Members of Congress are seriously considering enrolling millions of
uninsured Americans in Medicaid, the troubled welfare program for
the poor. Instead of burdening the already fragile public health
care delivery system, Congress should give the uninsured the
ability to choose the kind of private health insurance they need,
just as most of their fellow Americans do, by giving them direct
financial assistance through tax credits or premium subsidies to
purchase the coverage they want. President George Bush has already
unveiled such a proposal.
Why Adding the
Uninsured to Medicaid Is the Wrong Solution.
The estimated 39 million Americans without health
insurance are diverse not only in their health care needs, but also
in the reasons why they are uninsured. Many simply do not have
access to affordable health care coverage through their job, the
primary way most Americans are insured. Either their employers
offer no coverage, as is the case in many service-oriented jobs, or
employees cannot afford the package their employer does offer.
Still others are unemployed or between jobs.
Several proposals would broaden Medicaid
eligibility to expand the government health care safety net for the
indigent to include the uninsured. But Medicaid is not equipped to
handle such an expansion; in fact, it desperately needs
comprehensive reform to help those already enrolled in the program
get the care they need. Among the major factors discouraging an
expansion of the Medicaid program:
delivers a substandard level of care. In a recent study
published in the Journal of the National Cancer Institute, for
example, researchers found that women on Medicaid were three times
more likely to die of breast cancer than were women not on
Medicaid. Women on Medicaid tended to have late-stage diagnoses and
receive less radiation treatment. Medicaid is unable to offer its
enrollees the same level of quality care that the private sector
offers. Merely expanding a poorly performing program would not
serve new enrollees any better.
financial crisis is forcing states to ration care among
enrollees. Medicaid spending continues to strain the
states' already tight budgets. According to a recent National
Conference of State Legislatures survey, 19 states report that
their Medicaid programs are over budget and five
more anticipate a shortfall in the coming months. For fiscal year
2003, at least 37 states face potential budget shortfalls due in
large part to Medicaid. Given these trends, many states may be
forced to divert scarce resources away from other crucial
responsibilities, such as education or law enforcement.
To control their rising Medicaid costs,
states across the country are cutting services, limiting medication
and treatment options, and reducing payments to doctors, hospitals,
and other providers. This adversely affects patient access to
quality care. In Washington State, fewer doctors are seeing
Medicaid patients because of reductions in already low
reimbursements. A major expansion of the financially troubled
program to cover the uninsured would increase such rationing and
reduce the quality of care, leaving the truly indigent and poor
with even fewer benefits and poorer care.
expansion jeopardizes private employer-based coverage.
Studies show that as Medicaid expands, private coverage declines.
In a 1997 study published in Health
Affairs , health policy analysts David Cutler and Jonathan
Gruber reported that in one instance, Medicaid expansion caused
private coverage to decline by roughly 50 percent. In a
January-February 2002 Health Affairs
study, policy analysts Richard Kronick and Todd Gilmer found that
almost all the increase in public health coverage in Minnesota was
due to a decline in private coverage. As these studies point out, a
wide variety of factors can affect the extent of "crowd out." A
major expansion of Medicaid to lower-income Americans could entice
employers facing double-digit premium increases to dump these
employees from their private plans.
Instead of forcing hard-working Americans into a
substandard welfare program run by financially strapped state
governments, Congress should mainstream uninsured Americans into
the private health insurance system. Tax credits or subsidies would
enable them to choose the plans and benefits that are best for
their families, just as Members of Congress, federal workers, and
millions of privately insured Americans do now.
President Bush's proposal of health care
tax credits would enable the uninsured to secure the private
coverage they want and create real portability of health insurance
for low-income working Americans. Regardless of their job or job
status, this would allow them to maintain continuous coverage and
control of their health care decisions. The three key features of
the President's $89 billion health care tax credit proposal are
- It would be
equitable. It would address the current inequity in the
tax system that favors coverage bought by employees through
corporate plans, since the majority of the uninsured work for small
businesses that offer no health insurance at all. Uninsured
families and individuals who do not have employer-sponsored
coverage would receive up to $3,000 per family and $1,000 per
individual a year to help with monthly insurance premium
- It would be
refundable. Many low-income families and individuals have
no tax liability, so as a matter of policy, a standard tax
deduction for health care expenses is a futile gesture. A
refundable tax credit would target low-income families and
individuals and ensure that even those who owe no taxes are able to
purchase private coverage.
- It would be
advanceable. Eligible families and individuals would be
able to receive the credit up front, when premium payments are due,
instead of at the end of the tax year. Furthermore, the refundable
credit could be assigned directly to the health plan by the worker
to eliminate the burdensome paperwork hassles that could deter them
Congress must take steps to address the growing
problem of the uninsured, not only to do the right thing, but to do
it right. Rather than expand Medicaid, a broken welfare program
that promises more than it can deliver, Congress can directly help
the uninsured get quality private coverage by creating a new system
of refundable tax credits as the President and a bipartisan group
of congressional leaders have proposed.
Nina Owcharenko is Health Care Policy
Analyst at The Heritage Foundation.