Don't Let America Become a Medicaid Nation

Friday, 07 Oct 2011 09:14 AM

By Betsy McCaughey

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America is in danger of becoming a Medicaid nation. It will bankrupt our government, make private health plans unaffordable, and rob the elderly of the care they've been counting on.

The Joint Select Committee on Deficit Reduction — the supercommittee — should repeal the vast expansion of Medicaid enacted just 18 months ago as part of President Barack Obama's health law. That brand new entitlement, not in effect yet, threatens the nation’s future solvency.

The Obama health law converted Medicaid from a safety net to a permanent health entitlement in place of private insurance. A decade from now, when the temporary surge in Medicare demand caused by the baby boom generation subsides, Medicaid will cost more than Medicare and continue to grow.

According to actuaries from the Centers for Medicare and Medicaid Services (Health Affairs, July 28), Medicaid spending will increase faster than Medicare spending even in the coming decade, and the two programs will cost about the same by 2020. That’s amazing, considering the wave of baby boomers entering Medicare.

Medicaid spending will top $900 billion in 2020 (state and federal funds) up from $343 billion in the last year of the George W. Bush administration. The Obama health law makes more people eligible and increases benefits.

The president promised to reduce the number of uninsured by making health plans more affordable. But twice as many of the uninsured will gain coverage by enrolling in Medicaid as in private health plans. The actuaries estimate that Medicaid enrollment will reach 75 million people in 2014.

In addition, the actuaries cautioned that some workers and their families will be forced into Medicaid, when large employers drop coverage and choose to pay the $2,000 penalty, a mere pittance compared with the expense of providing what the Obama health law deems “essential” coverage.

McKinsey & Co., management consultants, found that 30 to 50 percent of employers polled were considering dropping coverage in 2014; Towers Watson, another consulting firm, found 9 percent and Lockton Benefit Group reported 19 percent of its middle-market clients likely to drop coverage.

When employers stop providing insurance, workers with household incomes below 138 percent of poverty ($30,500 for a household of four) will qualify for Medicaid. The Medicaid rolls could swell beyond the actuaries’ already alarming predictions.

The more Medicaid is expanded, the more the costs are shifted onto private health plan premiums. Medicaid shortchanges hospitals and doctors, paying only about 86 cents for every dollar of care delivered. Doctors and hospitals make do by shifting the cost onto patients with private coverage, pushing up their premiums.

The 9 percent premium hike employers experienced this year is partly due to the increase in Medicaid rolls during the downturn. The cost shifting will get much worse in 2014.

To avert these unintended consequences, the Medicaid expansion should be repealed. The Supercommittee should target Medicaid, not Medicare.

Keep in mind that the Obama health law reduced future Medicare funding by over $500 billion, largely by slashing what hospitals and doctors will be paid to care for seniors. At that time, CMS Chief Actuary Richard Foster cautioned Congress that these cuts are so severe that some hospitals may be forced to stop accepting Medicare. Then the debt hike deal signed this Aug. 2 cut another 2 percent from payment rates to care for seniors.

Now the president’s deficit reduction proposal calls for a third round of reductions, this time by $248 billion, including even further reductions in what doctors and hospitals are paid to care for seniors.

The more Medicare reimbursement rates are cut, the less likely it is that doctors and hospitals can afford to provide hip replacements, bypass surgeries, cataract operations, and the other procedures that have transformed the experience of aging.

The president’s rhetoric makes him sound like a defender of the elderly. He threatened to “veto any bill that takes one dime from Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share.”

But numbers tell the truth. The president is robbing Grandma to spread the wealth by radically expanding the Medicaid entitlement.

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