How to Fix Medicaid
28th June 2010
The sweeping health-care legislation enacted this spring is many things. It is a vast expansion of federal power. It is a budget-busting entitlement. It is a regulatory nightmare. But to a far greater degree than its advocates have acknowledged, it is also a massive expansion of Medicaid. This means that, under the new law, a hugely expensive program already deep in crisis would not only continue essentially unreformed: It would be put at the very center of America’s health-care system.
Medicaid is a joint federal-state program of health coverage for the poor. Its exact rules and practices vary from state to state; generally speaking, however, it is open to people with low incomes (below or just above the federal poverty level) and with some additional compelling condition of need — like being a parent, or having a serious disability. With these eligibility restrictions in place, Medicaid already covers 60 million Americans and accounts for 16 cents of every dollar spent on medical services in the United States.
It is also important to remember that Medicaid is not just a health-care program. It is the largest single component of America’s welfare state, far outweighing the dollar value of cash assistance, food stamps, or housing aid. Like these other programs, Medicaid often provides implicit disincentives to work, since increases in income can mean the loss of eligibility for a very valuable benefit. Unless future policymakers introduce reforms to help break the generational cycle of dependency — fixes based on principles that have worked in other welfare overhauls, like time limits and work requirements — the prospect of losing thousands of dollars a year in essentially free health care will perpetuate strong incentives against moving up the economic ladder. Refusing work, or accepting off-the-books jobs with few long-term prospects, will become rational choices for families facing the steep effective tax rates created by the eligibility rules for Medicaid (and soon to be made worse by Obamacare).
I’d say ‘two to the head’, but that’s me. The function of a government is to keep the peace, not hand out goodies.