What Medicaid Tells Us about Government Health Care

The upcoming federal stimulus package rumored to include up to $100 billion in increased funding for Medicaid is unlikely to improve the program by merely infusing more money. Medicaid needs to be held accountable for health outcomes. Dr. Gottlieb cites literature that demonstrates disparities in the care received by Medicaid patients relative to their privately or Medicare-insured peers and discusses steps that the new administration can take to reform Medicaid and improve patient health outcomes.

Resident Fellow
Scott Gottlieb, M.D.

Medicaid provides coverage to poor and disabled Americans, many of whom face the highest burden of chronic disease owing to cultural and socioeconomic challenges. The program beats being uninsured, but it often relegates the poor to inferior care.

Reimbursement rates are so low, and billing the program so complicated, that it is hard for internists like me to get beneficiaries access to specialized care or timely interventions. For my patients as well, many of whom are uneducated or don't speak English, Medicaid is replete with paperwork, regulations and rejections that make the program hard to navigate.

Now Medicaid is to receive a bolus of federal money, probably as part of the fiscal stimulus plan--the figure whispered in Washington is $100 billion--with no obligation that the program does anything to reverse its decline.

New money alone won't fix the program's woes. It will simply allow states to siphon off more of what they would have spent on Medicaid to other uses.

Accumulating medical data shows that Medicaid recipients' poor health outcomes aren't just a function of their underlying medical problems, but a more direct consequence of the program's shortcomings. Take the treatment of serious heart conditions, which are among the most closely evaluated Medicaid services.

One study published in the Journal of the American College of Cardiology (2005) found that Medicaid patients were almost 50% more likely to die after coronary artery bypass surgery than patients with private coverage or Medicare. The authors suggest this may be a result of poorer long-term, follow-up care. Like other similar studies, this one tried to control for the other social and medical factors that are believed to influence patients' clinical outcomes.

Another study in the journal Ethnicity and Disease (2006) showed that elderly Medicaid patients with unstable angina had worse care, partly because they were less likely to get timely interventions or be treated at higher quality hospitals. Three other recent studies showed that Medicaid patients presenting with heart attacks or unstable angina received cardiac catheterization less often than Medicare or private paying patients. This procedure to open blocked heart arteries has become standard care, with ample evidence showing it improves outcomes.

The same trends can be observed in other diseases. For example, a study of adults with cancer published in the journal Cancer (2005) found that patients on Medicaid were two to three times more likely to die from the disease even after researchers corrected for differences in the location of the tumor and its stage when diagnosed.

The federal and state governments are equally culpable for the program's troubles. The federal government matches state Medicaid spending, paying an average of 57% of costs. States expand enrollment in order to qualify for more federal aid. Insurance coverage has become the end itself, with states spreading resources widely but thinly--without enough attention to the quality of care, accessibility, or whether coverage was actually improving health. States have no obligation to rigorously measure health outcomes in order to qualify for more federal money.

A government survey in 2002 for the Medicare Payment Advisory Committee found that "approximately 40% of physicians restricted access for Medicaid patients" ?178 because reimbursement rates are so low. Only about half of U.S. physicians accept new Medicaid patients, compared with more than 70% who accept new Medicare patients. Several recent studies trace the difficulty in getting Medicaid patients seen by specialists to low fees and payment delays. Technologies are also restricted. Many expensive but important drugs aren't paid for under various state drug formularies. ?178

There's also a fair degree of fraud in the program. James Mehmet, New York's former chief Medicaid investigator, was quoted in the New York Times as believing that at least 10% of state Medicaid dollars were spent on fraudulent claims, while 20% or 30% more was siphoned off by what he termed "abuse." Even if the federal government wanted to hold states more accountable for peoples' ?185 health, Medicaid claims data is poorly gathered in most states, making meaningful oversight hard.

Barack Obama's team and Democratic leaders plan to change the federal matching rate to reduce the amount of state funding that is required for maintaining a given level of federal Medicaid spending. Mr. Obama would give Medicaid tens of billions more in federal dollars as part of the fiscal stimulus bill. And he wants to extend Medicaid to some unemployed workers, with the federal government paying the entire cost--a watershed expansion of the program.

New money alone won't fix the program's woes. It will simply allow states to siphon off more of what they would have spent on Medicaid to other uses.

For its part, the federal government has often prevented the states from taking steps to fix their own Medicaid programs, such as by devising outcome-based standards for evaluating performance, and de-emphasizing the goal of growing the number of covered people to focus more on improving the health of those served.

Among a handful of states that have received special permission from federal regulators to take incremental steps to improve their Medicaid programs, North Carolina has created a primary care-based program that pays doctors more to improve coordination of care, and gives patients more choice by getting new doctors to participate in the program. Indiana is incorporating personal accounts that allow patients greater choice of providers.

Another idea being tried in some states allows patients to choose coverage tailored to specific health needs like pregnancy or certain disabilities. In Louisiana, Gov. Bobby Jindal wants to provide tailored Medicaid services through managed-care networks run by private and competing companies that would be held accountable for showing better health results.

The Centers for Medicare and Medicaid Services, which regulates the program, recently gave states the flexibility to redesign their Medicaid benefits by modeling the programs after popular private-sector plans already being offered in a particular state. But creating enduring incentives for broader state accountability probably means ending Medicaid's open-ended funding. Even the auto makers are being held accountable to certain outcomes as a condition for getting federal loans.

The troubling evidence about the quality of Medicaid patients' services is a cautionary tale for Mr. Obama as he sets about to administer more of our health care inside government agencies. Turning Medicaid around should be the least we demand before turning over more of our private health-care market to similar government management.

Scott Gottlieb, M.D., is a resident fellow at AEI.

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