States Explore Consumer-Driven Medicaid

South Carolina, Florida, and Georgia are exploring proposals to save money for their Medicaid programs by giving patients a set amount of money to purchase private insurance or fund their own care. Backers say making patients more responsible will lower overuse of services. But patient advocates say the sickest people will quickly run out of money and be left even worse off than before.

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Starting today, a commission appointed by the Bush administration is going to consider ways to slow spending in the Medicaid program for the poor. States have tried to reduce benefits or eligibility. Now several are working on changes intended to make Medicaid recipients more responsible for their own medical care. NPR's Julie Rovner reports.

JULIE ROVNER reporting:

Like many states, Florida's Medicaid costs have doubled in the last seven years, from $7 billion to more than $15 billion a year. But Florida's problems are more than just the amount of money the state spends on health care for those with low incomes. Alan Levine, Florida's secretary of Health Care Administration, says it's how that money is spent.

Secretary ALAN LEVINE (Health Care Administration, Florida): It's fundamentally flawed in that we don't pay any money until someone ends up in an emergency department or somebody ends up with a chronic condition.

ROVNER: So Florida is proposing a full-fledged overhaul, aimed at giving patients more choices but also making them more responsible for their own care. Levine says the plan will provide incentives for both patients and the private health-care plans that serve them to spot and treat health problems early. Every Medicaid patient will be enrolled in a private health plan and the plans will be paid more to treat sicker patients. So when a new child is enrolled, Levine says, plan officials have a financial incentive to get that child in for a checkup as soon as possible.

Sec. LEVINE: Because if they identify that that child has asthma or diabetes, they're going to be eligible to get the higher risk-adjusted premium.

ROVNER: Plans would also have much more ability to tailor their benefits to patient's specific needs, dropping some benefits now required by federal law and potentially adding others. Florida's new Medicaid would also give individuals incentives to improve their health through an enhanced benefit. For example, Levine says, if a mother ensures that her child receives all recommended checkups and vaccinations...

Sec. LEVINE: We will allow the mother to access the enhanced benefit dollars and they could put that into their own account and that account would be available to them to purchase non-covered Medicaid services, for example, over-the-counter drugs or eyeglasses.

ROVNER: Florida's Medicaid proposal is similar to plans being developed in Georgia and South Carolina that also give patients more choice and more responsibility. All the plans will likely save the states money, say patient advocates, but not necessarily through better incentives, rather because they would essentially limit how much Medicaid will pay per patient. Joan Alker is a senior researcher with the Georgetown Center for Children and Families.

Ms. JOAN ALKER (Georgetown Center for Children and Families): One of the ways to think about these new proposals is that the Medicaid beneficiary, instead of being guaranteed a certain set of medically necessary health-care services, are now just entitled to a certain amount of money, regardless of what that money will buy.

ROVNER: That could be particularly problematic under Florida's scheme, she says, where patients could see benefits reduced dramatically.

Ms. ALKER: Because when you have an HMO that's in it to make a profit, and the state is in it because they want to control their costs, something's going to get squeezed. And the safety valve, as it were, is letting the HMO decide which benefits the children, the folks with disability and the parents are going to get.

ROVNER: South Carolina is proposing an even more far-reaching plan. It would give individuals a set amount of money they can use to buy private insurance or to purchase services themselves. Judy Solomon of the Center on Budget and Policy Priorities says that sounds like the ultimate in consumer choice.

Ms. JUDY SOLOMON (Center on Budget and Policy Priorities): Except that if they need more than they have in the account, they're on their own. And they're on their own to, basically, buy services at the going market rates, which, for people without insurance, are always the highest rates.

ROVNER: South Carolina's plan would give each individual an amount equal to the average spent by those in similar groups, like all children. But Solomon says because most people use very little health care, 85 percent of patients would actually get more than they need, which she calls a questionable use of scarce resources.

Ms. SOLOMON: Its other 15 percent, which are the children with the highest health-care needs, would have not enough.

ROVNER: The new plans require federal permission. Officials are expected to rule on the South Carolina and Florida proposals in the coming months. Julie Rovner, NPR News, Washington.

STAMBERG: You're listening to MORNING EDITION from NPR News.

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