurance because financial pressures limit the ability of some providers to take Medicaid beneficiaries.
Republicans in Congress are contemplating moving coverage for the "able bodied" from Medicaid to private insurance. There are many questions to be answered before such a policy change could be implemented, but the threshold question is simple: how could such a policy proposal not cost more than current law?
Medicaid beneficiaries have limited ability to pay for services. An individual with an income of $15,800 is currently Medicaid eligible. Assuming that the policy does not increase financial expectations from the beneficiary, it does not seem possible that Congressional Republicans could write a policy that moves coverage of Medicaid beneficiaries into subsidized private insurance coverage without spending more money. This leads us to the real question for Congressional Republicans: what would they have to do to ensure that this change would not result in spending more money?
Demography remains a constant pressure on payments to stakeholders. While stakeholders might look at movement away from Medicaid to private insurance coverage for any population as positive, there is a very high probability that any shift from Medicaid to private insurance coverage will come with strings to limit provider payments.