Medicaid in Review
Medicaid was created alongside Medicare in the 1960’s to provide health insurance to America’s poorest citizens. Each state administers its own Medicaid program with financial assistance from the federal government to guarantee health care services for those that cannot afford private health insurance. Today, Medicaid covers nearly 60 million low-income people, including almost 5 million seniors who also receive Medicare.
However, politicians have neglected the structural problems with Medicaid, making it the fastest -growing part of the federal budget without improving health outcomes for its beneficiaries. The program must be dramatically reformed to ensure that health care is available for every struggling mother, grandfather, and child who require it to live.
The Medicaid program operates as a federal-state partnership: each state designs and operates their own program under broad federal guidelines that designate eligibility criteria and a minimum set of health services that must be provided. Traditionally, anyone person whose annual income was at or below 100 percent of the federal poverty line qualified for the program. In 2016, the FPL for a family of four is $24,300. Medicaid is means-tested which means the more money you make the smaller level of benefit you receive.
When a Medicaid beneficiary goes the doctor or the hospital, the federal and state governments pay a pre-determined rate, known as fee-for-service, where health care providers are reimbursed a fixed dollar amount for each and every treatment. These static reimbursement rates are typically much lower than private insurance or even Medicare.
To pay for the Medicaid program, each state spends from their own budget with the knowledge that the federal government will match at least 50 percent of that spending. This Federal Medical Assistance Percentage (FMAP) increases as the state’s per capita income decreases from the national average. In other words, if a state’s population is poorer than the nation as a whole they receive more matching dollars. Because the FMAP’s are fixed every year, states have little incentive to deny or decrease coverage to shrink their budgets because the federal government will keep reimbursing despite the size of the Medicaid pool.
In 2012, total Medicaid spending was $431 billion, $251 billion (58 percent) of which was spent by the federal government. Without reforms to curb the growth of Medicaid the program will gradually consume more and more of state and federal dollars. Such crowding out of other budget items will mean a loss of other services, higher debt, or increased taxation.