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What if states ditch Medicaid?

By Suzy Khimm

The Medicaid expansion was meant to be one of the hallmark accomplishments of health-care reform. The Affordable Care Act will expand the program rapidly by subsidizing insurance for all Americans up to 133 percent of the poverty line, which will add an estimated 16 million new Medicaid enrollees. During the health-care debate, Democrats heralded the move for helping to bring the country closer than ever to achieving universal coverage.

But the Medicaid expansion has also become one of the biggest points of tension between the federal and state governments. The federal government will cover all the costs of the expansion until 2019, but the states will eventually be responsible for shouldering part of the
burden thereafter, as Medicaid has traditionally been a federal-state cost-sharing program. Many GOP state governments, along with a handful of Democratic ones, have complained that the expansion will bankrupt already cash-strapped budgets.

Texas, however, has taken such protestations a step further. Conservative state lawmakers are now demanding that the state drop out of the program altogether to alleviate the state's $25 billion shortfall. If Texas went ahead with such a plan, it's unlikely that the Medicaid program would entirely disappear, but its reimbursement rates would fall so low without state support that almost no one provider would accept the coverage, as Mike Tomasky explains.

What would justify such a move? The New York Times cites one veteran GOP state representative who's pushing the idea: "We need to get out of it. And with the budget shortfall we're anticipating, we may have to act this year."

The underlying rationale is that sacrificing the health coverage of poor people would be a worthwhile move if it solves the state's budget crisis. If you're a purist in opposing the welfare state — even at significant human cost to the most vulnerable — it's a logical argument to make. But even if we all agree the goal is fiscal solvency, there's also a chance that gutting Medicaid could end up backfiring.

The uninsured poor have already been resorting to hospital emergency rooms for care, and hospitals, in turn, have relied on state governments to cover the costs. If Medicaid coverage were pared back, the hospital ER would likely become the de facto safety net: The number of uninsured ER visits would invariably rise, and the state government would end up paying the price anyway. Texas's own comptroller, Susan Combs, has admitted as much: In a 2005 paper, she proposes that the state's Medicaid should be slashed and hospital reimbursements upped instead. But ER visits are extremely expensive, and they won't serve as a particular cost-effective solution to eliminating insurance, which at least gives patients other options for care.

To be sure, there's no question that Medicaid has been costly for state governments, and it's understandable that the lingering recession would make state officials feel panicky about the future expansion. There are deeper programs still: the cash-strapped program only pays providers 66 percent of Medicare reimbursement rates, making it hard for Medicaid patients to find doctors who accept their coverage. Such dilemmas strengthen the argument for simply federalizing the entire Medicaid program, protecting it from the ideological and fiscal battles on the state level.

But until the day comes that a better Medicaid overhaul is possible, states must also realize that simply trying to wash their hands of the problem by stripping Medicaid coverage from the poor — without providing a reasonable alternative — won't be the answer either. The uninsured poor will continue to get sick. They will continue to seek out health care. And many institutions — including state governments — will still end up paying for it.

Update: As Ezra points out Texas already has the highest proportion of uninsured residents in the nation, at 27 percent. If the state dropped Medicaid, that would go up to 40 percent.

Suzy Khimm is a reporter in the Washington bureau of Mother Jones. Read more of her work here, and follow her on Twitter.

By Suzy Khimm  | November 8, 2010; 3:50 PM ET
 
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Comments

"The federal government will cover all the costs of the expansion until 2019, but the states will eventually be responsible for shouldering part of the
burden thereafter..."

So, all those promises of the 'deficit reduction' the ACA would deliver after the first 10 years were false?

Sounds like that's the case, if Democrats had any truthiness in them and included the exploding deficit-increases at the state level when states are forced to fund the promises of Obamacare.

Posted by: dbw1 | November 8, 2010 4:15 PM | Report abuse

Obviously, the next step for Texas is to ditch the Hippocratic Oath.

Posted by: stevie314 | November 8, 2010 4:17 PM | Report abuse

ditching medicaid is idiotic. fixing medicaid and the payment structure and the perverse incentives would be preferential although that's about as likely as fixing the fraud that goes on in Medicaid. ACA's and capitation would be a great start.


stevie314,

i've got news for you. many docs ditched the Hippocratic oath years ago which is why healthcare costs so much nowadays.

