Does the Patient’s Choice Act Really Solve Anything for Medicaid?

by Tim Foley

categories: Medicare and Medicaid, Obama and Congress

Published May 24, 2009 @ 08:31PM PT

If there’s one unifying theory to the Patient’s Choice Act, it’s that the answer to any problems with public programs is to privatize them.  The rationale for modifying Medicare, VA and the Indian Affairs health services is paper-thin, but the proposal for reforming Medicaid may be appealing for many, particularly when they talk about finding a solution to removing the “stigma” associated with Medicaid.  However, all that glistens is not gold, and the Patient’s Choice Act could very well be swapping one set of hardships for another, solving nothing except shoveling still more Americans into private insurance.

The widespread positive perception of the quality of care offered through Medicare is not something the authors of the PCA want to challenge.  One of the questions in their Q&A document is “Why mess with a program like Medicare where satisfaction among seniors remains relatively positive?” In answer, they completely dodge the question of patient satisfaction, and just shrug “financial problems can been seen [sic] on the horizon.”  Their answer to solving financial problems, of course, is a mixture of common-sense payment reform and privatization through Medicare Advantage, a costly boondoggle as mentioned many times before on this blog.  The section on the VA is even less substantial, as there’s not even a suggestion that the VA isn’t cost-effective (it is) or doesn’t yields high quality care (it does).  Instead, we’re just told that our veterans deserve “competition.”  Something tells me veterans won’t be overly pleased with the implications of privatization.

Apparently it’s “Patient’s Choice” unless the patient wants to choose a relatively high-performing government program.

But as threadbare as the argument is for the privatization of these popular public programs is, Medicaid is a different story.  The mission statement certainly sounds rousing in the Q&A document, “We modernize Medicaid, putting it on a sound financial path, removing the stigma from Medicaid and giving Medicaid patients real choice for the first time.”  The PCA does this through its refundable tax credit of $2,300 per individual and $5,700 per family, which would enable those currently on Medicaid to opt-out of the system and purchase insurance through a state-based exchange.  Now clearly if you’re a family of four making $19,000/year and qualifying for Medicaid in Massachusetts, that won’t be enough for the average $12,000 family plan, and covering the rest of the premium out-of-pocket would take over 1/3 of your income.  Therefore, you’d get additional direct funding from the federal government, allowing you to pay for a full plan, leaving behind the stigma of Medicaid for the Elysian fields of a private HMO.

Put like that, it sounds worth trying.  But, of course, there’s a lot we’re leaving out.

For one thing, the example above makes presumptions about eligibility that simply aren’t true in most states.  Most people think of Medicaid as a public assistance program for people of a certain income, but that’s only partially right.  It’s only for people who meet that income and have an additional qualification – the elderly, the blind, the disabled and children (kids, in fact, make up just less than half of all Medicaid beneficiaries).  Beyond those categories, every state makes up its own standard of eligibility.  Some states do offer Medicaid eligibility to any adult who makes the income threshold, but that’s up to the state – if you’re in New York or Tennessee, probably; if you’re in Mississippi or Wyoming, no way.  So you’re not actually talking about the average insurance plan at all.  In many cases, you’re talking about insurance for the disabled, the elderly, those with chronic diseases or long-term care.  The PCA eliminates discrimination on the basis of pre-existing conditions, but doesn’t have any regulations on what they should charge for premiums (hint:  they’re going to charge a lot if they know you’re going to consume a lot of health care).

Henry Aaron of the Brookings Institute also makes the observation, “Medicaid recipients include lots of people who are poorly educated, mentally handicapped, and have other problems. That is not where one wants the private market to control.”

For families who are lower-income but not elderly or disabled, the stigma from applying to Medicaid can be a very real factor. This stigma tends not to come from the quality of care received, which is actually pretty good for most states.  It doesn’t particularly come from the growing number of physicians who limit the amount of Medicaid patients they take, since struggling with an inconvenient network of providers in private insurance can be just as bad.  The stigma tends to come from the applications process, which contributes directly to Medicaid being under-utilized – a chunk of the population that’s eligible never applies.  Some of this is Yankee self-reliance, and a willingness to be uninsured or underinsured rather than accept assistance.  But Medicaid eligibility is also means-tested, meaning that you have to demonstrate that you qualify for it.  This means-testing might just involve the normal hassle of paperwork, or it could be the more extreme “you have to specifically reapply from scratch each year in person” restrictions, depending on what state you’re in.  Ironically enough, this means-testing is meant to weed out “waste, fraud and abuse” – a favorite target of conservatives, the authors of the PCA included.  So the solution to discouraging fraud is to make means-testing as complicated as possible.  Thus it becomes a self-perpetuating phenomenon – people intent on committing Medicaid fraud can find a way around the means-testing, but people who actually need the program are less likely to apply the harder it is to do so.

Aside from giving everyone private insurance with its attendant problems, what’s the PCA’s solution?  “In addition to a tax rebate, families would receive enough extra money to buy the private plan that best fits their needs.”  The PCA is mum on the applications process for this extra money – but it’s not hard to guess, since the solution has always been means-testing for social assistance through public programs, no matter what they are.  (Indeed, the PCA suggests that Medicare Part D needs to be means-tested as well).  There’s no suggestion that the application process for the direct assistance would be different from application for Medicaid, i.e. controlled at the state level.  And given the number of times “waste,” “fraud,” and “abuse” are cited as cost drivers in the comprehensive summary, it’s hard to see how there wouldn’t be a huge push for safeguards against them in the applications process for direct assistance.

So what’s been solved, exactly?

No doubt, we need to come up with creative ideas on how to reform Medicaid – but these aren’t those ideas.  The only thing that’s changed is beneficiaries would be in private insurance, not the public coverage of Medicaid.  But they can look forward to the same process.  It’s the same safeguards against waste, fraud and abuse.  It’s the same “direct assistance.”  Likely it would be the same stigma.  It’s really hard to see how winding up at the same spot constitutes progress.

(Photo credit:  Korean Resource Center on Flickr.)