Sen. Brian Schatz (D-HI) told Vox this week that he’s preparing a bill that would let more Americans buy into Medicaid. In a recent Vox piece, Michael Sparer explained why building on Medicaid makes sense:
Now that the Affordable Care Act seems likely to survive the Republican effort to repeal and replace it (for now), many liberals are mobilizing around the idea of a “single-payer” insurance system, built off Medicare, the federal program that now covers the aged and disabled. Among the liberal luminaries who have signed on or expressed support are US Sens. Bernie Sanders, Elizabeth Warren, and Kamala Harris.
I have a better idea: Medicaid for more! Contrary to the rhetoric on Capitol Hill, Medicaid, not Medicare — or, for that matter, the ACA exchanges — offers the most plausible path to an American version of affordable universal coverage.
Medicaid has grown incrementally and continuously since the late 1980s, under both conservative Republican and liberal Democratic administrations. That pattern continues today, and more than a dozen Republican governors have been fighting to protect Medicaid expansions created by the ACA.
Looking ahead, there are opportunities for bipartisan efforts to expand Medicaid’s role as the nation’s medical safety net. We should encourage the 19 states that have so far rejected the ACA Medicaid expansion to embrace it. We should use Medicaid as the public insurance safety net in markets lacking adequate private competition. We should encourage states to allow residents to buy into Medicaid.
Finally, we should push a future administration to nationalize such a buy-in program.
Some states have begun to recognize the wisdom of the Medicaid buy-in approach. Nevada came close to adopting such a strategy: In June, Republican Gov. Brian Sandoval waited till the last minute before vetoing a bill that would have let Nevadans buy into Medicaid — but even as he did so, he said it was an idea worth considering. Now Massachusetts is exploring the option. So is Minnesota. More states should join them, as the idea is both good policy and good politics.
Medicaid has a long history of serving an expanding population
Let’s start with some Medicaid and Medicare basics. Both programs were enacted back in 1965 as part of Lyndon Johnson’s suite of Great Society initiatives. But the programs worked very differently. Medicare was a national program with uniform rules governing eligibility, benefits, and reimbursement policy. It provided health insurance to (nearly) all of the elderly and disabled, regardless of income, and it contained a uniform, though limited, set of covered services.
Medicaid, in contrast, was a collection of 50 state-administered programs that primarily served welfare beneficiaries, with significant variation in eligibility criteria, covered benefits, and provider reimbursement rules. The federal government funded between 50 and nearly 80 percent of the cost: the poorer the state, the higher the federal contribution.
Throughout the 1970s, Medicaid enrollment nationally fluctuated between 18 and 20 million, or around half of the nation’s poor. That number started to decline during the early 1980s, due to Reagan-era cuts in social welfare programs, so much so that soon fewer than 40 percent of those in poverty were enrolled.
Medicaid policy and politics changed dramatically and unexpectedly in the late 1980s, however. First, several Southern governors sought and received federal permission to expand coverage for pregnant women and young children, as part of an effort to reduce high rates of infant mortality. Congressional liberals then took advantage of the newly won Democratic majority as of 1986, and used the budget reconciliation process to convert those state options into federal mandates, requiring states to expand eligibility (to pregnant women and children), covered services (to children), and reimbursement (to community health centers and other safety net institutions).
Presidents Reagan and George H.W. Bush went along, partly because the targeted beneficiaries were sympathetic, partly because of unexpected interest group support for the expansions, and partly to avoid a showdown with Congress. Medicaid enrollment grew rapidly, from roughly 20 million nationally in 1988 to nearly 41 million by 1994. In a few short years, Medicaid moved well beyond its welfare roots and began covering many working poor families.
Since the late 1980s, Medicaid has continued to expand, evolving from a poor program for poor people into the nation’s largest health insurance program, with more than 70 million enrollees. It now covers one in every five Americans (and one in every three children). It provides decent and low-cost insurance to seniors in nursing homes, to people with disabilities still living in their communities, and to poor and working-class families. It enjoys relatively strong interest group support from hospitals, insurers, employers, and state officials. It is an increasingly popular program among its beneficiaries: Almost 90 percent are satisfied with their coverage.
States still split the program’s cost with the federal government. And the shared Medicaid funding model encourages states to provide more generous eligibility coverage: The formula encourages expansion during good economic times (since the feds pay most of the bill) but also discourages contraction during bad economic times (since every state dollar saved means even more federal dollars lost). There still is variation in the covered benefits, but all states provide a relatively generous benefit package, with few copays and no deductibles.
