How to solve America’s health care price problem? Maybe Medicaid

Putting on the squeeze

The Affordable Care Act continues to be controversial, eight years after its passage, and a hostile Administration and Congressional majority have managed to undermine it, even if they haven’t been able to repeal it. Regardless, the ACA (aka Obamacare) has shifted the discussion on health insurance. Policy makers and the public increasingly assume that affordable coverage should be available to everyone and that pre-existing conditions should not be a factor in rate-setting or eligibility.

With uncertainty and dysfunction at the federal level, states are looking into using Medicaid “buy-in” as a way to achieve their policy goals. There are two main approaches being discussed: allowing individuals to enroll in traditional Medicaid by paying a premium or allowing individuals to buy Medicaid managed care policies on the marketplace.

A Health Affairs blog post provides a framework for evaluating these buy-in proposals. They outline six goals that policymakers may have in mind when instituting these programs:

  1. Improve coverage for the current individual market
  2. Provide options for people living in regions with limited choices of health plans
  3. Improve the viability of the private insurance marketplace
  4. Reduce premiums for consumers in the private insurance market
  5. Provide people with a guarantee of coverage with state-mandated consumer protections
  6. Improve the financial viability and contracting power of the Medicaid Agency

These are all worthy goals, but I would add another, systemic one. We read over and over again that the main reason healthcare spending is so much higher in the US than elsewhere is that prices are so much higher. Private health plans and Medicare haven’t done much to address this issue. Only Medicaid consistently pays low rates, so it seems that a way to bring down overall spending is to pay Medicaid rates, something that all of these buy-in approaches would achieve.

Providers won’t be happy with Medicaid rates and I don’t blame them. But a “Medicaid reset” would do the job of price reduction more than any other policy I can think of.

By healthcare business consultant David E. Williams, president of Health Business Group.

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