March 5, 2003

March 5, 2003 | Commentary on Health Care

Improving the Welfare of Medicaid

Why can't Medicaid reform be like welfare reform?

It's a question the Bush administration and America's governors should ask themselves as they haggle over the best way to change the 38-year-old federal program that provides health insurance to the poor.

White House officials met recently with members of the National Governors Association to enlist them in a campaign to give the states more "flexibility" and control over Medicaid. But many governors are reluctant to sign up until they learn more about the plan's "fine print." As New Mexico Gov. Bill Richardson told one reporter, the Bush plan would "let states take the heat. I don't see it as serious flexibility. It is flexibility to take people off the [Medicaid] rolls."

That may be debatable, but the idea behind the debate itself is not: Medicaid can be changed the way welfare was in 1996. The '96 reforms gave welfare recipients incentives to work and encouraged them to move from welfare into the workforce. The administration and Congress should create similar incentives for people to move from Medicaid into the private health-care coverage most Americans enjoy.

The numbers alone call for reform. As the advertising campaign for the national "Covering the Uninsured Week" notes, more than 41 million Americans -- one out of every seven -- lacked health-care coverage in 2001. If we fail to address this issue, we can expect to see more people falling through the public safety nets and putting a strain on an already sluggish economy.

One way to improve coverage for the poor is to give Medicaid recipients money to help pay for private coverage. States could use their Medicaid dollars to help them buy coverage. That would allow individuals and families to get the health insurance that suits them best, regardless of their income status.

Individual health-care tax credits can help, too. As noted in "Agenda 2003," The Heritage Foundation's latest policy guidebook (, tax credits offer Congress a way to help all patients and to bring personal control to uninsured Americans. A health-care tax credit would:

  • Allow people to choose the type of coverage that best reflects their medical and financial needs.
  • Eliminate the bias in our tax code toward employer-based coverage -- the only type you can buy with pre-tax dollars. That discriminates against individuals who -- perhaps because they don't like their employer's health-care plan -- are trying to buy health insurance on their own.
  • Promote continuous health care by ensuring that people can maintain coverage regardless of where, when or how they work.

Fortunately, policy-makers already are warming up to this idea. Last year, President Bush allocated $89 billion in his budget to allow uninsured Americans a tax credit for the purchase of health-care coverage. Members of Congress introduced several proposals offering health-care tax credits to uninsured individuals and families. But no action was taken.

Congress did consider two smaller health-care tax credit initiatives. During debate on an economic-stimulus package in 2001, the House of Representatives twice passed proposals that included health-care tax credits for displaced workers who had lost their jobs. The Senate, however, didn't act on these proposals.

But health-care tax credits were included in the Trade Adjustment Act passed last year. The measure, designed to help American workers who lose their jobs to foreign competition offers them -- and some other workers -- tax credits to help buy coverage while unemployed.

Lawmakers should help the millions of low-income individuals and families get the coverage that they need and want by supporting Medicaid reform and individual health-care tax credits. As noted above, millions of working Americans and their families today can't afford coverage. Through Medicaid reform and tax credits, these people could get coverage while the truly indigent -- people who can't work -- would receive better quality care from the government. In essence, improve the welfare and health of all.

Nina Owcharenko is a health-care analyst at The Heritage Foundation (, a Washington-based public-policy institute.

About the Author

Nina Owcharenko Director, Center for Health Policy Studies and Preston A. Wells, Jr. Fellow
Center for Health Policy Studies

Distributed via the Heritage News Service