April 20, 2006

April 20, 2006 | Commentary on

Medicine for Medicaid

Government isn't very business-like. That's especially true when it comes to accountability. If a private business discovered it was being defrauded to the tune of billions of dollars every year, it would find out exactly where that money was going -- and plug the holes.

But in government, waste is often business as usual. Consider Medicaid.

The state of New York spends roughly $44 billion on that program. According to a New York Times report last year, at least 10 percent of that was simply wasted on fraudulent claims. That's $4.4 billion.

It gets worse. James Mehmet, the former chief investigator of Medicaid abuse in New York City, told the paper, "About 40 percent of all claims are questionable." That's a shocking $18 billion, big money by any measure.

There's a reason governments feel free to waste so much. The money they're spending isn't really theirs, it's ours. Plus, each state runs its own Medicaid program, with the federal government reimbursing the states for an average of 57 percent of what the program costs. So states such as New York have an incentive to over-report their spending, since out-of-state taxpayers are chipping in more than 40 percent of everything they spend.

Medicaid is supposed to help 44 million low-income Americans get medical care. But if lawmakers and voters really want it to help people, they should ask a fundamental question: Is it responsible?

It's difficult to imagine a system more open to fraud and abuse than the current one. If we want to make sure Medicaid meets the real health needs of poor Americans -- now and in the future -- federal and state policymakers should work together to fix Medicaid.

A sensible first step would involve focusing the program on patients, not providers.

The current system pays doctors set fees for particular services. It would be better to give beneficiaries control of this money and allow them to shop around for medical care. Doing so would save money, limit fraud and ensure that every patient was getting the care needed.

At the same time, policymakers should end Medicaid's one-size-fits-all approach to health care. Loosening up federal guidelines would allow doctors more freedom to treat each patient -- whether a retiree with a heart condition or a child from a foster home -- as an individual with specific needs.

Washington also should stop micromanaging which people must be in the program. Outdated federal rules slot people into "mandatory" or "optional" categories, and states have little real input. To promote effective reform, Washington should allow states to determine who needs to be on Medicaid and who doesn't.

In addition, the federal government must get spending under control.

Too many states have rigged the system because, like New York, they think they're getting something for nothing. But whether a tax dollar comes from Albany or Washington, it's still a tax dollar. It's time to close the loopholes that encourage out-of-control spending.

And Congress needs to crack down on the type of private fraud that happens when middle-class Americans shelter their assets in order to qualify for long-term care services (such as nursing home care) under Medicaid. Lawmakers should differentiate between medical services and welfare services.

Meanwhile, states should chip in by encouraging patients to buy private insurance coverage. This would move many families off direct assistance and allow them the same health-care choices most working Americans enjoy.

Medicaid should be a safety net for the needy, not a hammock for the greedy. And governments should spend tax dollars sparingly and responsibly. Medicaid has grown out of control and cannot survive in its present form. If lawmakers want to bring fiscal sanity back, fixing Medicaid is a critical first step.

Edwin Feulner is president of The Heritage Foundation (heritage.org), a Washington-based public policy research institute and co-author of the new book Getting America Right.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
Founder's Office

First Appeared in the Knight-Ridder Tribune wire