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Medicaid: Uniquely Prepared To Deliver On Health Care Reform

July 10th, 2009

For those of us who have made Medicaid the focus of our work, it never ceases to amaze us as we watch the great health care debate unfold how frequently we find ourselves saying, “Medicaid can do that.” Or, even more often, “Medicaid is doing that.”

These are heady times for big concepts for transforming health care delivery, but there is not always an obvious, real-world mechanism for implementing these innovations at scale. Just look more closely at many of the most-favored concepts of the day: covering the uninsured; accountable care entities; patient-centered medical homes; public reporting and performance measurement; pay-for-performance; health information technology for meaningful uses; reducing racial and ethnic disparities; and integrated preventive care for patients with multiple chronic conditions.

For each of these innovations, somewhere across the country — and in some cases, in many places — Medicaid is in fact already doing it.

National experts and policymakers, especially those inside the Beltway, tend to focus on Medicaid’s older sibling — Medicare — for obvious reasons. But, lest they forget, we should remind them: Medicaid is already serving more than 60 million Americans and, depending upon the trajectories of unemployment and health care reform, could hit 100 million in the next decade. The cost of their care is topping $360 billion, and last year while he was still at the Congressional Budget Office, Peter Orszag was predicting roughly 8 percent annual Medicaid spending growth through the next decade. Thus, by 2018, program spending would reach an estimated $700 billion. No matter how low the Medicaid payment rates are, that is a lot of purchasing power.

Indeed, in many states and communities, Medicaid is by far the largest purchaser, is well-positioned to lead the market, and is taking a leadership role in doing so. For example, in Rhode Island, the state has built a multipayer collaborative to test accountable patient-centered medical homes, and North Carolina state leaders created community-based accountable care networks that will potentially extend beyond Medicaid to improve care management for the entire Medicare population.

Choosing Medicaid Expansion Over Subsidies For Private Insurance: Building On What Works

But, first things first; let’s start with the debate over access to care and see why a Medicaid expansion is better policy than the most plausible alternative, which is providing subsidies to purchase private coverage through a newly-created health insurance exchange. In his June 23 contribution to this blog, Leighton Ku provides part of the answer, as he demonstrates that a Medicaid expansion is less expensive (both to government and to the beneficiaries) than subsidized private coverage, and also generally better for the beneficiaries (who get access to more preventive services and prescription drugs). More generally, Medicaid provides a relatively rich set of benefits to many of the nation’s most chronically ill and needy and it does so at a relatively low per capita cost.

Put simply, health reformers should build on what works (Medicaid) before enacting complicated new administrative infrastructures that may or may not work (insurance exchanges for low-wage families).

It is far from clear, for example, whether there would be a single national insurance exchange, or several regional ones, or 50 state-based organizations. It also is unclear whether current Medicaid and Children’s Health Insurance Program (CHIP) beneficiaries would need to participate in the newly created exchange(s). Whatever administrative structure were to be developed, however, is less likely to have the experience and the institutional history of the nation’s long-standing and generally quite effective state Medicaid agencies. Health reform is too important to overlook the federalism and implementation variables, and both of these considerations point in favor of a Medicaid expansion.

The politics of this issue are also more complicated than they might seem at first blush.  To be sure, the nation’s governors (or at least those in states that now have relatively low Medicaid eligibility levels) are skeptical, and federal officials likely would need to promise full federal funding for most or all of the expansion beneficiaries. There also is for many a “welfare-based” stigma attached to Medicaid, which while fading in potency should still be addressed. Finally, health care providers justifiably complain about low Medicaid reimbursement rates, and Medicaid agencies will need to pay higher rates (and rely more heavily on nurse practitioners and physician assistants), though even the promise of higher rates is unlikely to overcome physician resistance to the program.

The Evolution Of Medicaid: From A “Poor Program For Poor People” To The Most Successful Way To Help The Uninsured

Nevertheless, one of the most extraordinary stories of the American health care system is the evolution of Medicaid from a poor program for poor people (prior to the mid-1980s) to the most successful program in our history for aiding the uninsured. How did this happen, and how is that history relevant today?

