Sen. Jay Rockefeller vows to block Medicaid reform. Image via Wikipedia.
When I first began writing about the University of Virginia surgical outcomes study—the one that evaluated nearly a million major surgical operations from 2003 to 2007, and found that Medicaid patients were 13 percent more likely to die in-hospital than those with no insurance at all—there were skeptics. And I get why, because the study's findings were counter-intuitive: we spend more than $400 billion a year on a welfare program, only to get worse health outcomes?
Those invested in the political success of Obamacare had even more incentive to attack the UVa study, as our new health law adds 16 25 million Americans to the Medicaid rolls. If Medicaid leads to worse health outcomes, then Obamacare will throw trillions of dollars down the toilet, for nothing.
The most energetic skeptics of the UVa study went so far as to concoct elaborate statistical theories explaining why it was “not credible.” Even though the study controlled for the 30 medical conditions that are most strongly associated with poor medical outcomes, along with age, gender, income, etc., the skeptics argued that there must be “unobservable factors” that drove the results: “fewer community and family resources,” for example.
The real problem, however, is that many physicians don’t accept Medicaid patients, primarily because Medicaid underpays them for their time and costs. The Health Tracking Study Physician Survey found that internists are 8.5 times as likely to reject all Medicaid patients versus those with private insurance. The New England Journal of Medicine recently published a study showing that 66% of Medicaid children were denied an appointment with a specialist for an urgent medical condition—such as uncontrolled asthma or seizures—compared to only 11% for the privately insured.
What makes this even more appalling is that we're spending billions of dollars to take millions of children away from high-quality private insurance, and shoving them in Medicaid instead. As Peter Suderman notes, the Congressional Budget Office has estimated that of the children who have been added to Medicaid's sibling, the State Childrens' Health Insurance Program (CHIP), one-quarter to one-half were adequately covered by private insurance beforehand.
The GAO survey
Now comes a new survey from the U.S. Government Accountability Office showing that children have worse access to physicians than those with no insurance at all. The survey, which drew from 932 respondents, found that 21% of physicians were taking “none” or only “some” new patients aged 0-18, compared to 45% for the uninsured, and 53% for Medicaid/CHIP. Medicaid especially underperformed the uninsured among primary care physicians (23% private / 45% uninsured / 55% Medicaid) as compared to specialists (17% / 47% / 49%).
Why would the uninsured do better than Medicaid? It turns out that Medicaid’s problems aren’t just that the program underpays doctors. It’s also that the program is a huge hassle to work with, in terms of paperwork and billing requirements. It’s also that Medicaid reimbursement checks come late, and it takes a lot of effort on the part of busy doctors to track bureaucrats down for timely payment. An uninsured patient who pays cash is infinitely easier to deal with, even if the uninsured patient only pays $20 up-front for an office visit.
The GAO survey studied this problem too, asking physicians why they don't want to deal with Medicaid patients. Among physicians who have opted entirely out of participating in Medicaid/CHIP, 94 percent said “low reimbursements” greatly or somewhat limit their willingness to take Medicaid patients. The other top problems were “billing requirements and/or billing paperwork burdens” (87 percent said this greatly or somewhat limits their participation); “delayed reimbursements” (85%); “burdensome provider enrollment or participation requirements” (85%); and “difficulty referring patients to other providers” (78%). Note in the figure below that things like “complex medical or psychosocial needs of patients” or “limited patient compliance” were near the bottom of the list of physicians’ complaints.
Medicaid’s problems aren’t just about money
What does this tell us? It tells us that Medicaid harbors all of the hallmarks of extreme government mismanagement: burdensome requirements, excessive paperwork, and unresponsive bureaucrats. In other words, simply throwing more money at the program, as the Left advocates, won’t work. Even if we did have the money.
This is why the best solution is to do what the House of Representatives has done, and what Tom Coburn and others in the Senate are trying to do: convert the Medicaid program into block grants for the states, and let the states experiment with ways to deliver Medicaid more efficiently. Examples as diverse as Rhode Island and Indiana show that states can do a far better job than Washington can.
Ezra Klein and others contend that block grants have “nothing to do with making the system work better.” The exact opposite is true: block grants have everything to do with making the system work better. The 1996 welfare reform law was such a tremendous success because it used precisely this approach.
Most people don’t realize how complicated Medicaid is, and how Byzantine the rules are that Washington imposes upon the states. States, for example, can’t alter federal copayment requirements in order to steer Medicaid patients to higher-quality doctors and hospitals, or prevent wasteful ER visits. States can’t graduate their Medicaid subsidies so as to better assist the poorest, while more moderately assisting those with a little more money. States can’t give Medicaid recipients cash to purchase conventional private insurance, of the kind that people get through their employers, the kind that consistently provides the best medical outcomes.
Block grants also would eliminate the perverse incentive that states have to take advantage of federal Medicaid matching funds, and spend irresponsibly. Right now, states receive $1.30 on average from Washington for every $1 they spend on their own, giving them every incentive to spend inefficiently, and giving them little incentive to root out waste and fraud.
Democrats in the Senate continue to vow to filibuster any effort at block-granting Medicaid. But someone needs to ask them: why are they upholding a broken system that forces kids to die of a toothache? What is their plan for real Medicaid reform? Or do they truly believe, all evidence to the contrary, that Medicaid is just fine as it is?
