The Coming Train Wreck with Medicaid

The more I read about the mandates that the Obama Administration is imposing on Medicaid, the more it looks like an oncoming train wreck. Here’s why.
Medicaid ( the health insurance program for the poor ) already has perhaps the lowest reimbursement levels of any network of providers in the health care industry. Why? Because the government can get away with under-paying for a service at anywhere from fifty to sixty cents on the dollar. And, when the government underpays for a Medicaid patient, this underpayment is “cost-shifted” to the private sector. This is why the private sector has to pay extra- to make up for the payment shortfall by Medicaid ( and Medicare, for that matter).
Fewer doctors are willing to take Medicaid patients because the reimbursements are so low. And, many doctors have reportedly said they may retire if Obamacare is fully implemented.
It is important to note that Medicaid is funded fairly equally by the states and the federal government. In contrast, Medicare ( health care for seniors and the disabled ) is funded primarily by the federal government ( Part A = hospital coverage is paid in full by the government, while Part B= doctor coverage is paid roughly 75% by the federal government and 25% by seniors).
It is estimated that Obamacare will insure about 34 Million more Americans. Of those, approximately 20 Million will enroll in Medicaid.
Because many states are already stuggling financially, they are imposing severe budget cuts to Medicaid now. But the real severe cuts to Medicaid will likely take place as we approach 2014. That’s because Obamacare mandates that the states increase their Medicaid eligibility to 133% of the Federal Poverty Level( FPL).
To give you an idea of how painful this mandated enhancement to Medicaid eligibility will be for the states, take a look at the changes that must be made by 2014 as reported recently by the Kaiser Family Foundation:
Current states with Medicaid eligibility of 50% of FPL- 17
Current states with Medicaid eligibility of 51%-75% of FPL- 11
Current states with Medicaid eligibility of 76% to 100% of FPL- 6
Current states with Medicaid eligibility of 101% to 133% of FPL- 8
Current states with Medicaid eligibility above 133% of FPL-9
So, all but nine states will have to increase their Medicaid eligibility—at a time when Medicaid is already busting their state budgets. Although the Governors of many states have asked for relief, their hands are tied. States that accepted stimulus money had to agree to never cut their Medicaid eligibility or they would risk losing all of their state’s federal funding for Medicaid. In 2014 under Obamacare, it gets worse. As you can see above, most states will be forced to enhance their Medicaid eligibility.
The states’ only flexibility with Medicaid, which came from Kathleen Sebelius ( the Secretary for Health and Human Services ), is to cut benefits or work more efficiently.
The states are now cutting benefits, and they are already working efficiently. “It’s meaningless,” said Indiana Governor Mitch Daniels. “It’s of no use whatsoever. We already copy each other on best practices.”
When the insurance industry cuts benefits here and there to more effectively manage costs, they are vilified in the press. The states are doing the same thing now. Investors Business Daily recently reported that Arizona recently cut the organ transplants that Medicaid pays for. In California, Jerry Brown has proposed limiting Medicaid beneficiaries to 10 doctor visits per year and six prescriptions per month. Georgia and South Carolina are cutting benefits as well. Will there be similar outrage by the media now that state governments are cutting benefits to manage their health care expenses? I doubt it.
So, as we approach 2014, watch the coming Medicaid train wreck. A shortage of doctors. A significant increase in patients. And states with an unfunded mandate which will worsen their already strapped financial situation. And, most certainly, watch the states continue to cut benefits. It’s a safe bet that the wait to see a Medicaid doctor will increase substantially.