Bandaids on Fiscal Bullet Wounds

In the face of legislation to create a public option in health care, the American Enterprise Institute (AEI) recently convened a panel of experts to discuss the prospects of reforming the existing institution of Medicaid—a proposition which economists Thomas Granneman and Mark Pauly aim to defend in their newly released book “Reform Medicaid First: Laying the Foundation for National Health Care Reform.” The talk was moderated by Robert Helms, of the Medicaid Commission.

Pauly and Granneman gave the first two speeches. In his speech, Pauly stated that the most important reason behind his focus on reforming Medicaid was that “Medicaid’s there and history does limit what historical change is possible.”

“We might not have wanted to start with Medicaid,” Pauly said, “but it seems important to take it into account.”

Pauly then proceeded to detail the problems with Medicaid by showing his audience a variety of charts and graphs intended to illustrate Medicaid spending across states. These charts showed a number of financial disparities in Medicaid spending across States, which Pauly attributed to misguided Federal policy. “One of the main problems with Medicaid is that the Federal matching program is highly dysfunctional and really ought to be changed,” Pauly said, adding that because of the disparities caused by the matching program, “The average Medicaid spending per poor person varies by a factor of two to one.”

During the portion of his speech that focused on remedies for the problems with Medicaid, Pauly’s speech took a redistributionist tactic in calling for greater equality across States and beneficiaries. “We may want to have different designs and different levels of value for low-income people who are virtually entirely supported by taxpayers,” Pauly said, adding that “In an economist’s utopia, higher income people would be paying for their health care with their own money rather than the U.S. Treasury’s money.” Pauly also stressed the importance of altruism in his speech, saying that he hoped that “altruism is a common feature of human nature.”

During his speech, Granneman echoed Pauly’s calls for greater equality, saying that keeping the current federal matching rates would “leave an uneven foundation that really requires increasing benefits in low-income States.”

“To mandate a fill on those gaps would impose an undue burden on the low-income States because of the current Federal matching rates,” Granneman said. As a remedy, Granneman laid out several principles upon which Medicaid reform should be grounded, including”

• Interstate equity
• Continuity of subsidies
• Equal payment by setting,

• Claims-based accountability
• The existence of a provider network.

However, in making these prescriptions, Granneman also avoided overly optimistic or utopian rhetoric. “Full coverage of all uninsured is currently beyond reach,” Granneman said.

The first discussant, Nina Owcharenko of the Heritage Foundation, took a critical stance when dealing with the previous speakers’ fixation on leveling out spending on the poor. “I think one of the critical pieces to remember is that Medicaid is not just for poor,” said Owcharenko. “That complicates this issue of how do we level out the disparity?”

Owcharenko then discussed the portion of Medicaid that was geared toward the disabled, a not insignificant portion since, according to the Kaiser Family Foundation, twenty percent of the people covered by Medicaid suffer from severe disabilities.

With respect to the “leveling out” proposed by Pauly and Granneman, Owcharenko also posed an ominous question about the states which had seen large amounts of Medicaid funding. “How do we push down those that have kind of gone too far?” Owcharenko asked.

The final discussant, Alan Weil of the National Academy for State Health Policy, took an even more critical stance than Owcharenko, suggesting that the overall focus of the book was misleading, as the authors were really trying to argue for a national health care system, which he found potentially troubling. “How far do we take this?” Weil asked. “What does it really mean to mainstream people whose needs are very different?”

Weil began his speech on a pessimistic note, saying that “The reason I get anxious whenever people talk about Medicaid reform is because often I feel like the reform suggestions begin with a misunderstanding of what the program is.” Weil then proceeded to list the various ways in which the two authors had missed the point of Medicaid, with special attention paid to their twin foci on equality and altruism. “The notion that somehow our goal is to equalize this as a poverty program really doesn’t capture the design of the program…[and] treating this all as altruism, it seems to me, sort of misses the point of how most Americans view the Medicaid program,” Weil said.

Mytheos Holt is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.