Ironically, the very same factors that have previously dashed more comprehensive reform initiatives themselves encouraged Medicaid expansions. Business and insurance groups, for example, that have traditionally opposed employer mandates have often supported Medicaid expansions, both to relieve pressure to cover low-wage workers and also to leave intact the core of the existing private insurance system. Similarly, the nation’s complicated system of checks and balances might make it hard to enact comprehensive reform (as we’re re-learning in 2009), but Medicaid’s intergovernmental structure and shared financing actually has encouraged program expansion. Finally, the flexible, state-based variation inherent, by design, in Medicaid programs may minimize the anti-big government argument of some reform opponents. These factors explain why Medicaid enrollment has grown far faster than Medicare’s, even though it is Medicare that has been long touted as the presumed path to universal coverage.

For all of these reasons, regardless of whether Congress enacts universal coverage in 2009, it is reasonable to assume there will be some additional Medicaid expansions forthcoming.

Two other points on the politics of this issue. First, reports out of Washington suggest that Congress is looking to cut the cost of reform by (in part) cutting the level of premium subsidies.  This is not surprising: it is easier to cut premium subsidies than to cut Medicaid enrollment.  Second, a Medicaid expansion (especially if combined with a Medicaid buy-in program) could lessen the need to push for a brand-new public insurance program. The employer-sponsored system works pretty well for most Americans, and Medicaid is best viewed as a complement to that system, covering those (such as low-wage workers, small businessmen, and the sole proprietor) for whom the larger system does not work.

Medicaid Programs Have Been Leaders In Mining Data To Improve Quality

Finally, politics aside, state Medicaid programs offer important lessons and future directions for those focused on improving the quality of care, especially for high-need patients. Medicaid also offers lessons that can help to constrain costs (i.e., bending the trend) and thus make resources available for coverage expansion. Again, state Medicaid agencies are perfectly positioned for leadership in this area. For example, a number of states — Michigan, Oklahoma, and Pennsylvania — have figured out how to mine their data on the size and performance of primary care practices, beneficiaries’ race and ethnicity, and chronic disease burden to: (a) stratify their high-volume Medicaid practices in which there are significant disparities in care; and (b) design and support interventions to improve quality and reduce avoidable emergency room and hospital readmissions among these beneficiaries. These state pilot projects are being independently evaluated to determine whether they can generate savings that can potentially be reinvested elsewhere in the health care system.

Efforts to create integrated systems of care for the highest-need, highest-cost beneficiaries with multiple serious chronic illnesses are, perhaps, even more promising in terms of the potential for dramatic improvements. The top 5 percent of these patients account for 50 percent of Medicaid’s costs. While Medicaid is the primary insurer for this population with disabling and extremely costly chronic conditions, the same basic expenditure pattern exists in Medicare and even in employer-based insurance.

This fact has impelled leading-edge health plans like Kaiser Permanente and Aetna/Schaller Anderson to invest in Medicaid-based demonstrations to, for instance, integrate physical and behavioral health care for those with serious mental illnesses. These plans are also supporting pilot efforts to integrate care for those with numerous chronic conditions who have multiple physicians and complex health care needs, yet no accountable care management entity. That should sound familiar, in fact, very similar to fee-for-service Medicare.

Another dramatic area of opportunity is the alignment of care for those who are dually eligible for Medicaid and Medicare. Currently, these programs tend to operate at cross-purposes, with plans and providers for the respective programs often acting on incentives to shift costs to the other. The more than 7.5 million older Americans and people with disabilities who are fully eligible for both programs are among the highest-need, highest-cost patients in America, accounting for 46 percent of all Medicaid expenditures — mostly for long-term care — and 24 percent of all Medicare expenditures. According to a recent Lewin report, that translates into more than $239 billion per year for a group that constitutes less than 3 percent of the American population.

A number of those on the front lines suggest that it would be entirely reasonable to aim for a combined 20 percent reduction in expenditures from avoidable hospitalizations and long-stay institutionalizations for this population. Arizona, Massachusetts, Minnesota, and Wisconsin have long been leaders in this arena and have been joined more recently by states like North Carolina, New Mexico, New York, and Vermont. These states all see the opportunity to provide higher-quality care that will help their residents live independently in the community and benefit their state budgets at the same time.

