Utah and exploding Medicaid costs

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Medicaid – a program designed to help the disabled, the mentally ill and the truly destitute – has been eating up our state budget at an unprecedented rate. As it does so, it competes with every other service provided by state government – education, transportation, corrections – all are squeezed by exploding Medicaid costs.

In Utah, the Medicaid budget in 2000 was 9% of our general fund. In 2010, it was 18%. Unchanged, it is projected to be 36% of our general fund by 2020 – and that is without the additional projected expansion under The Patient Protection and Affordable Care Act. Once the affordable care act – Obamacare – goes fully into effect in 2014, Medicaid is expected to consume as much as 46% of our state’s general fund. That is obviously unsustainable.

Medicaid is no longer the safety net it was once meant to be. It has become a luxury hammock. In fact, it is the best “insurance” money can’t buy. It requires no premiums, pays for all FDA-approved drugs but one (Viagra), and requests (not mandates) a tiny co-pay. Under the affordable care act, the Medicaid rolls are projected to grow quickly. Asset testing will be dropped, single males will qualify, the income limits will be raised and additional pressures on the work force are likely to make Medicaid a more attractive option for some than traditional insurance.

Under the current Medicaid structure, we have a fee-for-service model. The more services provided, the higher the pay. Why do one lab test when we could be paid for 20? Why do “just” a CAT scan, when doing the more expensive MRI means we’re paid more? As we “pay per procedure” and tie providers hands when it comes to innovation, we in fact, are providing perverse incentives. We “reward” over-treatment and we punish innovation and efficiency.

We are also required to pay for any Medicaid eligible candidate, up to 90 days retroactively, making it impossible to adequately budget for those expenses. How can you possibly account for things that haven’t happened yet? Each year, we must pour tens of millions of dollars into ongoing Medicaid funds, even while we are cutting vital programs, including education. This year, we were finally able to fund a little bit of education growth – while Medicaid expenditures got an additional $40 million in ongoing funds and some $13 million in one-time funds.

Shortly before the legislative session started, Dr Brent James, Executive Director for the Institute for Health Care Delivery Research for IHC testified in front of the Social Services Sub-Appropriations committee. As he spoke in favor of Medicaid reform, he pointed out that we have well-documented, massive variation in practices, high rates of inappropriate care, unacceptable rates of “care-associated” patient injury and death, a striking inability to do what we know works and huge amounts of waste – over 50% by recent measures. In almost all cases higher quality equals lower costs, but we have not “aligned incentives.” In fact, Dr James testified, we have perverse payment incentives under the current plan. We actively incent overutilization, we pay more for complications than for staying healthy and we actively disincent innovation by not paying for providers to be cost-effective and efficient in their care.

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4 Responses to “Utah and exploding Medicaid costs”

  1. rmwarnick Says:

    There’s a simple solution. Control health care costs. Americans pay twice as much as other developed nations for the same level of care. Unfortunately, neither political party is willing to take on the health care special interests. Not the pharmaceutical industry, or the health insurance industry, or the hospitals and HMOs.

  2. Pops Says:

    Simple, but wrong. Compulsory economies don’t work very well because the laws of economics have ways of asserting themselves in spite of whatever force one might use in an attempt to subvert them. The ultimate end result of the forced economy is North Korea and Cuba.

  3. rmwarnick Says:

    I thought you would tell me some anecdotes about a few people who dislike the Canadian and British health care systems. You know, compared to just about everybody in America who hates the non-system we have.

  4. Pops Says:

    We hate our system because it isn’t a free market system. Moving further away from a free market approach will only make things worse.

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