Medicaid could help cover more uninsured, but not everyone's sold

Kaiser Health NewsJuly 1, 2009 

WASHINGTON — Medicaid's role in health care is emerging as a flashpoint, exposing policy and political rifts not only between the two parties but also among Democrats themselves.

As part of efforts to extend health coverage to millions of uninsured Americans, congressional Democrats are pressing for a major expansion in the state-federal program for the poor and disabled. As a result, Medicaid, which now covers 60 million people, could pick up more than a third of the 46 million uninsured. Those numbers are far from final, given that overhaul legislation is still being written and negotiated.

The disagreement centers on a critical issue: What's the best way to cover impoverished Americans? Is it by expanding Medicaid? Or by providing subsidies for the poor to buy private insurance on new health insurance exchanges to be created by the legislation?

Most Democrats come down squarely on the side of Medicaid, saying it's the most efficient and least expensive way to cover the poor. Rep. Frank Pallone, D-N.J., said the program is "one of the best ways" to make sure lower-income people are covered.

Most Republicans, leery about expanding a big government program such as Medicaid, argue that private insurance is better.

Some moderate Democrats agree. Sen. Ron Wyden, D-Ore., calls Medicaid a "caste system" that hurts poor people's choice of doctors and the care they receive. Some governors worry that, sooner or later, they'll end up paying for a big chunk of any Medicaid expansion.

In the end, though, Medicaid's role in health legislation may be bolstered by simple math: Studies suggest that enrolling people in the program would be substantially cheaper than giving them subsidies for private insurance.

Medicaid, which spent $330 billion in fiscal 2007, is considered one of the most complicated government programs. Overall, the federal government provides 57 percent of the money and states chip in the rest. The federal matching rate varies from state to state, with poor states getting higher rates.

Under federal rules, certain poor people must be covered. That includes children under age 6 and pregnant women whose family incomes are below 133 percent of the federal poverty level, or $28,200 for a family of four in 2008, and children age 6 to 18 whose family incomes are below 100 percent of the poverty level, or $21,200 for a family of four.

Beyond that, the federal government lets states set their own eligibility rules, which vary greatly.

Here are some of the issues being debated by lawmakers:

_ Medicaid versus private insurance: Under legislation pending in Congress, the uninsured could get coverage from a few different sources: Medicaid; private insurance sold through the new health exchanges or, if it's created, a government-run insurance plan.

Provisions in House and Senate bills, which would expand Medicaid eligibility, would affect states differently. Many northern states, for example, already have expanded their programs to the levels under consideration in Congress, so they may not benefit at all.

The House Democrats' draft bill would raise eligibility to 133 percent of the poverty level for individuals and families. The Senate Finance Committee bill, which is still being developed, may raise eligibility to the same level for children and pregnant women and to 100 percent of the poverty level, or $10,800 a year, for parents and adults without children.

The Senate Health, Education, Labor and Pensions Committee bill is more generous, raising Medicaid eligibility for all individuals to 150 percent of the poverty level, or $31,800, for a family of four.

Some critics say it makes little sense to channel millions more people into Medicaid, given that the program has been a budget-buster for states. States' spending on Medicaid ranks second only to education funding.

"States are facing a combined budget shortfall of more than $200 billion over the next two years, with rising Medicaid costs as one of the primary drivers," said Sen. Orrin Hatch, R-Utah.

Medicaid backers, however, say that program is the better choice — for taxpayers and the enrollees.

"Medicaid is by far the better deal from society's point of view, from the consumer's point of view," said Leighton Ku, a health policy professor at George Washington University's School of Public Health and Health Services.

He said that it would cost up to 30 percent more to put poor people in subsidized private insurance plans rather than in Medicaid.

_ Who pays: Expanding Medicaid under the scenarios being discussed on Capitol Hill would cost tens of billions — if not hundreds of billions — of dollars over 10 years. The exact price tag depends on several major factors, including the extent of the expansion and whether Congress raises Medicaid reimbursement rates to try to ensure that doctors and other providers are willing to treat Medicaid patients.

One thing is clear: With states wracked by recession and governors terrified about getting stuck with a bigger Medicaid bill, the federal government would have to pay the entire tab for any expansion, at least for the first few years.

_ Who'd benefit: The expansion would have the biggest impact in states, particularly in the South and West, with high numbers of poor uninsured people and tight Medicaid eligibility standards.

In addition, many states already cover children whose families' incomes are above the poverty level. That means a Medicaid expansion would have a greater impact on poor adults, especially those who don't have children. Currently, six states provide coverage to childless adults, although others provide some limited benefits.

While Medicaid provides coverage to half of low-income children, "nearly half of poor and a third of near-poor adults are left uninsured," Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, told Congress in May. (The commission and Kaiser Health News are part of the Kaiser Family Foundation.)

According to an analysis by Avalere Health, a health care consulting firm in Washington, the congressional plans could reduce the number of uninsured people by up to 18 million.

(Julie Appleby and Jaclyn Schiff contributed to this article.)

(Kaiser Health News is an editorially independent news service and is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization that's not affiliated with Kaiser Permanente.)

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