What Would A Free-Market Medicaid Reform Look Like?

With all the discussion about Medicaid reform, transformation, and (an unwise) expansion, it’s worthwhile to remind ourselves what “success” for both Medicaid patients and taxpayers should look like. Patients should have access to health care that can be tailored to their needs. Taxpayers should be able to rest assured that Medicaid dollars aren’t being wasted. Unfortunately, Medicaid is failing on both of these fronts, delivering poor health outcomes to enrollees and terrible results to taxpayers.

What would be a better way to deliver this care? Here are some ideas:

• The state currently spends (roughly) between $3,000 and $5,000 on each child and adult enrolled in the Medicaid program. Split the current level of Medicaid spending into the equivalent of state-held health savings accounts (HSA) that the beneficiary controls. After the purchase of at least a catastrophic insurance plan, the enrollee could decide what additional health services he or she needs to spend money on, if any. Leftover money could be rolled over year to year, meaning beneficiaries wouldn’t feel compelled to use or lose those health dollars unnecessarily.
• Give enrollees a reason to leave the Medicaid program on their own. If a Medicaid patient complies with the regulations of the program — high among them, to not use emergency room services unnecessarily — then the patient could take the bulk of the leftover money when he or she exits the program, either as an HSA or as a reduced amount in cash. Indeed, beneficiaries would have something to gain by leaving Medicaid.
• Health insurance is insurance first, not a health plan. One of the few benefits found in an Oregon study on Medicaid was that enrollees felt financially secure after they joined the program. Not only can Medicaid reform of the nature described above provide that security, it can do it at a lower cost and with greater flexibility for the patient.
• Sow the seeds of even wider, positive health care reforms. A market-based reform of the kind articulated here would inject thousands of cost-conscious consumers into the health care marketplace who are not only empowered to negotiate for the services they need, but have the incentive to negotiate.

That’s where I would start Medicaid’s reformation. You can call these ideas a free-market solution or a transformation, but most importantly, I think you could call it a vast improvement over what we have now. Medicaid needs to be reformed first and foremost, and failure to do so will hurt all of its stakeholders. Patients and taxpayers deserve better than the status quo; I think these proposals would help to move the reform discussion and the Medicaid program in the right direction.