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New Report on State Medicaid Programs Highlights Danger of ObamaCare’s Inadequate Health Care Financing

by | Dec 2, 2011

By Jennifer Popik, JD
Robert Powell Center for Medical Ethics

Jennifer Popik, J.D. Robert Powell Center for Medical Ethics

A Washington Post piece from this week titled, “States face crushing economic outlook,” reports that Medicaid is expected to be the biggest upcoming burden on states.  Medicaid, an expensive joint Federal/State health care program, primarily for the poor and those with disabilities, is a perennial source of state budgeting fights.  

A joint report from the National Governors Association and The National Association of State Budget Officers out this week concludes, “[S]tate Medicaid spending is growing much faster than state revenue, crowding out other priorities.” Because Medicaid relies on general tax revenues, the money available depends on the state economy and budget available.  The amounts set aside are not related to what is actually spent on health care but are based off of budgeting ‘best guesses’ coupled with what tax revenue the state could cobble together.

Not only has the recession meant that more people are joining the Medicaid rolls, but by 2014, the Obama Health Law insurance mandate is expected to draw in many who are now eligible, but not enrolled.  This has had and will have the continuing effect of leading the state governments to arbitrarily reduce Medicaid reimbursements.  Indeed, ObamaCare as a whole is a combination of unfunded, or inadequately funded, mandates for expanding health care coverage, linked with measures that would have the effect of rationing health care by limiting not just government expenditures but also what private citizens are allowed to spend on their own health insurance and health care so as not even to keep up with medical inflation.  [For a fuller explanation, see  www.nrlc.org/HealthCareRationing/LifeatRiskLongform.pdf .]

The Washington Post article, written by Michael A. Fletcher, reports that states have to increase their Medicaid spending by an average of 29% this year (higher than normal due to the end of Stimulus Bill Federal dollars that had been given to state Medicaid programs).  The problem is that state budgets are struggling under declines in their revenues due to declining property values and other recession effects. As a result states have difficulty maintaining current Medicaid funding, let alone covering the increases expected.  Deep cuts are anticipated and already taking place in some states.

The National Right to Life Committee (NRLC), in an effort to prevent the denial of life-saving medical treatment, has long promoted an alternative means of financing for the health care safety net.  We have emphasized that over the long term productivity increases in other parts of the economy free up resources that Americans are using to increase private spending on life-saving health care. Such private health care spending will often rise faster than increases in general tax revenue, but this does not need to lead to the rationing of care in safety-net programs. [See http://nrlcomm.wordpress.com/2009/06/18/hcrwebinar]

NRLC has proposed that instead of relying on general revenue unrelated to what is actually spent on health care, growth in spending on the health care safety net be financed by cost-shifting based on what IS actually spent on health care in the private sector. The full proposal is available here: [http://nrlc.org///MedEthics/VariableWithhold.pdf]. 

The NRLC plan would have insurers to provide their fair share of basic health insurance policies to those the government determines will otherwise be unable to afford them at sliding scale discounts that vary with income and assets. When setting their premium prices, insurance companies would take into account the need to finance these required discounts just as hospitals now have to take into account the need to finance undercompensated and uncompensated care in their emergency rooms when setting the prices for their services. But because hospitals and doctors will be fully compensated, eliminating the need to cost shift when setting their fees, there should be no significant net increase in costs to insurers, thus not to policyholders.

This would mean that the level of health care for all would effectively be set, not by legislative votes establishing varying levels of taxes, but by the collective decisions of many citizens (and employers) deciding what premiums they were willing and able to pay for health insurance, with the cost of covering the uninsured taken into account in those decisions. 

The level of health care provided would never exceed what the economy as a whole could afford, but neither would it be held, by government constraint, below what Americans would freely choose.  Yet as the level of available health care changed, the health care available to those otherwise unable to afford it would change with it.  A rising tide really would lift all boats.

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Categories: ObamaCare