Who abuses free health systems most? Will the US have to ration overtly?

In the Regional Health Services, which are free in essence in the UK, it is interesting to ask the question “Who abuses free health systems most?”. The equally perverse reporting and use of biased organisations’ reports (see FGA below), actually on discharged former prisoners, shows how vitriolic and divisive the republicans approach to sensible Obamacare is. Nevertheless, the financial trend points to a need for even the USA to ration overtly.

In the USA Medicaid is a free service to the lower social classes, unemployed and poverty stricken. The safety net of the state is expensive… and the graphic shows its potential to harm an economy. There is no reason to suggest that this trend, for the increase in demand to come from childless able-bodies adults, should be any different in the UK. But can NHSreality find the figures? No way..

Phil Kerpen (a free market proponent) on CNN News 18th December says: ‘Shameful’: 82.4 Percent of Medicaid Expansion Is Comprised of Childless Able-Bodied Adults

One of the most perverse consequences of the feverish backroom deals used to get Obamacare past the finish line was the funding formula for the law’s Medicaid expansion, which started with the infamous Cornhusker Kickback, a sweetheart deal for Nebraska alone to get 100 percent federal funding for Medicaid expansion that was used to get then-Senator Ben Nelson’s vote.

When the whistle was blown on that dirty deal, Nelson implausibly explained that the Nebraska-only provision was intended to be a “placeholder” for higher Medicaid funding for all 50 states.  And that’s what ended up ultimately passing: if a state expands Medicaid to able-bodied adults, the new population is eligible for 100 percent federal funding through 2016, phasing down starting in 2017 until it reaches 90 percent in 2020 and permanently thereafter.

Yet states continue to receive an average of 57 percent federal funding for the pre-expansion Medicaid population of needy families and people with disabilities.  In short, under current law, states are given a huge financial incentive to favor able-bodied adults over the truly needy.  It’s shameful and it should be fixed.

Here is a good explanation of the problem and a sensible proposal for a solution:

“Under current law, States face a patchwork of different Federal payment contributions for individuals eligible for Medicaid and CHIP. Specifically, State Medicaid expenditures are generally matched by the Federal Government using the Federal medical assistance percentage (FMAP); CHIP expenditures are matched with enhanced FMAP (eFMAP); and the ACA provides increased match for newly-eligible individuals and certain childless adults beginning in 2014. This proposal would replace these complicated formulas with a single matching rate specific to each State that automatically increases if a recession forces enrollment and State costs to rise beginning in 2017. This proposal is projected to save $17.9 billion over 10 years.”

The author of that paragraph?  President Barack Obama.

It comes directly from the budget he submitted to Congress on February 13, 2012, and it was the kind of bipartisan reform that should have been able to pass Congress easily.  It would have fixed a serious perverse incentive problem, reduced administrative complexity, and saved billions for federal taxpayers.

Just four months later, however, the Supreme Court struck down Obamacare’s provisions purporting to force states to expand Medicaid to able-bodied adults or lose all of their federal Medicaid funding for their existing programs.  It was a resounding 7 to 2 decision, and it set off intense legislative battles over the issue in state capitals.

It also prompted President Obama to completely abandon his proposal for a single matching rate.  His apparent political calculation was that dangling 100 percent federal funding for the expansion population would make it irresistible for state legislators and governors to go along with the now-optional expansion.

Yet at present 19 states have rejected Medicaid expansion and four are still considering it.  So the 100 percent funding wasn’t irresistible at all, but it does mean that the 27 states that have adopted Medicaid expansion now face budget pressure to cut care for the truly needy while maximizing the number of healthy able-bodied adults they add onto their Medicaid rolls.

A study by Jonathan Ingram of the Foundation for Government Accountability (FGA) found that 82.4 percent of the expansion population is comprised of able-bodied, working-age adults with no children.  Analyzing what he called “the new Medicaid math,” Ingram determined that the current funding formula creates overwhelming pressure on states that adopt Medicaid expansion to cut Medicaid for the poor children and the disabled who are in the traditional Medicaid program.  He also found empirical examples of such cuts in state like Arizona and Oregon, which were early to expand Medicaid to childless adults.

Let’s be clear: I disagree strongly with President Obama that Medicaid, a welfare program, should be expanded to able-bodied adults, giving them a disincentive to work and pay their own way.  But I couldn’t agree more with his 2012 proposal that each state should have a uniform federal matching rate.  This fix should be high on the agenda for the new Congress and the president should sign it.

Phil Kerpen is head of American Commitment and a leading free-market policy analyst and advocate in Washington. Kerpen was the principal policy and legislative strategist at Americans for Prosperity for over five years.  He previously worked at the Free Enterprise Fund, the Club for Growth, and the Cato Institute.  Kerpen is also a nationally syndicated columnist, chairman of the Internet Freedom Coalition, and author of the 2011 book “Democracy Denied.”

This entry was posted in A Personal View, Perverse Incentives, Post Code Lottery, Rationing, Stories in the Media on by .

About Roger Burns - retired GP

I am a retired GP and medical educator. I have supported patient participation throughout my career, and my practice, St Thomas; Surgery, has had a longstanding and active Patient Participation Group (PPG). I support the idea of Community Health Councils, although I feel they should be funded at arms length from government. I have taught GP trainees for 30 years, and been a Programme Director for GP training in Pembrokeshire 20 years. I served on the Pembrokeshire LHG and LHB for a total of 10 years. I completed an MBA in 1996, and I along with most others, never had an exit interview from any job in the NHS! I completed an MBA in 1996, and was a runner up for the Adam Smith prize for economy and efficiency in government in that year. This was owing to a suggestion (St Thomas' Mutual) that practices had incentives for saving by being allowed to buy rationed out services in the following year.

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