Fixing Medicaid's Myriad Problems

An increasing number of officials and analysts are saying that Medicaid cannot be fixed. Medicaid is the nation's largest health insurance provider for the poor and its budget is straining local and federal governments.

RENEE MONTAGNE, host:

This month marks the 40th anniversary of the Medicaid health program for the poor. Medicaid has long lived in the shadow of its more visible sibling, the Medicare program for the elderly, but Medicaid has now passed Medicare as the nation's largest health insurer and its growing costs are bearing down on states and the federal budget alike. Fixing Medicaid won't be easy in part because it's not one program but 50. NPR's Julie Rovner reports.

JULIE ROVNER reporting:

Nowhere is the Medicaid conundrum more obvious than in Tennessee. Democratic Governor Phil Bredesen is in the process of dropping more than 300,000 people from the Medicaid roles as he takes his state's program from one of the nation's most to one of its least generous. Bredesen says the requirement that he balance the state's budget leaves him with no other options.

Governor PHIL BREDESEN (Democrat, Tennessee): I simply do not have the money to keep the program going in its current form, so this is not some policy choice that we're making. At some level, I've got to do something.

ROVNER: Tennessee is not alone in feeling the strain of Medicaid. In Arkansas, says US Democratic Senator Blanche Lincoln...

Senator BLANCHE LINCOLN (Democrat, Arkansas): One in five people receive Medicaid, more than half of the births are financed by Medicaid and close to 80 percent of nursing home residents are paid for by Medicaid.

ROVNER: But despite its growing cost, more than $300 billion last year, Medicaid doesn't come close to covering all of the nation's poor residents. Because of the way the program was created in 1965, to serve people already getting cash aid from other programs, being poor is not enough. Tim Westmoreland, who ran the Medicaid program for the federal government in the Clinton administration, says people have to be both poor and something else.

Mr. TIM WESTMORELAND (Former Head of Medicaid Program): Like they're poor members of a family with children or poor disabled people or poor people over the age of 65.

ROVNER: That means in most states, childless adults can't qualify for Medicaid no matter how poor they are. And in many other states, parents have to live well under the poverty line in order to get coverage says Leighton Ku of the Center on Budget and Policy Priorities, a liberal think tank.

Mr. LEIGHTON KU (Center on Budget and Policy Priorities): Right now the typical state covers parents up to around 60 or 70 percent of the poverty line. That's around $10,000 for a family of three people. So in other words, if you earn more than that, you're considered to make too much money for the Medicaid program.

ROVNER: Unlike Medicare, which is fully financed by the federal government, Medicaid costs are shared between the federal government and the states. The federal government does require states to cover certain people for certain basic services like hospital care for children getting cash welfare. But states can also add optional populations--families with slightly higher incomes, for example--and optional services like prescription drug coverage. That makes Medicaid's problems and solutions hard to generalize says former Medicaid head Tim Westmoreland.

Mr. WESTMORELAND: There's a joke in the Medicaid crowd that if you've seen one Medicaid program, you've seen one Medicaid program.

ROVNER: But there are commonalities in what's driving Medicaid spending up says Westmoreland and it has nothing to do with the poor women and children who make up the majority of the program's enrollees. Rather, it's the inadequate benefits provided to seniors and the disabled by Medicare.

Mr. WESTMORELAND: Most of the fastest-growing and biggest expenses in the Medicaid program are holes in the Medicare program. Long-term care, Medicare practically doesn't cover. Prescription drugs, Medicare hasn't covered up until it's going to starting in January. And those are the fastest growing parts of the program and the things that are most expensive.

ROVNER: In fact, low-income elderly and disabled people make up about a quarter of Medicaid's enrollees but represent nearly 70 percent of all Medicaid spending. That grates on the governors who see it as the federal government shirking its responsibility. Governors are also irritated by the fact that when Medicare does start paying for prescription drugs next year, states will be required to pay back nearly all the savings they'd otherwise get. But Medicaid spending is also being pushed up by the same trends forcing up private health spending says Leighton Ku, the Center on Budget and Policy Priorities.

Mr. KU: Which is to say that health-care costs are growing faster than the economy. People are aging, so they naturally become a little less healthy, and that's why it's a little unfair when people sort of heap all these woes on Medicaid and say, `Gee, it's a Medicaid problem.'

ROVNER: And while both state and federal officials talk about, quote, "fixing" Medicaid, former Medicaid Chief Tim Westmoreland questions the premise that it's actually broken.

Mr. WESTMORELAND: Medicaid is a war horse. Medicaid takes up all the hard parts of our broken health-care system that nobody else wants to take care of--low-wage workers who don't have health insurance and their children, long-term care costs for elderly and disabled people, fast growing prescription drug costs.

ROVNER: Even so, Medicaid is under the gun. Even while a half-dozen states proceed with plans to limit eligibility and cut back on services, Congress has until September to figure out how to cut $10 billion in federal Medicaid spending.

Julie Rovner, NPR News, Washington.

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