Debating Medicaid's Future

Judy Solomon, co-director of health policy, weighed in on the New York Times’ “Room for Debate” forum, which features commentary from policy experts on a variety of pressing issues.  The topic was “How to Save Medicaid.” Solomon explained that Medicaid costs have risen no faster than private insurance and that capping federal funding is the wrong approach to slowing future cost growth.

The Workhorse of Health Care

Medicaid is the workhorse of the nation’s health care system. It provides health coverage to about 58 million low-income Americans, covers almost half of the costs of long-term care for seniors and people with disabilities, and pays for 40 percent of all births. It provides critical services that people with disabilities and children with special health care needs require but that private insurance generally doesn’t cover.

Yet Medicaid’s average cost per beneficiary has grown no faster than the cost of private insurance over the last 30 years. In fact, Medicaid actually costs less per individual than private insurance, when you adjust for Medicaid beneficiaries’ poorer average health.

Capping federal funding would cripple Medicaid and significantly shift costs to states, families, and doctors and hospitals. Facing inadequate federal funding, states would have to contribute more of their own funds or cut back eligibility, benefits and payments to health care providers. States would also be unable to cover the many families that lose their jobs and health coverage during a future downturn. (During the recent downturn, states struggled with the greater caseloads under the current financing structure and required even greater federal help.) And states would be unable to address large, unanticipated medical costs like those resulting from the H.I.V./AIDS epidemic they faced in the 1980s.

While slowing Medicaid costs and improving efficiency are essential, the solution is not to cap federal funding. The health reform law takes a sounder approach, giving states new tools to take steps such as moving away from costly nursing home care to care in the community, and delivering health care to beneficiaries with chronic conditions in better and less costly ways. The health reform legislation also takes a number of other steps that hold considerable potential for slowing the long-term growth in health care costs system-wide.