The Medicaid mess
Tue December 7, 2010 11:50 am

The recent report on whether Texas should opt out of Medicaid should make it clear that opting out is not an option. Texas would lose $15 billion in federal matching funds. Texans would still have to pay the federal Medicaid tax, but the money would go to Medicaid programs in other states. Some 2.6 million Texans would become uninsured.

The report is justifiably critical of the way the federal government administers the program. Everyone agrees that Medicaid is unsustainable as it currently exists – everyone, that is, except the bureaucrats who administer the program. Nobody, not the Congress, not the White House, not the agency, shows the slightest inclination to change anything, even something as simple as requiring a small co-pay in service of the concept of individual responsibility.

What is the alternative? The state could take the money that it currently spends to draw down federal matching funds and establish its own health care system. There are two obvious problem here. One is that you can’t just snap your fingers and start a new health care system. What would such a program look like? Has anybody in or out of state government even thought about it?

Governor Perry issued this statement the other day:

“Texas, the states and the federal government would be much better served by increasing flexibility and innovation in Medicaid, even block granting funds to the states, so we can tailor Medicaid dollars to best serve the needs of Texas patients, families and taxpayers.”

Perry is right. The complacency of the federal government in the face of the breakdown of the Medicaid system is a disgrace. This is not just a Texas problem. The fiscal structure of every state is breaking down under the burden of Medicaid. But then the question is, Will a system run by our state government be any better? We all know that Texas will spend as little money as possible on whatever services it provides.

Perry advocates block grants, but these will not enhance public health. The difference between Medicaid and block grants is that Medicaid is an entitlement, while block grants are a fixed sum. Texas could get a block grant from the federal government, but when a block grant runs out of money, the services are terminated. If there is no money to treat people, nobody gets treated. Two-thirds of Medicaid expenditures goes to support nursing homes. If a block grant expires, what happens to nursing home patients? Do they expire too? What happens to indigent women who are pregnant? Can we expect an employment boom in midwifery?

I do know what happens to the folks who used to be on Medicaid. They show up at hospital emergency rooms. Hospitals are required to treat them. This is uncompensated care. How do the hospitals pay for it? Well, in the days when Texas had Medicaid, the federal government helped pay for it. But if Texas doesn’t have Medicaid, then the taxpayers have to pay for it. It won’t be state taxpayers, because the Legislature won’t take the responsibility for raising new revenue. They’ll boast about not increasing taxes. The responsibility for paying for uncompensated care will then fall upon local taxpayers. Hospital districts will have to raise property taxes, their only dependable source of revenue. Local taxpayers will howl. And I’ll bet you a jillion bucks that the Legislature will respond by cutting local property taxes and taking credit for it.

I don’t have any numbers about how much money could be raised through a combination of current Medicaid funding plus block grants. But you can be sure of this much: It’s going to be less than we currently spend on health care.

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