Sunday, July 15, 2012

Of Medicaid, State Budgets and Government Coercion

On June 28, 2012, the Affordable Care Act received a highly controversial stay of execution from the Supreme Court; in a 5:4 decision, the Justices ruled that the individual mandate does not represent a constitutional over-reach, and that the entire bill should fundamentally remain intact.

This historic decision will reshape the American healthcare system, perhaps irreversibly, and going forward, will serve as legal precedent for the highly manipulative use of taxation to further facilitate usurpation of our rights.

Regardless of the recent High Court ruling however, individual states would have been left to contend with escalating healthcare costs and burgeoning uninsured populations – A fact that even relegating ObamaCare to the gallows would not adequately address.  The fact is that current Medicaid spending for low-income American consumes twice the percentage of most states’ budgets than it did just 25 years ago, and this spending is simply not sustainable.

Across the United States, 20% of the total population is enrolled in Medicaid, with Utah setting the lowest percentage at 11%, and California marking the high at 30%. Total Medicaid spending in 2010 was $390B, $126B of which was borne by the states themselves.

ObamaCare was designed to include a significant expansion of Medicaid eligibility, ultimately intending to bring an additional 17 million low-income Americans into its fold.  Although the Federal government is slated to cover the costs of the expansion initially, subsequent increased costs will be on the States’ tabs.  Even had the “Affordable Care Act” been struck down in its entirety, however, the flailing economy and weak jobs market has caused Medicaid rosters to explode.  Most states are feeling the crushing impact of their growing Medicaid populations: The number of Texas residents who qualified for the program doubled from 2000 to 2011. State officials say the new federal law will no doubt deal Texas another financial blow as they struggle to cover an additional 1.8 million low-income residents, but the problem was already well established.  Likewise, Medicaid enrollment in Colorado increased nearly 58% between January 2007 and December 2011 as a result of the economic downturn and the State’s own program eligibility expansion. Add to that another half-million or so new Colorado Medicaid enrollees courtesy of ObamaCare, and one begins to understand the magnitude of the problem. States can afford just so many lining up at the trough.

The burden of providing health insurance to low-income residents has become so onerous that a number of states are now working to craft their own solutions to rising costs and the uninsured. Vermont, for example, has a plan to replace its traditional insurance model with a single-payer system. In their plan, the state would act as a publically funded and managed insurer, setting reimbursement rates and paying healthcare providers itself, much like the Canadian system. Once again, however, the devil is in the details; no one has yet figured out how to pay for such a plan.  It is not a blind leap to suspect that hefty new taxes and serious restrictions on healthcare choices will have to be part any large-scale state-administered insurance program. 

As the States struggle to deal with the growing Medicaid liability, it is worth noting that while Obama’s reform plan remains wildly unpopular, the GOP has yet to launch a credible alternative that has garnered the support of the populace either.  Congressman Paul Ryan’s plan to overhaul Medicare was not widely embraced, and other “plans” suggested by conservatives have been long on rhetoric and short on detail. 

In a recent opinion piece, political analyst, Scott Rasmussen, posited that lack of consumer involvement and control was ultimately responsible for our healthcare insurance crisis.  According to Rasmussen, “Both plans [Obama’s and Ryan’s] are unpopular because neither one puts consumers in charge of their own health care decisions. More than anything else, that lack of consumer control is the root cause of the health care problems facing our nation today.”  Even apart from consumers’ lack of personal and fiscal accountability regarding health and life-style decisions, Rasmussen has a point when it comes to the acquisition of health insurance.

First, Rasmussen’s argument gets to the proverbial “carrot vs. stick” dilemma: ObamaCare was designed for ultimate governmental control over the system, and it intends to employ a hefty stick, in the name of a tax, to levy on those who do not comply with the mandate to buy insurance. Second, is the more subtle and more insidious fact that people do not place the same value or appreciation to those things that are either chosen for them or forced upon them.  

A more palatable approach would be to align incentives such that consumers are motivated to purchase their own insurance, and to arm them with tools to make the most prudent and informed choices for themselves and their families.  This includes the multitude who are currently preparing to be embraced by the newly expanded Medicaid cloak, many of whom might be inclined to seek out private insurance rather than settle for the public option if they were appropriately enticed to do so.  Let’s face it: Does anyone really think that the public option will be a better one than private insurance?  Public housing with a fresh coat of paint is still public housing; and most people would far prefer another alternative.  Since most Americans recognize that it isn’t in the country’s best interest to have millions of uninsured citizens drawing resources from the system, the challenge becomes how to approximate “universal coverage” on a more voluntary basis.

For the 50% of the population that actually pays taxes, offering broader tax incentives would likely result in more people voluntarily buying insurance.

Rather than companies providing insurance for their employees, workers should be allowed to use employer designated monies, as pre-tax dollars, to pick their own insurance plans, supplementing with personal funds if the plan chosen costs more than the company has allocated, and perhaps keeping the surplus if they opt for a less expensive one.  Part and parcel with such an approach is to have a wide variety of competing insurance plans for employees to consider, including options with both high and low deductibles and corresponding premiums.

People should be able to buy insurance policies across state lines, and take their policies with them should they leave and choose other employment.

It is also high time to end the federal antitrust exemption currently granted to health insurance companies, eliminating price-fixing, bid rigging, and market allocations.

Lastly, and not insignificantly, healthcare insurance companies should be allowed to offer attractive discounts to subscribers who make proactive healthy life-style choices such as maintaining a normal BMI, exercising regularly and not smoking, in the same way that auto insurers reward safe driving records and homeowner’s insurers incentivize fire suppression systems.

All of this would result in increased free-market competition among insurance companies, and would likely do more to drive down costs than any amount of government interference or regulation.

Many of these same strategies could be instituted for the newest population of Americans who are heading to flood the Medicaid program.

Rather than further burdening the states to provide additional residents with subsidies in the form of Medicaid -- and rather than trying to strong-arm citizens to purchase insurance for fear of the tax hammer -- aligning incentives to drive consumer engagement and desired behaviors, and empowering people with information to make informed decisions about their healthcare is a far more worthwhile approach.