The Facts Surrounding Privatizing Medicaid | Eastern North Carolina Now

    Publisher's note: The author of this article is Katherine Restrepo, who is a Health and Human Services Policy Analyst for the John Locke Foundation.

    RALEIGH     The catch phrase "privatizing Medicaid" currently thrown around in the media is misleading.

    A number of states -- most notably Arkansas, Ohio, Wisconsin, and Florida -- have proposed methods of "privatizing" the optional Medicaid expansion dollars through which the federal government agrees to fund fully, for the next three years, the provision of health coverage to low-income citizens whose incomes extend up to 138 percent of the federal poverty level. (For more on this, see the health care policy proposals in the John Locke Foundation's latest book, First In Freedom.

    However, these seemingly "unique" proposals of how best to utilize federal expansion dollars are nothing new. In a recent Washington Post interview, George Washington University Medicaid policy expert Sarah Rosenbaum says, "Keep in mind that states have been using Medicaid to buy managed care plans since the beginning of Medicaid. The whole notion of this as a conceptual breakthrough for Medicaid feels a bit off for me."

    Arkansas and Ohio wish to divert their federal Medicaid expansion dollars into the health insurance exchanges that are to be implemented by either the federal government or the states themselves beginning in 2014. In other words, Govs. Mike Beebe, D-Ark., and John Kasich, R-Ohio, are expanding their health insurance exchanges. New Medicaid-eligible enrollees will receive Medicaid benefits through the states' health insurance marketplace.

    Republican Gov. Scott Walker of Wisconsin is taking a slightly different approach by scaling back Wisconsin's statewide medical assistance program, BadgerCare, from 200 percent of FPL to 100 percent of FPL. Walker seeks to bridge the gap by enrolling the new Medicaid population with income between 100 percent and 138 percent of FPL on the insurance exchange.

    Meanwhile, Florida Gov. Rick Scott, another Republican, plans to distribute his state's Medicaid expansion money among its five managed care pilot programs.

Privatizing Medicaid: Not what it seems

    As private insurance companies operate within the health insurance exchanges, they cannot be defined as truly "private" entities. Because these insurance companies must abide by strict government regulations (PDF), private insurers operate under "managed competition." In their book, Healthy Competition: What's Holding Back Health Care and How to Free It, Cato scholars Michael Cannon and Michael Tanner define managed competition:

    One step removed from government management of the health care marketplace is "managed competition." That idea would leave the provision of health care in private hands, but would create an artificial marketplace run under strict government control.

The bottom line

    It is possible that the expanded Medicaid population will have to contribute a cost-share of 2 percent toward the exchange to receive Medicaid benefits. Despite the notion that such citizens may finally have a thin layer of "skin in the game," the rise in premiums will only continue.

    The Congressional Budget Office projects that each additional Medicaid enrollee who receives coverage through the exchange will cost the federal government an additional $3,000 over gaining access to the original Medicaid program. This figure would increase the cost of the exchanges by 13-14 percent.

    Throwing federal money at an already broken entitlement system is not an effective means to a desired end. Medicaid expansion is simply a short-term budget fix. Only 10 states would stand to save any money at all, and even in those it would be an insignificant amount, due to the fact that their Medicaid programs are already bloated. A major question states should be asking themselves is what happens when this money runs out?

    Christie Herrera of the Foundation for Government Accountability describes Medicaid privatization as a "poison pill no other state would want to swallow."

    Despite the warning, Pennsylvania wanders down Temptation Road. Gov. Tom Corbett has been flirting with the idea and met earlier this month with Kathleen Sebelius, Secretary of the U.S. Department of Health and Human Services, to clarify the state and federal government's roles moving forward.

Three Years of Unintended Consequences

    Three years after approval of the Patient Protection and Affordable Care Act, it looks as if states are either still searching for affordable provisions within the legislation's 2,700 pages of false promises -- or steering down the wrong path in thinking they have found an affordable solution.

    North Carolina is one of the 18 states saying no to the optional Medicaid expansion. Gov. Pat McCrory takes the rational approach by choosing first to tackle much-needed reform within North Carolina's own broken Medicaid system. Such problems include wasteful spending, overutilization of services, and unnecessarily high administrative costs.