| :East Valley Tribune; |
:Dec 5, 2005; |
:East Valley Opinion; |
:38 |
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It’s high time to get control of state’s Medicaid costs
- East Valley resident Tom Patterson (pattersontomc@ cox.net) is a retired emergency room physician, former state senator, and chairman of the Goldwater Institute.
Arizona’s state budget may be in better shape for now, but lurking within it is a money gobbler that could menace our financial future. It’s the Arizona Health Care Cost Containment System (AHCCCS), our state’s Medicaid program. This would be a good time to explore some options for controlling it.
Medicaid provides medical insurance for the poor. It is designed and run by the state, but 60 percent of the funding comes from the federal government. Arizona, like most states, has a generous and expanding package of benefits because added benefits, even for non-essential services, are “such a deal”, with the feds picking up most of the tab. The voters also approved a substantial increase in the number of eligible participants in 2000 (the “Healthy Arizona Initiative”). Again, the “bargain” was just too good to pass up.
The discerning reader may sense where this narrative is headed. Between 1995 and 2005, there was a 90.6 percent increase in the AHCCCS general fund expenditure, the most of any budget unit. AHCCCS enrollment went from 487,000 in January 2001 to 1.1 million in October of this year. The total cost of AHCCCS, federal contribution included, went from 2.9 billion in Fiscal Year 01 to a projected 6.4 billion in FY 06! With rising medical care costs, burgeoning enrollment and an outmoded delivery system, AHCCCS costs within a decade or two could well eat up half the state’s budget.
Moreover, the financial structure of AHCCCS discourages individual initiative. Low-income workers who are AHCCCS eligible lose their total benefit if their wages go over the federal poverty line. Parents without employer provided health insurance are practically prohibited from working hard and trying to move up the economic ladder when faced with this formidable penalty.
There are other structural defects in AHCCCS. Like most Medicaid programs, AHCCCS promises more than it can deliver. The list of covered services is extensive, more than are included in many private insurance plans. But price controls result in limited access to some services. Medicaid beneficiaries, by federal law, may not be charged anything for covered services. Consequently, AHCCCS patients often seek routine care in expensive ERs, because they lack any financial disincentive to do so. There is no more inefficient way to provide medical services for the poor than comprehensive, use-it-orlose-it insurance with no incentives for the patient to economize where possible.
South Carolina seems to be the state poised to take the lead in looking for a better way. Like Arizona, South Carolina has about 20 percent of its population enrolled in its Medicaid program with costs careening out of control. Gov. Mark Sanford is proposing a plan to give Medicaid recipients more choice, access and quality while saving money. (Quick side note: Gov. Sanford, a very creative fiscal conservative, was recently rated one of the “three worst governors” in the same Time magazine poll that rated Gov. Napolitano in the top five. Go figure.)
Gov. Sanford’s plan is to give each Medicaid enrollee a “defined contribution” with which to purchase medical care. Enrollees would select from a menu of state approved options, all of which would include catastrophic insurance coverage. Options would include managed care plans, preferred provider organizations and provider-based networks. An employed enrollee could use their contribution to participate in coverage provided by their workplace, thus encouraging employers of low wage workers to make coverage available. The contribution could also be used to fund an especially promising option, the Health Savings Account, which the participant would use to buy their medical services directly.
Flexibility, competition and self-responsibility are the keys. The amount of the contribution would depend on the age and health status of the participant. Participating plans would be encouraged to provide individualized services such as HIV care, pediatrics specialization or alternative therapies. Enrollees could select the option best suited for them.
It’s too bad Arizona’s administration is not more interested in reforming the AHCCCS delivery system. Maybe we can at least learn the right lessons from other, more visionary states.
