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There are reports out of Texas that as many as a dozen states are thinking of opting out of Medicaid.  They have their reasons.  The program is expensive for the states and seems to do a lousy job of delivering care. 

But I don't think the answer is for states to opt out of Medicaid.  I think the answer is for Republican governors (and the newly elected Republican state legislators) to offer policy fixes for Medicaid in their own states, apply for waivers from the federal government and let the Obama administration say no if they dare.  There is obviously a policy component to this.  The governors would have to put together Medicaid reform plans that would either save money or plausibly offer better care to Medicaid recipients or both.  There are several models to choose from including Mitch Daniels's Healthy Indiana Plan, and Bobby Jindal's plan to introduce insurance competition into Medicaid.  Let a dozen reform plans bloom.  Then the governors (hopefully a lot of them) could put public pressure on the Obama administration (and make intense use of media) to allow the states to experiment with plans that would save the their states money and offer better care to their states' residents.  This could also be a good way to open a two front war against Obamacare as it would let congressional Republicans introduce bills to give the states flexibility.  All of this would tend to increase public awareness of more free market approaches to health care reform and we might actually get some good policy out of it to boot.   

Obamacare includes a huge expansion of the already problematic Medicaid program.  It is also contains an opportunity for conservative politicians to gain ground on the health care issue and restructure Medicaid in a direction that nudges the country toward a more consumer-driven health care system.    

h/t to Peter Suderman.

Categories > Politics

Discussions - 8 Comments

There are reports out of Texas that as many as a dozen states are thinking of opting out of Medicaid.

Are there any reports as to what they are planning to do with their nursing home population? Export it to the other 38 states, perhaps?

Pete, you make the fundamental assumption that the american public wants a consumer-driven healthcare system. I think you're wrong in that assumption. As people age and increasingly need medical care they want simple, not complex and involved negotiations with insurance companies over what will recovered and what won't be covered. Talk to a person who has been denied coverage for what the doctor considers a 'medically necessary' procedure about the reports that his insurance company earned record profits during the year.

There are many who oppose the ACA but at least half of those opposed think that the plan didn't go far enough toasted a single-payer system.

AD, one reason I'm against that policy.

Anon, I don't think most people are in favor of such policies because I doubt the vast majority of people have heard of such policies in any but the vaguest terms. The state workers of Indiana seem to like their HSA/catastrophic coverage plan well enough. Such plans also don't have to be any more (and might often be less) complicated than our current system of comprehensive(ish) prepaid care.

Though I do agree that any such system would take some getting used to and would have to involve obvious and well publicized benefits to subgroups before more people got on board, which is why I'm in favor of incremental reforms that, if they work, will give conservatives leverage in pushing larger reforms.

Whatever people want or do not want, there are not an unlimited way to allocate factors of production or income. You can do so with markets, you can do so with systems of administrative command, or you can attempt to synthesize or juxtapose administrative command; done poorly, you get the series of unstable equilibria we have had since 1965.

A portfolio of tests a physician or surgeon orders and any sort of therapy a physician or surgeon orders have benefits and costs, and the benefits are often a matter of actuarial calculation. A physician of my acquaintance put it thus: you have a medication which you may figure has an x% chance of producing a degree of improvement y (and a z% chance of inducing some sort of iatrogenic ailment). Do you deny your patient this therapy, even though you know it likely will make hardly a dime's worth of difference? Often what is 'medically necessary' is opaque. Also, if you have been through the cancer treatment mangle recently, one thing hits you: physicians are not actuaries. They often have only a vague idea of how likely their treatment protocols are to have a desired effect. They know qualitatively that x is better than y in circumstance z. Insurance companies and utilization review staff may have access to a more valid information base than the physician about the efficacy of given treatments (tho' the former have economic interests at stake, to be sure).

What people are accustomed to evolves as well. Thomas Sowell has offered that 60 years ago, people in general did not expect third parties to pay their medical bills any more than people in our own time expect others to make their car payments or mortgage payments. Yet, we now live in a world where first-dollar coverage (or coverage in return for piddling co-pays) is an expectation. Unfortunately, it is neither economically or socially sustainable and has given us escalating costs and continuing political disputation over the allocation of benefits and charges (not to mention ruining the morale of much of the medical profession).

Whether you are for it or against it is of no interest. What is the State of Texas planning to do? You have 1.8 million people living in nursing homes in this country. Sixty years ago, some of them might have been cared for in the homes of their children or shirt-tail relatives, domestic labor being comparatively plentiful then. Others would have been in state asylums and still others would have died before they were ever so debilitated. Today's nursing home population is not exactly the picture of health and sending them back to their families wrapped with a bow will likely require a jarring re-ordering of domestic life for millions of people. The way we live now can be critiqued severely, but we cannot simply re-create the pattern of family relations prevailing in 1948 in time for the close of the fiscal year. My grand-mother took care of her antique in-laws for a string of years just after the war. However, they were ambulatory enough to climb stairs, vigorous enough to travel a couple hundred miles by train, and given only to episodic disorientation. Neither one would be a candidate for admission to a nursing home in this day and age.

AD, sorry to not interest you, but I figure why stop now? I think that Gov. Perry is just posturing and is planning for some combination of headlines and maybe some waivers from the Obama administration. I guess Texas could make a go of it in theory by some combination of cutting back on the Medicaid eligibility of some working-aged and able bodied adults (and their dependents), reducing provider reimbursements for the rest and cutting the reimbursements to long-term elder care facilities. You could also introduce eligibility standards to encourage middle-class people to take out long-term care insurance, and change guidelines for how assets are spent down as per John Hood's suggestions in National Affairs (though that that would take time to save the state money.) I don't know what Texas's reimbursement rates are but I suspect that they are not nearly as high as New York State's (my experience with New York State Medicaid reimbursement is ten years old but I remember it is as being especially generous), so I'm not sure how much lower the reimbursement rates could go to make up for the lost federal funds. There would of course be enormous moral and political costs to such an opt out (to start with the collapse of many nursing home businesses, but not to stop there), which is why I think Texas is only a little more likely to opt out of Medicaid (under current and projected policy) than to secede.

I suppose that Texas could try to spend more of its own money in the short-term to partially cover the revenue gap, thinking that a reformed state program for the indigent might save money in the long-run by avoiding the coverage expansion in Obamacare, but I don't think that is what they have in mind.

Encouraging people to purchase long term care insurance will not pay off for another thirty years, so I doubt that is part of Gov. Perry's strategy. You have another problem with long-term care insurance: underwriting standards are such that much of the population is uninsurable. In my immediate nexus we've seven adults of an age to purchase long-term care insurance. Two cannot afford it and four are uninsurable. The last is able to purchase it through his employer (and yes, he is a public employee).

The thing is, a particular configuration of old-age benefits sit in a nexus of the recipient's long-term planning and of his children's domestic arrangements. The old cannot readily shift gears and the disabled old are locked into their circumstances. Their children have more flexibility, but are still faced with difficult adjustments in living circumstances in response to issues in elder care. If Gov. Perry attempts this, it will offend a smaller constituency than gutting Medicare, but the constituency offended will make the most disagreeable town meeting Harry Reid had to attend look like two men in smoking jackets equipped with sherry and pipe and their thoughts on Sallust.

AD, I think that what Hood had in mind was that adults would start paying for long-term care earlier in life and in larger numbers than at present though I'm not sure how much that would affect premiums of policies and it would take a long time to save the government lots of money.

Agree with all the rest.

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