We could continue in this vein, because there are so many ways in which Medicaid can inform the transformation of the U.S. health care delivery system, starting with its role as an essential coverage vehicle with ready-made infrastructure. We urge the national experts and policymakers to remember that “Medicaid for More” is both good policy and good politics.

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1 Trackback for “Medicaid: Uniquely Prepared To Deliver On Health Care Reform”

  1. Medicaid – You already pay for it, and soon you might pay more… « What You May Have Missed in Health Care Reform When Glenn Beck and Keith Olbermann Were Wasting Your Time Which You'll Never Get Back
    October 19th, 2009 at 2:34 pm

5 Responses to “Medicaid: Uniquely Prepared To Deliver On Health Care Reform”

  1. Neil Gardner Says:

    Stephen Somers, thanks for your reply, but you still did not answer the question of whether a 40 year history of failure indicates a good program to build upon.

    Let me get at my point by trying this series of questions. A society through its government functions creates a monopoly profession to deal with a certain disease, and only that monopoly profession can deal with that disease! That same society through its government functions also deems childhood dental disease an important enough entity to be treated for all and offers to pay for such treatments for its poorest children citizens. However, that government created monopoly entity, again which is the only entity that can treat such disease, almost entirely refuses to see those children whose disease that same government has deemed important enough to get treated. The situation as described goes on for more than 40 years with little real solutions.

    What is wrong with this picture, and what real solutions are p

  2. Stephen Somers Says:

    Yes, we are intimately aware of the challenges that state Medicaid agencies face in ensuring that children and adults have access to quality dental care. One of the critical obstacles is the national dearth of dentists to care for the Medicaid population. The Center for Health Care Strategies, through funding from the Robert Wood Johnson Foundation, recently worked with six states in the State Action for Oral Health Access initiative ( to test new strategies to expand dental access to low-income, racially/ethnically diverse, and disabled populations served through Medicaid, SCHIP, and the public health system. Several states, including Michigan, New Jersey, Oregon, Rhode Island, and Vermont, have developed innovative programs to improve children’s access to oral health services, particularly basic preventive services and screening. Although dental reform has been successful in some states, it has not yet had a national impact and it is too early to build upon in terms of broader reform models. Fortunately, Medicaid’s track record extends far beyond dental care – the program provides a rich set of cost-effective benefits for physical, behavioral health, and long-term care services for some of the nation’s most complex need populations.

  3. Bobby Peterson Says:

    The authors are so correct!! Medicaid is a logical choice to use as a vehicle for reform. The authors fail to note, however, the legal protections afforded Medicaid recipients including constitutionally enshrined due process of law. The debate over Health reform has lacked a meaningful discussion of consumer protection and patient advocacy. Our organization released a health reform proposal that builds of the Medicaid program and includes important consumer protections.

  4. RogerCollier Says:

    Somers and Sparer are to be commended for asking a question that has not been raised publicly by congressional policymakers. Certainly, it’s reasonable to wonder why we need yet another government-administered health care program. However…

    1. Congressional committees are already considering a huge expansion of Medicaid to supplement the proposed health care reform legislation. The CBO estimates that expansion of eligibility to cover all those with incomes below 150 percent of FFP could add up to 20 million people to Medicaid rolls and cost some $500 billion over ten years.

    2. Given that many Medicaid eligibles already find difficulty in getting care, a one-third growth in demand may be impossible to satisfy without much more generous provider payments.

    3. Unless expansion funding comes entirely from the federal government, it’s hard to see how cash-strapped states can afford even the expansion currently being considered, let alone a replacement for the insurance exchange model.

    On the other hand, there may be some merit, from the viewpoint of reform cost-containment, of reducing the proposed subsidies for lower-income exchange participants to the level of per capita Medicaid expenditures and then allowing these individuals to buy into Medicaid.

  5. Neil Gardner Says:

    Are the authors of this article familiar with the Medicaid dental track record over the last 40 years especially for children’s dental access?? If so, do they consider that a successful model to build upon?

    If an entire profession outside of some safety net clinics reject a needed program, is that a success to build upon?

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