And as the past few months have demonstrated, Medicaid has both bipartisan support and surprising political resiliency. From a program the New York Times didn’t mention when it was passed, Medicaid has grown into one so large and successful that Republicans didn’t dare cut it back.
Much criticism of Medicaid has been unfair
So why aren’t more policymakers proposing “Medicaid for more?”
For one thing, conservatives have long been (unfairly) skeptical of Medicaid. Some suggest, for example, that Medicaid beneficiaries are no better off than the uninsured, citing a study of Oregon beneficiaries whose blood pressure, cholesterol, and diabetes blood sugar levels did not improve despite (just) two years of coverage. That same study, however, demonstrated that beneficiaries had better access to needed care, a reduced risk of depression, and improved self-reported health.
Other studies provide evidence that Medicaid increases the odds of early disease detection and decreases the odds of “avoidable” hospitalizations and mortality. Surveys also suggest that Medicaid beneficiaries are just as likely to have a go-to source of primary care as those with private insurance, and are even more likely than their privately insured counterparts to rate their care as excellent or good.
Conservatives also argue that Medicaid is an out-of-control entitlement and that program funding should be capped. It is true that anyone who meets the eligibility criteria can enroll (just as with Medicare and Social Security), and that there currently is no cap on overall program spending.
But there are two problems with the conservative argument about cost. First, on a per-patient basis, Medicaid is a low-cost program, providing coverage to millions of the nation’s oldest, sickest, and most vulnerable populations for roughly 25 percent less than employer-sponsored private insurance. Why? Because Medicaid reimburses providers (particularly office-based physicians) far less than private insurers (and less than Medicare as well). While some provider complaints about inadequate reimbursement are legitimate, we should be at least as concerned with the high price paid by private insurers as with the low price paid by Medicaid.
Second, converting Medicaid to a block grant — a popular Republican plan for reining in the program — would reduce overall spending primarily by cutting eligibility and benefits, not by doing anything about the cost of the care and procedures provided.
The argument that Medicaid is a “big government” program — a bureaucratic monolith — is another myth. More than 60 percent of its beneficiaries are enrolled in private managed care plans, with the government paying the plans for each beneficiary they sign up. There also is significant variation in the type of health plan that states contract with, the formulas by which health plans are paid, and the regulatory oversight of plan performance. That’s just the sort of federalist public-private experimentation Republicans usually embrace.
States are experimenting with Medicaid in interesting ways
Medicaid is also adapting to today’s pressing health care challenges. States are experimenting with novel approaches to managing the care of particularly hard-to-serve populations, such as the homeless, substance abusers, or emergency room “frequent fliers.” Ohio provides recovery housing for opioid users, and North Carolina has prodded community pharmacists to identify and consult with individuals who visit the pharmacy more than 35 times annually.
Of course, it is the hefty dose of state variation that leads to a core liberal complaint about the program — and to liberals’ preference for Medicare more generally. It is true that interstate variation has a downside. Why should a family in New York be Medicaid-eligible while a similarly situated family in Mississippi is not? Wouldn’t it be better to have national rules?
Yes and no! There should indeed be some basic national eligibility minimums — and there are. Federal law does require all states to cover kids (who are in the country legally) in families with income at or below the federal poverty level.
Moreover, the ACA mandated coverage of low-income adults, and raised the threshold to 138 percent of the poverty level. The Supreme Court subsequently downgraded the mandate into an option, which 31 states plus the District of Columbia have adopted. The other 19 states should adopt the expansion, and if they don’t, a future Democratic administration should try again to impose national eligibility minimums. (The Supreme Court decision did leave open this possibility.)
But there does need to continue to be room for state-based flexibility and innovation, which is already built into Medicaid.
Medicaid could bolster the ACA exchanges
Another option for expanding health care access is to build on the ACA exchanges, but this path has several disadvantages. Created for consumers who did not qualify for Medicaid and who did not have access to affordable employer-based insurance, these exchanges have had at best mixed success. This is not surprising: Creating a new publicly subsidized market just for the uninsured, the self-employed, and the small business community is inherently problematic.
Now the markets are under additional stress from a Trump administration that rattles insurers by threatening to eliminate cost-sharing subsidies, scale back outreach efforts, and end enforcement of the (relatively weak) individual mandate.
