Why We Need Real Healthcare Reform

Review: How Medicaid Fails the Poor by Avik Roy

Illinois medicaid transplants
• November 29, 2013 12:00 pm


With the disastrous rollout of Obamacare’s website dominating the news over the past month and a half, another part of Obamacare is easily overlooked: the law’s expansion of Medicaid, the federal government’s health insurance program for the poor.

But the Medicaid expansion should not be overlooked, as it is arguably just as important as the new, floundering exchanges. The Medicaid expansion was originally designed to cover about half of the newly insured people under the law, with the Congressional Budget Office (CBO) projecting in March 2012 that of the 30 million newly insured people by 2016, 17 million of them would be covered under Medicaid.

The central goal of Obamacare is to increase the number of people with access to affordable health insurance, whether through private insurance plans or Medicaid. But the goal presupposes that Medicaid is good insurance; that Medicaid is worth expanding because it helps the people who have it. It is this premise that Avik Roy attacks with vigor in his new pamphlet How Medicaid Fails the Poor.

Roy opens with the story of Deamonte Driver, a teenager living with his single mom on welfare in the Washington, D.C., suburbs. Driver died at the age of 16 from an ailment that most people do not have to worry about: a toothache.

The real tragedy in Driver’s story is that he died even though he had health insurance. He had Medicaid, yet even with this government-provided insurance, Driver’s mother could not find a doctor quickly enough to prevent the infection in his tooth from spreading to his brain.

The problem with Medicaid, Roy says, is that it simply does not pay doctors enough for them to accept Medicaid patients. Medicaid pays on average 52 cents for every dollar that private insurance pays, due to payment caps instituted by the federal government. Some states pay far less: In New York, Medicaid pays 29 cents for every dollar that private insurance pays.

Given the shortage of doctors in the United States, the results of this payment gap are not difficult to game out. "Now imagine you’re a primary-care doctor with a busy practice," Roy writes. "Two people call asking for an appointment to see you today, and you have one slot open. Do you give that slot to the patient who has private insurance or to the one who has Medicaid?"

And because of the payment gap, people like Driver who have Medicaid have to call around to many doctors and wait for weeks for treatment. A federally run study found that primary doctors are 73 percent more likely to reject patients with Medicaid than patients with private insurance, and another study found that the average wait time for Medicaid patients is over twice that for patients with private insurance.

The major flaw in America’s healthcare system is its cost. Americans spend far more than other countries on healthcare, which means that even simple procedures can strain budgets. Face a major medical emergency—cancer, a stroke, or a heart attack—and even the most financially prudent family can go bankrupt. The costs make health insurance an imperative in America and turn insurance into a ticket to access to healthcare. Without insurance, there is no guarantee of access.

As these statistics show, though, having Medicaid does not guarantee access, either. The poor with Medicaid are sometimes just as bad off as those with no insurance.

The trouble with Medicaid does not stop with limited access, however. Patients with Medicaid actually experience worse health outcomes than even than those without any insurance at all.

Roy references several studies to prove this point, but one is particularly surprising. "A Johns Hopkins study of patients undergoing lung transplantation, published in the Journal of Heart and Lung Transplantation, found that Medicaid patients were 8.1 percent less likely to be alive 10 years after their transplant operation, compared with those with private insurance and those without insurance," Roy writes. "Medicaid was a statistically significant predictor of death three years after transplantation, even after controlling for other clinical factors."

These studies all exhibit a fatal flaw, though, in that they are comparing two different populations: those with Medicaid and those without. People who sign up for Medicaid have a reason they want to have it— they most likely are poor and have health problems. It is unsurprising, then, that those with Medicaid would have worse health outcomes.

Roy then points to a final study on the effects of Medicaid, published earlier this year, which addresses this flaw. Oregon had a significant waiting list for its Medicaid program, and after securing funds to expand the program, it held a lottery for those who could get in. Researchers were then able to compare the effect of Medicaid to the effect of no insurance by looking at the same group: those who want Medicaid.

The results of this study are sobering. While the researchers found that Medicaid improved mental health and allowed more use of healthcare services, they found no improvement in several measurable health outcomes after two years. After two years, Medicaid had no impact on the physical health of those who had it. They were statistically the same as those who were denied Medicaid.

The expansion of Medicaid highlights an important point about Obamacare. Much of the law seems new: There are new regulations, new marketplaces and subsidies, and a new (and broken) website. But for most people, Obamacare simply perpetuates a broken system without attempting any significant reform. It is effectively America’s current, broken healthcare system with more federal dollars in the mix.

The result is a clear opening for conservatives, and Roy’s pamphlet combines the two necessary features of any conservative response to Obamacare. It couples a devastating critique of the existing program with substantial and workable ideas to replace that program.

Roy outlines a few proposals at the end of his pamphlet. Former Indiana Republican Gov. Mitch Daniels’ Medicaid reforms in Indiana have been wildly popular there, and Roy puts forward his own proposal that is similar to Daniels’, consisting of a high-deductible private insurance plan combined with regular access to primary care.

While it is incumbent on Republicans to acknowledge the obvious—the current system is failing—they cannot stop there. They must put forward workable solutions to solve the real problems facing the poor and struggling needful of health insurance. As Roy’s powerful pamphlet shows, Republicans have both the facts and ideas on their side.

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