Medicaid is worse than no coverage at all

Across the country, cash-strapped states are leveling blanket cuts on Medicaid providers that are turning the health program into an increasingly hollow benefit. Governors that made politically expedient promises to expand coverage during flush times are being forced to renege given their imperiled budgets. In some states, they've cut the reimbursement to providers so low that beneficiaries can't find doctors willing to accept Medicaid.

Washington contributes to this mess by leaving states no option other than across-the-board cuts. Patients would be better off if states were able to tailor the benefits that Medicaid covers--targeting resources to sicker people and giving healthy adults cheaper, basic coverage. But federal rules say that everyone has to get the same package of benefits, regardless of health status, needs or personal desires.

These rules reflect the ambition of liberal lawmakers who cling to the dogma that Medicaid should be a "comprehensive" benefit. In their view, any tailoring is an affront to egalitarianism. Because states are forced to offer everyone everything, the actual payment rates are driven so low that beneficiaries often end up with nothing in practice.

"Dozens of recent medical studies show that Medicaid patients suffer for it. In some cases, they'd do just as well without health insurance."--Scott Gottlieb, M.D.

Dozens of recent medical studies show that Medicaid patients suffer for it. In some cases, they'd do just as well without health insurance. Here's a sampling of that research:

  • Head and neck cancer: A 2010 study of 1,231 patients with cancer of the throat, published in the medical journal Cancer, found that Medicaid patients and people lacking any health insurance were both 50% more likely to die when compared with privately insured patients--even after adjusting for factors that influence cancer outcomes. Medicaid patients were 80% more likely than those with private insurance to have tumors that spread to at least one lymph node. Recent studies show similar outcomes for breast and colon cancer.
  • Major surgical procedures: A 2010 study of 893,658 major surgical operations performed between 2003 to 2007, published in the Annals of Surgery, found that being on Medicaid was associated with the longest length of stay, the most total hospital costs, and the highest risk of death. Medicaid patients were almost twice as likely to die in the hospital than those with private insurance. By comparison, uninsured patients were about 25% less likely than those with Medicaid to have an "in-hospital death." Another recent study found similar outcomes for Medicaid patients undergoing trauma surgery.
  • Poor outcomes after heart procedures: A 2011 study of 13,573 patients, published in the American Journal of Cardiology, found that people with Medicaid who underwent coronary angioplasty (a procedure to open clogged heart arteries) were 59% more likely to have "major adverse cardiac events," such as strokes and heart attacks, compared with privately insured patients. Medicaid patients were also more than twice as likely to have a major, subsequent heart attack after angioplasty as were patients who didn't have any health insurance at all.
  • Lung transplants: A 2011 study of 11,385 patients undergoing lung transplants for pulmonary diseases, published in the Journal of Heart and Lung Transplantation, found that Medicaid patients were 8.1% less likely to survive 10 years after the surgery than their privately insured and uninsured counterparts. Medicaid insurance status was a significant, independent predictor of death after three years--even after controlling for other clinical factors that could increase someone's risk of poor outcomes.

In all of these studies, the researchers controlled for the socioeconomic and cultural factors that can negatively influence the health of poorer patients on Medicaid.

So why do Medicaid patients fare so badly? Payment to providers has been reduced to literally pennies on each dollar of customary charges because of sequential rounds of indiscriminate rate cuts, like those now being pursued in states like New York and Illinois. As a result, doctors often cap how many Medicaid patients they'll see in their practices. Meanwhile, patients can't get timely access to routine and specialized medical care.

The liberal solution to these woes has been to expand Medicaid. Advocacy groups like Families USA imagine that once Medicaid becomes a middle-class entitlement, political pressure from middle-class workers will force politicians to address these problems by funneling more taxpayer dollars into this flawed program.

President Barack Obama's health plan follows this logic. Half of those gaining health insurance under ObamaCare will get it through Medicaid; by 2016, one in four Americans will be covered by the program. A joint analysis from the Republican members of the Senate Finance and House Energy and Commerce Committees estimates that this will force an additional $118 billion in Medicaid costs onto the states.

We need an alternative model. One option is to run Medicaid like a health program--rather than an exercise in political morals--and let states tailor benefits to the individual needs of patients, even if that means abandoning the unworkable myth of "comprehensive" coverage.

Democratic and Republican governors are pleading with the president for flexibility to do just this. At least so far, this has been a nonstarter with an Obama health team so romanced by Medicaid's cozy fictions that it neglects the health coverage that Medicaid really offers, and the indecencies it visits on the poor.

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

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