Posted by: visionbrkr | November 8, 2010 4:35 PM | Report abuse

As I have posted elsewhere, I think the real sticking point is not going to be the sick relying on ER care, but the elderly and disabled in nursing homes who rely on Medicaid. Nursing homes are going to find the first excuse to ship medicaid patients to the hospital and then refuse to readmit them. You cannot get 24/7 skilled nursing care in the ER. I, for one, have not forgotten the coverage in L.A. of hospitals dumping patients on skid row. I hope Sarah has her twitter account warmed up to start warning of death panels again dumping granny onto the streets from nursing homes.

Posted by: punchaxverulam | November 8, 2010 4:57 PM | Report abuse

Should the states bring renact Filial Care laws that would place the burden of care on the adult surviving children of enfeebled parenets? (So much for the state getting off ones back.) What if children can't be found or the enfeebled person is childless. Will Texas just start dumping poor old folks on the sidewalk and wait for them to drop dead. That would make for bad TV so I am sure Governor Perry will want a quiet disposal solution.

Posted by: rickstersherpa | November 8, 2010 5:11 PM | Report abuse

I think in our current crop of GOP texan legislators, they think "medicaid patient" = BROWN ILLEGAL PERSON.

Of course, none of them are too smart, and they aren't really capable of thinking things through. Oh, and there's that pesky problem with reality.

The state is turning into a complete cluster - I blame Perry and his presidential aspirations.

Posted by: lcrider1 | November 8, 2010 6:00 PM | Report abuse

Hang on...

Assuming Obamacare is not repealed, the poor should still be eligible for federally subsidized policies through the exchanges. Subsidized policies they are obligated to buy, but that won't cost the state anything. If that is the case, why should any state continue participating in medicaid?

Posted by: ath17 | November 8, 2010 7:19 PM | Report abuse

Tomasky's post is hysterical and inaccurate.

Medicaid from the start has been a voluntary program that states can choose or choose not to enter into.

The reason why all 50 states eventually entered into Medicaid, including the conservative ones, isn't that they care a lot about poor people having access to health care. They really don't. It's that the way the formula works out, it ends up costing you more money to opt out of Medicaid than it is to run a bare bones Medicaid program.

If they opted out of Medicaid, they wouldn't just lose the federal Medicaid money. There is a lot of additional federal money that is tied to running a Medicaid program that Texas would lose out on. And under federal law, hospitals would still be required to give emergency care regardless of insurance. The people currently on Medicaid would end up crowding emergency rooms and probably end up costing the state even more money.

Additionally, even though Medicaid is supposed to be a program for the poor, the majority of its costs actually go to paying for long-term care for the elderly, most of whom come from middle class families. (Since they're not working, they still count as poor under the eligibility requirements)

Medicare does not cover long-term care, so if someone requires it, they will eventually end up on Medicaid unless they have private long-term care insurance, which most Americans don't have. When you're talking about cutting off Medicaid, you're cutting off nursing home care to middle class grandmas who vote Republican and have Sarah Palin bumper stickers. This is why Republicans haven't tried to eliminate Medicaid at the federal level when they were in charge. It would be killing off one of their biggest voting blocs.

By opting out of Medicaid Texas would almost certainly increase their state budget deficit while bankrupting most of their hospitals and nursing homes and killing a lot of Republican voters. It's not going to happen.

This is just more heated rhetoric from the state where the governor vowed to secede from the United States after Obama got elected.

Posted by: dstr | November 8, 2010 7:20 PM | Report abuse

ath17, writing above, makes the correct assertion: if a state drops Medicaid, those formerly enrolled in Medicaid continue to be subject to the Obama/Pelosi Mandate to procure health insurance -- the state does not pick up the tab for their care.

The states -- Texas, Florida, and Virginia, to name three -- are aware of the workings of the PPACA. By simply ceasing participation in the Medicaid program, the PPACA mandate operates on an increased number of citizens, increasing the number of exchange purchasers. Effectively, a state can force a grater federal handout simply by dropping Medicaid. The name that's floating around is the "Inverse Massachusetts Gambit" -- MA is essentially gaming the system by increasing the number of Medicaid recipients whereas Texas is gaming the system by decreasing the number of Medicaid recipients. Either way begins to bleed the federal coffers dry at quick pace... with no budget increases likely.

