Medicaid Costs Less Than Private Insurance

In last week’s post explaining why block-granting Medicaid or capping its funding would be ill-advised, I noted that Medicaid costs per beneficiary have risen at about the same rate as costs across the health-care system as a whole (both public and private) in recent decades.   Moreover, Medicaid actually costs less per beneficiary than private insurance, after taking into account differences in health status.  This chart shows how much less.

We need to slow Medicaid cost growth over the long run in order to reduce federal deficits and debt.  But block-granting the program or otherwise cutting its funding, in isolation from changes to slow health costs systemwide, would simply shift costs to states, beneficiaries, and providers.

Medicaid and private insurance costs grow for the same reasons, so a far better approach would be to continue to take steps — like those in the health reform law — to change how health care is delivered in order to improve quality and lower cost.  This would help slow cost growth throughout the U.S. health-care system.