Medicaid’s cruel status quo

Last week, the editors of the New York Times called the House Republican budget “cruel” because it seeks to reform Medicaid, our nation’s government-run health insurance program for the poor. But, in fact, it’s the Times that is showing cruel indifference to Medicaid’s inhumane status quo, a status quo that will deteriorate further under President Obama’s health care law.

As I describe in a new policy brief for the Manhattan Institute, medical studies consistently show that patients on Medicaid have the worst health outcomes of any group in America—far worse than those with private insurance and, in some cases, worse than those with no insurance at all. 

A landmark study from the University of Virginia, which reviewed records of nearly a million surgical patients, found that those on Medicaid were twice as likely to die in the hospital as those with similar health status, but private insurance. Dozens of other studies have found the same result.

How can this be? It turns out that Medicaid’s profoundly inefficient design leads to hundreds of billions of dollars in waste and fraud. As a result, fewer funds are left over to care for actual Medicaid patients. Medicaid pays physicians, on average, about half of what they get from private insurers.

Indeed, a study by two MIT economists found that nearly 60 percent of doctors gained more revenue from the uninsured than from Medicaid patients, because many uninsured patients pay out-of-pocket for their care. And you don’t have to fill out any government forms when your patient pays you in cash.

Medicaid’s paltry payments, in many cases, amount to less than what it costs to care for these patients. As a result, doctors are faced with two choices: caring for Medicaid patients and going broke, or shutting their doors to the poor.

Many doctors have stopped accepting Medicaid patients as a result.

Rebecca Curtis, a Medicaid enrollee, found it impossible to get a pediatrician to see her two-year-old son. “I called four or five doctors and asked if they accepted our Medicaid plan. It would always be, ‘No, I’m sorry.’ It kind of makes us feel like second-class citizens,” she told the Times in 2010.

“My Medicaid card is useless for me right now,” adds Nicole Dardeau. “It’s a useless piece of plastic. I can’t find an orthopedic surgeon or a pain management doctor who will accept Medicaid.”

Deamonte Driver, a 12-year-old boy on Medicaid, died of a toothache because he had trouble finding a dentist or an oral surgeon who would help him with his infected teeth.

If you can’t get a doctor’s appointment, it doesn’t matter if you have a card that says you have insurance. Health insurance is not the same thing as health care.

One of the biggest problems with Medicaid is fraud. The federal government estimates that at least 10 percent of all Medicaid spending—and possibly much more—is fraudulent. In a state like New York that spends $53 billion on Medicaid, that amounts to billions of dollars that could be devoted to caring for the poor and the sick.

But Washington’s Byzantine rules and regulations make it impossible for state governments to reform their Medicaid programs, to root out fraud and put more people on higher-quality private insurance.

The Obama administration blocked Illinois from requiring that Medicaid applicants prove their residency and income before gaining access to government funds. It also forced Indiana to shut down its innovative Healthy Indiana Plan, which gave Medicaid recipients access to superior private care.

Worse still, President Obama’s Affordable Care Act doubles down on this broken system. The law forces state governments to put 17 million more people on Medicaid—more than half of ObamaCare’s promised health coverage expansion—but does nothing to improve Medicaid’s structural flaws.

House Republicans seek to change all this by following the template of America’s greatest domestic policy success of the last twenty years: Bill Clinton’s 1996 welfare reform law.

Just as with Clinton’s reform, the Republicans’ proposal would give state governments the freedom to take their Medicaid money in the form of block grants. States would then be able to restructure their Medicaid offerings in the ways that are best suited to the residents of their states, curtailing fraud and providing higher-quality insurance.

The New York Times calls this “cruel.” But by ignoring the past success of welfare reform, and ignoring the serious problems with today’s Medicaid program, it’s the Times that is seeking to trap sixty million Americans in a government-run health care ghetto.

Avik S. A. Roy is a Senior Fellow at the Manhattan Institute for Policy Research.