Medicaid: Key Pillar of American Social Democracy
W. E. Smith, Editor, The Social Democrat
If one single element of the GOP’s recent plans to restructure Obamacare could be said to have doomed their efforts it would be large cuts to Medicaid. Governors and senators from both parties saw the cuts, which the Congressional Budget Office predicted would deprive 15 million low-income Americans (and working-class elders) of access to healthcare, as deal-breakers. Though congressional Republicans have punted the healthcare debate down the field, the fight over Medicaid will no doubt return in the next round. The Social Democrat thought it would be useful to present some basic facts about a major but not universally understood program that is currently at the forefront of the battle for social democracy in the U.S.
Medicaid is a joint federal-state program that funds healthcare for low-income Americans, as well as the “medically needed” (seniors, generally, not otherwise poor, whom nursing home costs would render destitute). Anyone falling below the income thresholds is eligible, and care is essentially free to recipients. The program is massive. In April, 2017, almost 69 million Americans were enrolled in Medicaid, according to official government figures: more than one-fifth of the U.S. population. Another 5 to 6 million children were enrolled in the closely related Children’s Health Insurance Program (CHIP). With 74 million clients, it could be claimed that Medicaid and CHIP makes up the largest single-payer healthcare system in the world (seconded by Britain’s National Health Service, which covers 65 million British citizens). The program is the largest source of federal government funding to states (57%) and the second largest item in state budgets. At $345 billion, Medicaid represents between 11 and 12% of the federal budget. The primary payer of long-term care for the elderly and disabled, the program pays for 6 in 10 nursing home patients. Eight percent of Medicaid participants are elderly, 43% are children. The blind and disabled make up 13% of enrollees; the remaining 36% are non-disabled and non-elderly adults. The blind, disabled, and elderly—who often require more intensive medical care—make up nearly half of Medicaid spending.
Medicaid was birthed in 1965, along with Medicare, as part of what is known as the Social Security Amendments of 1965 (the New Deal Social Security Act of 1935 was repeatedly amended over subsequent years). Prior to that, health benefits for low-income Americans were meager, varied greatly by state, and the federal government’s role was slight. The opposition of powerful interest groups, particularly the American Medical Association, as well as charges of “socialism,” had doomed efforts by FDR, Harry Truman and congressional Democrats to provide comprehensive, government sponsored healthcare. Under the Social Security Amendments of 1950, Congress did include some limited funding to the states to help subsidize medical care of those on public assistance, and the Kerr-Mills Act of 1960 expanded federal involvement to include the elderly poor. Neither program went very far toward solving the problem of healthcare for the indigent, however, as few states made full use of the programs, and eligibility requirements excluded most of those needing assistance.
It took Lyndon Baines Johnson’s landslide 1964 election victory and a solidly Democratic Congress to finally do something more substantial on healthcare for low-income Americans. The Medicaid system which emerged, unfortunately, shared many of the same drawbacks as earlier legislation: chiefly that in deference to federalism, states were allowed a great deal of latitude in determining who would be eligible and what services would be covered. Medicaid is structured as a joint federal-state effort. In order to qualify for matching federal funds, a state’s program must include certain basic benefits and conform to minimum federal eligibility requirements. The five required benefits are inpatient hospital care; outpatient hospital treatments; lab services and x-rays; skilled nursing home care; and physician services. As far as eligibility requirements, states only need to cover families with incomes below 44% of the poverty line—a derisory amount: $8,985 for a family of three in 2017. Childless adults need not be covered at all.
Beyond the basic federal requirements, however, states are free to offer a great many other services, determine the extent to which certain benefits are covered (for example, the number of days in hospital), establish co-pays, or include additional covered groups (childless adults, pregnant women, the non-poor elderly) in their programs. There are 30 optional services that states may offer, and if a state decides to offer services beyond the minimum requirements, the federal government will continue to match the expanded coverage at least dollar for dollar (in poorer states, the federal match can go as high as 73%). A list of all mandatory and optional Medicaid services can be found here. As a result of the great flexibilty afforded states, there is no one Medicaid program, but 50 separate ones which vary widely in the percentage of the eligible populations covered, as well as the range of benefits offered. An illustrative factoid: Massachusetts spends 11,091 combined federal-state dollars per beneficiary; Nevada spends only 4,010.