It might be time to "tweak" the Obama/Pelosi PPACA.

Posted by: rmgregory | November 8, 2010 7:44 PM | Report abuse

"Effectively, a state can force a grater federal handout simply by dropping Medicaid."

Nope. There are maintenance of effort requirements in the bill. Dropping or cutting back on Medicaid will lead to states losing more federal money than they would possibly gain through those cutbacks.

Does anyone seriously think Mississippi and Alabama would be running state Medicaid programs if they thought it was a cost they could avoid? Under the federal formulas, it's always cheaper to run a bare bones Medicaid program than it is to not have one at all. PPACA reinforces that further.

Posted by: dstr | November 8, 2010 7:52 PM | Report abuse

"ditching medicaid is idiotic. fixing medicaid and the payment structure and the perverse incentives would be preferential although that's about as likely as fixing the fraud that goes on in Medicaid. ACA's and capitation would be a great start.

stevie314,
i've got news for you. many docs ditched the Hippocratic oath years ago which is why healthcare costs so much nowadays."


At least doctors provide a service. What service do the insurance cronies you work for provide? Without doctors, healthcare does not exist. You insurance guys are "errand boys sent by the store clerk to collect the bill" as Col Kurtz put it.

Besides, the Hippocratic Oath (and all the "modern" versions with stripped out references to abortion and surgery being banned) says absolutely nothing about requiring doctors to work for the government for whatever the govt wants to pay.

Posted by: platon201 | November 8, 2010 8:20 PM | Report abuse

Hopefully other states will follow Texas' lead and shed the Feds' golden handcuffs. If those on Medicaid don't like Texas' alternative, they are free to move and leech off their fellow citizens elsewhere.

Posted by: mike_w_long | November 8, 2010 8:51 PM | Report abuse

*****additionally, even though Medicaid is supposed to be a program for the poor, the majority of its costs actually go to paying for long-term care for the elderly, most of whom come from middle class families*****

good point, dstr, which is the REAL reason it's hard to imagine any state ditching Medicaid, at least for very long...

Posted by: Jasper999 | November 8, 2010 10:14 PM | Report abuse

Poor people dropped from medicaid would not be subject to the individual mandate. The mandate has an exemption due to poverty. The exempted people are exactly the people that medicaid covers.

Posted by: theamazingjex | November 8, 2010 10:16 PM | Report abuse

"And under federal law, hospitals would still be required to give emergency care regardless of insurance. The people currently on Medicaid would end up crowding emergency rooms and probably end up costing the state even more money." posted by dstr

It all sort of depends on what the definition of "emergency care" is, doesn't it?

Posted by: bgmma50 | November 8, 2010 10:47 PM | Report abuse

Also, that federal law only applies to hospitals that accept Medicare. Right now, that's most hospitals. But for how long?

Posted by: bgmma50 | November 8, 2010 10:49 PM | Report abuse

People on Medicaid use ERs more than the uninsured.

Posted by: theo2709 | November 9, 2010 12:22 AM | Report abuse

Texas is not going to drop Medicaid ... The Republicans are saying they're going to study how much it would cost to replace it with some other kind of insurance for poor people ... When they figure out there is no replacement that would be cheaper, they will drop the idea. They are panicking because of how big this deficit is and saying whatever. Texas Republicans are crazy but not THAT crazy.

Posted by: jfung79 | November 9, 2010 2:35 AM | Report abuse

Wyoming already did a Medicaid opt out study and found that it doesn't make sense for the state, providers, or patients.

I suspect Texas and the other states will reach the same conclusion.

Posted by: bmull | November 9, 2010 3:49 AM | Report abuse

At least doctors provide a service. What service do the insurance cronies you work for provide? Without doctors, healthcare does not exist. You insurance guys are "errand boys sent by the store clerk to collect the bill" as Col Kurtz put it.

Besides, the Hippocratic Oath (and all the "modern" versions with stripped out references to abortion and surgery being banned) says absolutely nothing about requiring doctors to work for the government for whatever the govt wants to pay.


