Medicaid reform: For the poor and the poor taxpayer

Cross-Posted at Capital Domes

The Pittsburgh Tribune-Review recently looked at the looming budget shortfall and its potential impact on Medicaid spending. The legislature couldn't simply cut Medicaid spending -- as it is an entitlement program -- but would instead have to adjust eligibility requirements or levels of payment to health care providers.

Medicaid is the largest program in the state budget. In 1980, Medicaid represented around 12 percent of the state budget, but by 2007 Medicaid accounted for almost 26 percent of the budget. The problem is that it is increasing at an unsustainable rate.

Medicaid reform is necessary, both to reduce the costs to taxpayers and to give recipients better quality of care. Since the payments to health care providers established by the state are often set too low, many providers won't serve Medicaid recipients. And when Medicaid providers are paid below-market rates, they attempt to offset this loss by increasing rates to private payers.

Apart from oversight problems, Medicaid has a well-deserved reputation for providing low-quality care. The services are often low quality, treatment is episodic and preventative care is rare. With all of these problems now is an ideal time to reform the system.

Our suggested reforms include:

• Creating an insurance and provider exchange (IPE) that would give participants credits (or vouchers) to purchase health care coverage. The insurance credits could be risk-adjusted to serve the diverse Medicaid population.
  
• Controlling fraud and providing incentives for innovation by ensuring all plans are pre-paid.
  
• And giving providers the freedom to design specific products for a variety of medical problems facing Medicaid enrollees.
  

More details of our proposal can be found on the Commonwealth Foundation's Web site.

Continuing to frame the Medicaid debate in terms of spending cuts or spending increases is useless. Reforming Medicaid requires a new way of thinking.

The question is: Can Harrisburg think differently?