There are ways to stabilize the exchanges — including more generous subsidies for enrollees and a federal commitment to the cost-sharing subsidies and other programs designed to minimize insurer risk. But Medicaid can also play an important role in stabilizing the exchanges. Medicaid managed care could serve as a public insurance safety net in markets lacking adequate private competition.
Such a policy might require Medicaid plans to participate in the exchange whenever there would otherwise be fewer than two participating plans.
Medicare for all?
What about Medicare (and the single-payer argument)? Bernie Sanders and the liberal wing of the Democratic Party sense an opening for Medicare-for-all — or at least for lowering the Medicare eligibility age to 55, allowing those between 55 and 65 to buy into existing Medicare, or creating a so-called “public option” (a new, publicly administered plan that would build off and resemble Medicare). Why not coalesce around this increasingly popular approach?
For starters, Medicaid has more generous coverage than Medicare. Most Medicare beneficiaries find themselves having to purchase supplemental private coverage to compensate for the program’s high cost-sharing burdens (deductibles, copays, and premiums). This is why proposals to build off Medicare generally assume significant additions to the program’s benefits, additions that would require federal legislation.
At the same time, Medicaid costs less than its public sector peer, mainly because it pays lower rates to providers, both because of its welfare-based roots and because organized medicine (namely the American Medical Association) has more influence in the Medicare rate-setting process.
There also already is a Medicaid buy-in model: More than 40 states successfully allow the disabled to buy into the program.
The pragmatic political argument for Medicaid
Perhaps the best case for building off Medicaid (as opposed to Medicare) is that that path has a better chance of succeeding politically. This argument is admittedly counterintuitive. After all, providers do complain about low reimbursements, and the stigma of the program’s roots as a welfare program — and its role as a conservative boogeyman — persist. Politicians on both sides of the aisle express more rhetorical support for Medicare.
The key to making a pragmatic political case for Medicaid starts by recognizing that neither Medicare nor Medicaid is going to replace the nation’s system of employer-sponsored coverage. There is insufficient political appetite for such a sweeping overhaul, whichever federal program is involved. Nor is there cross-national evidence that eliminating private insurance altogether is a worthy goal: Other nations with universal insurance almost always rely on a mix of public and private coverage.
The question then is: Which program is a better fit for an incremental expansion strategy? The clear answer is Medicaid. For more than 30 years, Medicaid has incrementally increased its eligibility criteria while Medicare covers the same group of the elderly and the disabled that it did decades ago.
Medicaid also has the political advantage of dividing its cost among federal, state, and local governments, whereas Medicare is funded entirely by the federal government (and beneficiaries).
Perhaps most crucially, individual states are already free to adopt a Medicaid buy-in approach, so long as they get federal permission to do so. And several state legislatures are considering exploring the Medicaid buy-in strategy. There is no need to wait for a Democratic takeover of the presidency and Congress — both of which are necessary ingredients of a federal Medicare expansion.
In June, the Nevada legislature passed legislation introduced by Assembly member Mike Sprinkle that would have allowed state residents to use ACA tax credits (or other funds) to buy into Medicaid. As mentioned, Gov. Sandoval did ultimately veto the bill, citing the current uncertainty in the ACA insurance markets, but also noted that his veto “does not end the conversation about potential coverage gaps or possible solutions, including Medicaid-like solutions.”
Let’s continue that conversation and see how state-level experimentation plays out. Let’s have the states grapple with the inevitable implementation issues, such as setting premiums, developing an outreach strategy for hard-to-reach populations, and ensuring adequate provider participation.
The way forward
Yes, there are numerous obstacles to a Medicaid buy-in strategy. But it is plausible that moderate politicians on both sides of the political aisle could decide to stabilize the exchanges, preserve the ACA, and encourage innovative states to adopt a Medicaid buy-in approach. Perhaps liberals will come to think of this approach as the American version of the Canadian system, under which each province administers a universal coverage system for its residents — under federal guidelines and with partial federal funding.
Perhaps it’s a strategy that Republican moderates from states like Nevada (Dean Heller), Ohio (Rob Portman), and West Virginia (Shelley Moore Capito) could support, in tandem with their Democratic colleagues?
Perhaps building on Medicaid — not Medicare — could lead, at long last, to a bipartisan American version of affordable coverage for all.
Michael S. Sparer is the chair of the department of health policy and management in Columbia University’s Mailman School of Public Health.
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