Posted by: platon201 | November 8, 2010 8:20 PM | Report abuse

absolutely. Without doctors healthcare does not exist and if doctors charged rates in line with other countries healthcare would be affordable. With the PPACA those "insurance cronies" you call them are nothing more than regulated utilities. Once the public realizes this and can't blame them any longer for skyrocketing costs guess who they're coming after next??

Posted by: visionbrkr | November 9, 2010 7:55 AM | Report abuse

Medicaid has been in trouble for years and it has nothing to do with "Obamacare." Obama has been stating for years now that "... the cost of healthcare if not addressed, is going to bankrupt this country." The problems is, most Americans like politicians who tell them what they want to hear. It's time to deal with the things we've been avoiding for almost 50 years. We can't keep looking to for "TAX CUTS" to pay for our schools, keep teachers and police officers on the job, fix our roads and bridges, pay our men/women in the military, provide disaster relief for our citizens and the plethora of items we as a people depend upon. I'm a business owner, but I'm also a realist who understands lowering taxes don't pay the bills nor does simply cutting spending. There comes a point where just cutting spending doesn't do it even in your personal life. Sometimes you just need a better paying job or additional income. I'm extremely conservative regarding spending, but we have to also be realistic. We constantly talk about the debt we're leaving our children, but no one mentions the crumbling infrastructure and antiquated facilities and technology we're leaving them in addition to the poor schools and transportation systems. My fellow Americans, it is simply time to have an adult conversation and face reality.

Posted by: docregi | November 9, 2010 8:58 AM | Report abuse

Set up clinics in all cities and towns- have Dr. rotate and provide care for the poor- they can afford to "give" a few free hours a week with what they are charging the rest of us. My Dr. appointments run $300 a visit- the Dr. are all behind covering everyone as long as the get paid. It would be cheaper to provide clinics than to pay medicaid with all of the fraud. Even the poor should pay a small fee so they have skin in the game- abuse comes from having anything free.

Posted by: nnaus | November 9, 2010 10:02 AM | Report abuse

So how will this work, exactly- will Texas emergency rooms provide dialysis and chemotherapy?

Posted by: cbriskin | November 9, 2010 10:09 AM | Report abuse

Here's an idea I read:

1. Establish a single payer system in the new hugely Democratic California.

2. States like Texas trade their Medicaid patients to California in exchange for California's businesses.

Posted by: krazen1211 | November 9, 2010 11:13 AM | Report abuse


Posted by: docregi

There comes a point where just cutting spending doesn't do it even in your personal life. Sometimes you just need a better paying job or additional income. I'm extremely conservative regarding spending, but we have to also be realistic. We constantly talk about the debt we're leaving our children, but no one mentions the crumbling infrastructure and antiquated facilities and technology we're leaving them in addition to the poor schools and transportation systems. My fellow Americans, it is simply time to have an adult conversation and face reality.

****************

Thank goodness there is still common sense and intelligence left rattling around in this country.

One can never pay bills without an income. Even the government has to pay bills. Tax is a necessary evil. Moderation in all things is a necessity for everyone and including the governing bodies.

Common sense, intelligence and strength of character are needed in all things.

Posted by: steffy_28838_C | November 9, 2010 11:52 AM | Report abuse

'The state is turning into a complete cluster - I blame Perry and his presidential aspirations.'

Really?

Measured in foreclosures, unemployment, job growth, etc, its out performing the rest of the nation.

And yeah, he's running.

Posted by: krazen1211 | November 9, 2010 12:02 PM | Report abuse

Slashng medicare would have two immediate effects: 1) drive the indigent to the socialized states (as higher welfare payments have historically done); and 2) Push the worthless into emergency rooms. The response to 1) is "good"; the answer to 2) is to restrict emergency room visits to those brought in by ambulance and send the remainder ('walk-ins') to much cheaper 'urgi-care' centers [emember, this was Michelle Obama's make work $300,000 a year job in Chicago]. Simple, but obvious, alternatives to nationalizing/ socializing one-sixth of the U.S. economy.

Posted by: IQ168 | November 9, 2010 1:48 PM | Report abuse

I work in managed long term care and dstr is absolutely right and rmgregory and ath17 are uninformed. If the GOP drop Medicaid, a huge number of seniors will drop the GOP.

Posted by: zvelf | November 10, 2010 7:10 PM | Report abuse

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