With revenues reduced to a trickle, some states are considering drastic measures to balance their budgets. Gov. Rick Perry of Texas has proposed abandoning Medicaid, the federally mandated program that provides health care for the poor. That idea also has its advocates in Florida, Nevada and here in South Carolina.
But before ditching Medicaid, let’s do ourselves the favor of considering this cautionary tale from Indiana.
By LAURA HERMER
Nov. 20, 2010, 3:59PM
The health policy world is in a tizzy. Texas is thinking about dropping Medicaid. Gov. Rick Perry thinks a private solution can work better. Several other states are paying close attention and considering doing the same.
Texas’ actions shouldn’t come as any surprise. Legislators and others in Texas, Florida, Nevada and elsewhere started threatening to drop Medicaid months ago, claiming they could create a better and cheaper program by providing subsidies for private coverage for the poor.
We’ve heard about how private business works better and cheaper than government for many years now. We’ve made a lot of public policy decisions based on this premise. Consequently, we also have some data on how well this has worked. How much better and cheaper has the private market in fact functioned in comparison with government programs?
In the case of Medicaid, we have a particularly good example from Indiana. The state’s Healthy Indiana Plan offers subsidies to help certain low income uninsured people purchase private health insurance plans, in lieu of offering them traditional Medicaid. The concept sounds irreproachable. Beneficiaries who otherwise wouldn’t be able to afford coverage get it, health care providers get better reimbursement than they would if the beneficiaries were covered via Medicaid, and the state pays less than it would if it offered the beneficiaries traditional Medicaid coverage. What’s not to like?
Unfortunately, lots. First, many beneficiaries have to pay a lot more out of pocket than they would if they had traditional Medicaid coverage. Nonpayment has been the No. 1 reason for terminating beneficiaries from Healthy Indiana since the program began in 2008, with up to 35 percent of beneficiaries in certain income levels failing to make their first payment.