Monday, December 22, 2008

A New Day for Medicaid Reform


By Timothy D. McBride

The increase in the uninsured to 729,000 in Missouri and 45.6 million nationwide can be traced in part to a sluggish economy. When people lose jobs they lose access to employer sponsored health insurance, and in Missouri almost 17,000 jobs have been lost in the last 12 months.

Spiraling health insurance costs have also made insurance unaffordable and led employers and employees to drop health insurance. Premiums have doubled in the last eight years, well above the 20 percent increase in inflation. This has led to an unprecedented drop in the percentage of firms offering health insurance from 69 percent to 60 percent nationwide.

Rising health insurance premiums are also cutting into the take home pay of workers. While health insurance premiums were doubling since 2000, wages increased only 24 percent. Thus, when employers set aside money for wages and benefits -- they had little left over for wage increases.

The biggest blow though came in 2005 when the legislature and Gov. Matt Blunt led an effort to reduce the Medicaid rolls by more than 10 percent. This cut eligibility for more than 100,000 persons and reducing services for another 300,000. This effort, advertised as an effort to balance the budget, was short-sighted.

Governor-elect Nixon campaigned to restore the Medicaid cuts if elected. To do so, the state would spend roughly $265 million in state dollars. However, this expenditure would bring in roughly $430 million in federal matching dollars. Once the total Medicaid spending is cycled through the economy, economic models show that it would lead to a total annual increase of about $890 million in economic activity, an increase of over 11,500 jobs, and an increase of over $400 million in wages.

This projected increase in economic activity demonstrates how closely linked the health care and economic issues are. Since the 2005 policy changes were enacted, the state has turned away over $1.6 billion in federal matching dollars. These are funds that could have gone to health providers, who in some cases have been used for treating the uninsured.

Evidence shows that spending on uncompensated care (health care delivered to individuals but not leading to payment) for hospitals alone in Missouri increased by 38 percent and at least $162 million in the first two years after the Medicaid cutbacks. This is an underestimate of the total economic burden of the Medicaid cutbacks because it is a measure of only the increase in uncompensated care to the hospitals, and does not fully measure lost revenues to clinics, physicians and other safety net providers. All of these providers likely have not only seen their incomes drop, but have had to lay off workers, contributing to unemployment in Missouri.

Our health care system is not likely to improve without intervention and a public-private effort to resolve this problem. Employers and health providers are now sufficiently concerned about these issues, and our inability to sustain these trends, that they are willing to consider working with state and federal policymakers to put together packages of reforms that can address the long run affordability and access problems we face.

We know what needs to be done. There is a list of viable private-public approaches that should be acceptable across the political spectrum, including: expansions of the children’s health insurance program and Medicaid, chronic care improvement programs, consumer choice and high deductible plans, and insurance reforms to reduce premiums.

With a new administration here in Missouri and in Washington, we have the way, and we will now need to find the political will. We all must understand that we have a common stake in the solution and realize how our economic woes are tied to our health care problems. The voters, in their infinite wisdom seemed to understand as much on Election Day.
McBride is a health economist and a Professor in the Brown School of Social Work at Washington University in St. Louis.
Copyright (C) 2008 by the Missouri Forum. 12/08