Commentary: Plenty of problems with Medicaid

The State (Columbia, S.C.)January 7, 2010 

Whether it was constitutional or not — and I suspect it was — the "Free Medicaid for Nebraska" deal that Senate Democrats made to secure their crucial 60th vote to pass health reform last month marked a dangerous departure for the Congress.

This was not, as U.S. Rep. Jim Clyburn has insisted, merely the normal horse-trading that goes into passing major legislation. Though there have been occasional glitches in the formulas, Medicaid always has been formula-driven: The federal government picks up more of the tab for poorer states (such as South Carolina) and less for wealthier states. That's because unlike highway funding, questionable research grants and other programs that routinely are used as log-rolling currency, Medicaid is a life-or-death program.

Nor is Mr. Clyburn right when he suggests that the way to fix things is to cut a better deal for South Carolina. But he's much closer to being right than Sens. Jim DeMint and Lindsey Graham and Attorney General Henry McMaster, and their counterparts in other states who are raising similar objections.

That's because both "sides" in this debate are ignoring the central problem — which seems to be the inevitable consequence of our hyper-polarized political system.

The biggest problem isn't that South Carolina didn't get the same deal as Nebraska, which under the Senate bill won't have to pay any of the costs of expanding Medicaid for the next 10 years — though we have good reason to worry about that. As Mr. McMaster notes, our state and the other 48 will be subsidizing Nebraska with our state tax dollars, since we'll all have to pay part of our own Medicaid expansion costs.

Mr. Clyburn disputes Gov. Mark Sanford's claim that South Carolina's cost to add another 300,000 people to the 700,000 already receiving Medicaid could top $1 billion over the next decade. But whatever the number, it's going to be a massive expense for a state already struggling to keep the lights on.

Nor is the biggest problem that the Nebraska deal took congressional logrolling to a crass new low, though that too is worrisome. Slippery slopes and all that.

The main problem is that Medicaid remains a combination state-federal program, rather than a fully federal program like Medicare.

This doesn't simply mean that states have to pick up part of the cost for Medicaid. They also get to decide — within a broad set of parameters — how generous Medicaid is. So while Medicaid coverage is available to children whose parents earn up to 300 percent of the federal poverty level in Massachusetts, children in South Carolina are covered to only 200 percent.

The working poor receive an unlimited number of prescriptions per month, for free, in New Jersey; they get a maximum of four (10 with an override) in South Carolina, with a $3 co-pay. Nebraska covers up to 60 physical therapy sessions a year; South Carolina covers none. South Carolina covers chiropractic treatment; Georgia and 20 other states do not. (This speaks more about the power of the chiropractic lobby in South Carolina than anything else.) South Carolina covers eyeglasses after some eye surgeries; while Virginia does not. The list goes on and on, and you can review it all at medicaidbenefits.kff.org.

Medicare recipients, on the other hand, receive the same benefits whether they live in South Carolina or New Hampshire — as they should. (Likewise, doctors and other medical providers receive the same pay for treating Medicare recipients, no matter where they live — unlike with Medicaid, where providers in some states get far more for treating Medicare patients while in other states they receive less.)

From a policy perspective, the only disparity that would make sense is the opposite. The poor all need help with medical care, whereas some elderly people could pay for their own health care — particularly if they were allowed to purchase Medicare insurance. (And from a distastefully hard-nosed economic perspective, it makes more sense to see to it that working people and young parents are healthy than that retired people are.)

The technical reason for the difference is that Medicare was designed as a federal entitlement for the elderly — all the elderly, regardless of their income or where they live. Medicaid was designed to help states help the poor elderly with the costs that Medicare didn't cover, if they so chose; it was expanded over the ensuing half century to help other groups, primarily children and pregnant women. If the states have to pick up some of the tab, it only makes sense that they would have some say in how big the overall tab is.

One can never know for sure why the two programs started out and remained so different. Some suggest that the Congress put Medicaid under state control so Southern lawmakers could make sure they didn't have to cover too many black people. Others say it was simply that the Congress could justify creating a new tax to fund a program for the elderly, since we all get old eventually, while it was more difficult to justify a tax to help the poor.

Or it could have been simpler still: Medicare was the focus; Medicaid was very nearly an afterthought — a charity program, as one analyst put it. And as the cost (and need) for both programs grew exponentially, there simply wasn't enough motivation for Congress to standardize and pick up all the cost of a program to provide health care for poor people, who unlike the elderly do not tend to vote in particularly high numbers.

Perhaps it made sense at the time. But that was a different era. An era before Medicaid was competing with public education to eat up the largest share of a state's budget — even in a state with as parsimonious a Medicaid program as ours. An era before federal law required everyone to have health insurance and the idea of a state refusing to go along with a massive expansion of Medicaid was a complete non-starter. Today, for all practical purposes, Medicaid is an unfunded federal mandate to states. And this unfunded federal mandate is a key component of the Congress' plan to implement what it has determined is a national priority.

That is the Medicaid problem we ought to be talking about — and working to correct.

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