Health-Care Reform

Let Higher-Income Americans Buy In to Medicaid

The program was more widely admired than anyone expected. Its future is the future of U.S. health policy.

More pressure.

Photographer: Joe Raedle/Getty Images

The day after the 2016 election, health-policy advocates had many fears, but one stood above them all: the end of Medicaid.

For decades, the Republican Party has pushed to end the federal government’s commitment to matching state investments in Medicaid. Since the program primarily serves low-income Americans, it has long been perceived as politically far easier to slash than the other social-insurance programs, Medicare and Social Security.

With unified Republican government, it seemed inevitable that Medicaid would be turned into block grants, capped or otherwise subject to severe cuts.

Nine months later, Medicaid remains under intense threat -- and yet, as the GOP failed in its latest effort to piece together 50 votes in the Senate, one thing has become abundantly clear: Medicaid has far more support than anyone realized.

Grassroots activism from disability-rights advocates and other affected groups has made finding 50 votes for the Better Care Reconciliation Act very difficult -- in part because of the legislation's caps on Medicaid spending and repeal of the Affordable Care Act’s Medicaid expansion.

There is a lesson to be learned here: Policy makers shouldn’t be cutting Medicaid; they should be expanding it even further.

Approximately one in five Americans is covered by Medicaid today; its expansion under the ACA enrolled more than 11 million people who were not eligible before. Yet access to Medicaid is still profoundly limited, available only to individuals making below 138 percent of the federal poverty level -- $16,643 for a single individual and $33,948 for a family of four in 2017.

This is a shame. Medicaid is excellent insurance, and its growth may signal that it is the most politically sustainable of the ACA’s achievements. After the election, news reports and focus groups with Trump voters found that many enrolled in Obamacare Marketplace coverage envied Medicaid beneficiaries, who do not have to pay the cost-sharing found in commercial insurance plans. This resentment helped fuel their vote for Trump -- with many expressing a desire for access to Medicaid-like plans themselves.

With the right tweaks, Medicaid could represent the future of American health policy.

Efforts are underway to convince the remaining 19 states that have yet to expand Medicaid to those making under 138 percent of the poverty level to do so. Should this prove successful, as many as five million additional people may gain coverage.

But what if people whose incomes exceed that level could choose to buy in to the program? Last month, the Nevada Legislature passed a bill -- later vetoed by the governor -- that would have allowed uninsured state residents to use their ACA Marketplace subsidy or their own funds to pay for Medicaid coverage. Wisconsin legislators introduced a similar bill, allowing residents to buy in to Medicaid “no matter who you are or how much money you make.”

While such a plan may not yet be feasible in purple-ish Nevada and Wisconsin, it would likely sail through legislatures in deep blue states like California, Maryland and New York.

State policy makers should advance such proposals, and Democrats in Congress would be well-served to couple their growing advocacy for “Medicare for all” with legislation to require states to allow Americans at any income level to buy in to Medicaid, with their costs based on their state’s Medicaid spending.

Such coverage would be costly -- as to be expected from comprehensive insurance without significant co-pays or deductibles. Wisconsin’s Medicaid buy-in proposal would cost $602 a month for adults and $248 for children. But allowing those eligible to use the ACA’s premium subsidies would significantly defray the cost for many in the lower middle class. Changes to federal law to allow states to use federal matching funds for the buy-in population could cut this cost in half across the board.

Even for those who don’t qualify for subsidies, purchasing Medicaid coverage at its actual value may be worth it. Advocates of the buy-in plan in Wisconsin have pointed out that for a 40-year-old living in Madison, the state’s capital, Medicaid’s $7,224 annual price tag is still a good deal, with the cost for a Silver Plan expected to be 15 percent higher, accounting for both premiums and deductibles.

For those who don’t expect to have medical bills, commercial insurance may be a better deal. But for those who do opt in, Medicaid is a bargain, even when paying full freight. Such a policy would effectively create a version of the ACA’s missing “public option,” managed at the state rather than the federal level.

In addition, by offering older and sicker adults the opportunity to exit the commercial insurance market in favor of coverage that is more cost effective and of higher quality, it may well reduce premium costs for those who prefer to stick with private insurance -- helping to improve the ACA’s Marketplaces.

Allowing people to buy into Medicaid regardless of income would give the middle class a stake in improving the quality of what has historically been a poverty program.

Momentum would grow for long-needed policy fixes, like expanding the availability of home care for seniors and people with disabilities or increasing payment rates. Home care can be far less costly -- and deliver far better outcomes -- than institutional care, but right now the system funnels disabled beneficiaries toward segregated lives in nursing homes and institutions.

The broader approach would also help fix one of Medicaid’s biggest problems: the relatively low levels of physician participation due to low reimbursement rates.

Both Medicaid and Medicare pay less than commercial insurance does for most medical procedures, but doctors are far less likely to opt out of accepting Medicare coverage than Medicaid, in part because Medicare serves more people. As Medicaid’s enrollment expands, so does the program’s purchasing power, giving more providers incentives to participate in the program even at comparably low rates of reimbursement.

If Congress does finally give up on the ill-advised proposal to end Medicaid as we know it, it seems likely that the program will be the primary focus of advocates and policy makers over the coming years.

One way or another, Medicaid will be the battlefield on which the war over American health policy will be fought.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Ari Ne'eman at Ari@mysupport.com

    To contact the editor responsible for this story:
    Katy Roberts at kroberts29@bloomberg.net

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