Implications of Medicaid Reform: Current Topics and Future Direction

The Medicaid program, which was created by the Social Security Amendment of 1965, is a health program that provides healthcare access to families and individuals with disabilities, limited resources, and/or low incomes. Historically, the federal program was jointly funded by state and federal governments. Medicaid is currently the largest source of funding for health-related services for individuals with limited resources in the United States. Recent legislation that substantially increased Medicaid funding, but limited the program's ability to expand nationally, has been the topic of contention among health policy and managed care authorities. In today's featured seminar, 2 policy experts shared their insight about the current landscape and future direction of Medicaid reform.

First to present was Nina Owcharenko, director of the Center for Health Policy Studies and Preston A. Wells, Jr. Fellow at The Heritage Foundation. She began by stating that the implementations of the 2010 Affordable Care Act (ACA) do not contain enough structural reforms. With 16 million new individuals now added to the program, the nation's healthcare situation has become more uncertain and should be approached much more cautiously. While it is recognized that the ACA's goal is to get more individuals insured, there are many fiscal issues that have to be addressed and questions that need to be answered, especially as spending jumps from approximately $400 billion in 2010 to a projected $870 billion in 2020, with a population growth to 85 million individuals.

One of the growing concerns is the issue of what individuals may consider “free money,†as legislation implications and Medicaid reform may bring about the “woodwork effect.†According to this concept, a new increase in the access and availability of Medicaid services will cause an influx of patients coming “out of the woodwork†to attain those services, thereby increasing service volume and generating aggregate healthcare expenses that would overwhelm any per-service cost savings. In addition to these costs, the health reforms have not factored in administrative costs, which are a substantial financial component of any Medicaid program at the state level.

Fiscal components are only 1 side of the argument; policy changes are the other. With so much uncertainty regarding the Medicaid program's interaction with healthcare legislation as a whole, many states are currently finding it a risky proposition to move forward with the program. Ms Owcharenko asked how care could be improved for the populations who are dependent on Medicaid while improving the economic outlook for taxpayers. The goal should be to shift the Medicaid-dependent populations to the private insurance access of middle-class Americans. This can be partially achieved by leveraging privatized insurance options into the Medicaid program, which would increase marketplace competition to balance costs. There is a real opportunity to look at the components of the healthcare system and target specific areas for improvement, thus making it more palatable and approachable for further collaboration on the state and federal levels.

Taking the podium after Ms Owcharenko was Len M. Nichols, PhD, professor of health policy and director of the Center for Health Policy Research and Ethics at the College of Health and Human Services at George Mason University. Dr Nichols began by stating that, with the incredibly rapid growth of the Medicaid program, he understands the current frustrations surrounding the healthcare system. It's unrealistic to expect doctors to treat the poor out of the kindness of their hearts, and unfortunately, the Medicaid program is only able to cover approximately half of the needy population. However, he questions whether Americans are truly “overtaxed,†as only 1% of the gross domestic product is shifted over to healthcare funding. To move forward, there needs to be coordination, management, rationalization, and the engagement of less fortunate individuals in their care–all of which is being accomplished by the ACA.

The ACA has raised much contention and ruffled many feathers in the political arena because it utilizes federal authority to shift the balance of power in the marketplace to the consumer. While there are disagreements today, Dr Nichols pointed out that when Medicaid was created, only 26 states adopted the program in the first year, and 5 years later, 49 states had adopted Medicaid. In the long run, “Math will trump ideology.†Although cautiously optimistic about the future of healthcare reform and the Medicaid program, Dr Nichols admits that a method for achieving tax reductions while increasing Medicaid funding is currently unknown, but there are certain mechanisms that can help the improvement process, such as allowing individual states to be creative and innovate. He agreed with Ms Owcharenko that the focus should be targeted for specific populations and that Medicaid policies should reflect the resources “on the ground.†As these recipient populations are heterogeneous, health policies need to be customized and individually tailored. Until then, to help bring authorities and the nation together on healthcare reform, Dr Nichols asserted that there needs to be honesty and transparency about what it truly costs to take care of the poor. Unfortunately, there is often a dichotomy between ideology and pragmatism, and a lack of solidarity among policy makers; however, the federal government's role cannot be minimized if society is to be taken care of.

AHIP 2012 Medicare and Medicaid Conference website

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