We help several groups of Americans to obtain health insurance through a series of separate programs. Medicare helps seniors. Medicaid helps people in families with low incomes. And now the Affordable Care Act provides subsidies to many with low and moderate incomes for purchasing coverage in private insurance exchanges. (Middle and upper income people receive a massive subsidy for purchasing group insurance through the tax exclusion of premiums that, in my opinion, defies rational explanation.)
We see each of these groups as deserving help from higher income taxpayers, but we treat them in very different ways. In the exchanges, subsidy recipients in most states enjoy a wide range of insurance plan choices that vary both in the extent of required out-of-pocket payments and in the limitations imposed on provider networks. The subsidies remain the same regardless of whether one chooses a generous plan with a high premium or a plan with a lower premium that includes high deductibles and strict limits to network doctors and hospitals. Consumers have a wide range of choices but with a floor in the form of minimum mandated benefits.
Medicare, again, offers choices. Nearly 30 percent of beneficiaries have taken advantage of them by choosing to direct their share of the taxpayers’ contributions toward private Medicare Advantage Plans rather than the fee-for-service plan managed by the government. Many beneficiaries exercise their choice by paying extra for somewhat better coverage, either as an extra premium for their MA plan or for a private Medigap plan to top up their government coverage.
But for people on Medicaid, either the mothers, children, and disabled who were the traditional beneficiaries or the able bodied adults who have become newly eligible in states accepting the ACA’s expansion, there is rarely meaningful choice, and no opportunity to pay more to get more. Physician payment rates that are 40% below what private insurers pay, enormous difficulties in getting referrals to specialists, and very limited networks of inconveniently located doctors are all typical.
Why the differences in Medicaid from the other public programs? State Medicaid programs could pay more and get more if taxpayers would come up with the money, but they are often reluctant to do so or have not been persuaded by political leaders that it would be a good idea.
Some might argue that lower rates of formal education constrict the ability of many on Medicaid to make wise choices. Others might say that the value of choice, despite its major role in the talking points for ACA exchanges, is way over-rated — so most people should just take what is good for them. But in both cases, you would sound patronizing, and you would be underestimating both the desires and the capabilities of people temporarily unlucky enough to earn incomes low enough to put them on Medicaid.
It’s time for a fresh approach, one that can help even under current stringent Medicaid budgets. This approach might be so attractive a model that it could even lead to loosening of the purse strings. And that model could be just around the corner, in what the government already does for Medicare and the exchanges. In both cases, beneficiaries are eligible for a fixed dollar (given their income level) government contribution, and then can choose from a range of vetted options, some requiring modest additional premiums (but saving on out-of-pocket payments and unreimbursed hassle costs), and others just different.
In my opinion one of the options under Medicaid should remain a public option (as in Medicare but not in the ACA exchanges) for those beneficiaries who trust the government and like what it offers. But it should not be the sole option. Calling this arrangement a “voucher” would be political death, but calling it a “free choice contribution” might give it bipartisan appeal—and if it works well, taxpayers reluctant to throw good money after bad into the existing Medicaid program might have second and more generous thoughts. The proposals in Pennsylvania and other states to use exchanges for the newly Medicaid eligible move in this direction, but they suffer from poor explanation and narrow vision.
The upbeat argument for this approach recognizes that the time is ripe. Medicaid is changing under the ACA, and even states reluctant to go with the expansion of old-style Medicaid to the able bodied poor might go for this. The realistic argument is that Medicaid is not working in many states. It does not give the poor the same help as the government gives to other groups, so opening the doors to alternatives is at least worth a try. And a program that does not stigmatize citizens with lower incomes may improve both their current wellbeing and their future prospects.
Editor's Note: Cross-posted on the Voices@LDI blog of the Leonard Davis Institute of Health Economics of the University of Pennsylvania.