It’s remarkable how badly most health care observers understand Medicaid. But once you understand Medicaid, it’s less remarkable, because it’s so darned complicated! Many people think that Medicaid covers the poor and uninsured.  In fact it covers some sub-segments of the poor, but most of the working poor are not covered, and access to Medicaid has become more difficult for those who have been moved off the welfare rolls in the  late 1990s. Nonetheless, the Kaiser FF Commission on Medicaid & the Uninsured reported this week that costs have gone up but benefits have gone down, mostly because of the fall off in revenues at the state level.  And this will get worse — we’ve noticed that particularly out here in California where the recent budget deal included a further 5% cut in rates to Medi-Cal providers which has caused anguish on the political left.

In the last 15 years Medicaid has been responsible for taking on many millions of poorer Americans who would otherwise have had no coverage.  So without Medicaid expansion in the 1990s uninsurance rates would be much higher today, mostly because of the fall-off in employer-provided insurance (see this post).  This expansion of the Medicaid rolls was mostly among the AFDC population (poor moms with kids) in the early 1990s and mostly children only in the late 1990s, as part of the SCHIP expansion of health insurance for kids.  It’s hard to work out how many people are on Medicaid because the numbers go up and down all the time, and there is double counting with Medicare.  When I was researching this in the late 1990s, my estimate was that roughly 10% of the population (28-30 million people) were using Medicaid as their primary insurer. (the disabled and elderly tend to end up in the Medicare numbers). That number held steady until the year 2000, but now some 35 million adults and kids are in Medicaid.  Most of this growth has come from the kids insurance programs created by SCHIP, but the number of adults in the program has also been growing at 10% annually.  These are adults who have been crammed back down into welfare-type poverty levels in the current recession, even though they may not be on welfare itself.

Medicaid also covers many of the disabled and seniors in nursing homes who have "spent down"–i.e. have no money left. Medicaid also pays into Medicare to cover part B premiums and drugs for a group called the "dual-eligibles".  In fact the fate of the dual-eligibles is one of the many wrinkles that’s holding up the Medicare bill in Congress now. There are about 4 million elderly and 7 million disabled getting benefits from Medicaid, although most of these are also in Medicare.

The final wrinkle in Medicaid is the disproportionate share (DSH–pronounced "DiSH") payments that go to hospitals with a high proportion of uncompensated care and/or Medicaid patients.  These are usually big inner city teaching hospitals or county hospitals, and this is one of a number of subsidies they get–direct support from Medicare for training residents is another. DSH is evidence of the political clout of these big facilities, and of the fact that it’s hard for Medicaid recipients and the uninsured to get care at other facilities.

The costs of the program, while rising for all, are mostly spent on the elderly ($61 bn) and the disabled ($84 bn). The kids are a bargain at $36bn and the adults are only $25 billion.  DHS payments were about $15 billion in 2002 . Altogether, this leaves a Medicaid program which in 2002 spent over $200 billion for the first time.  (Medicare is $254 bn).

Reforming Medicaid is a nightmare and always has been. No-one understands it, the states use it as a way to extract money from the Feds, and the covered population is transient, hard to manage, doesn’t vote and so has little political clout. For national scale providers and pharma companies there are 50 different programs to deal with.  Under any rational system the care for the elderly and disabled would be split off, and the moms and kids would be added to some kind of universal insurance scheme.  Well that’s not going to happen any time soon. With the Medicare bill stuck in Congress, no comprehensive Medicaid reform will happen this side of 2005. So expect more pain in the provider world and much more experimentation in the purchasing world, including expanding the power of the state to extract discounts like MaineRX, as the states try to get a handle on spending.