The Affordable Care Act of 2010 (“Obamacare”) brought major changes to Medicaid—but once again, everything hinged on the willing participation of states. At the heart of the ACA Medicaid changes was the “Expansion.” Under the law, states who opted to accept a higher eligibility income (138% instead of 44% of the official poverty level) and to cover childless adults, would receive not merely 50, but 90% of costs from the federal government (100% for three years after 2014, phasing down to 90% by 2020). The objective was to bring more of those who clearly cannot afford insurance premiums into the program. The Expansion has been a qualified success: 31 states and Washington, DC, opted to accept the more generous standards. Unfortunately, such is the hold that laissez-faire ideology has on large segments of the nation that the remaining 19 states declined to accept better healthcare for their residents, even when it comes at little additional cost to the state. It is this “expanded” coverage that has been the major roadblock to recent Republican efforts to dismantle the ACA. The Republicans’ replacement bills have sought to once again restrict Medicaid coverage, with the Congressional Budget Office predicting that 15 million Americans, many of whom gained coverage under the Expansion, would once again be left without access to medical care. Even many Republican governors and legislators are unwilling to see more of their indigent citizens thrown under the bus.
Medicaid is one piece—a major one—of the Rube Goldberg machine which is the American healthcare system: cobbled together, along with the rest of the apparatus, to satisfy competing demands and ideologies. The program has not been without controversy from its beginnings. The founding legislation establishes certain basic principles. Among them are that all enrollees in a state must have equal access to services, no matter where they live (equality of access), also that each service must be “sufficient in amount, duration and scope to reasonably achieve its purpose,” (adequate care) and that “any individual eligible for Medicaid may obtain Medicaid services from any institution, agency, pharmacy, person or organization that is qualified and willing to furnish the services” (freedom of choice). Honoring these principles in the real world has been problematical, however. By the late sixties most states had established Medicaid programs, and costs soon began to balloon far beyond initial projections: from $2.7 billion in 1970 to $16 billion in 1980 (would that we could return to the days when a $16 billion federal program was considered out of control!). States and the federal government pursued “an ongoing tug-of-war, still prevalent today, between the federal and state governments over which one would get stuck with the Medicaid bill.” [1] Some states, moved by federal largesse, enacted generous programs “well beyond what the framers” of Medicaid intended. Others, attempting to control costs, unduly restricted eligibility. Doctors and other providers could not be forced to participate; when states set fee schedules too low they created medical deserts where few if any decent providers chose to offer services. Finally, many states took advantage of an allowed waiver to the freedom of choice provision and began to ration care through managed care organizations (MCOs). The results have not always been to patients’ benefit.
A major trend in Medicaid over the decades since its founding is its role as the primary payer of nursing home costs for the elderly. Not only the indigent, but also the “medically needy” (those whose incomes do not fall below the poverty line but who are unable to afford the costs of, for example, a nursing home) have become a major cost-driver for Medicaid. The average semi-private room in a nursing home ran $81,000 per year in 2012, according to a MetLif survey. An entire industry of nursing homes, many substandard, has sprung up to take advantage of government outlays. Patients often must divest themselves, under various state provisions, of all personal wealth before the state begins to pick up the tab, a provision which generates considerable constrovery: some feel heirs should not be divested; others point the finger at well-off elders who gift their resources to children before entering Medicaid in order to keep from the state its due.
Medicaid has provided care to hundreds of millions of our fellow citizens who otherwise would not have had access, while failing to provide care to many who are in desperate need. Until the United States joins other modern nations in establishing a federal universal healthcare system, Medicaid, however imperfect, will continue to be the last line of defense for our most economically marginalized neighbors when health fails.
[1] Laura Olson, The Politics of Medicaid
Social Democrat Staff
