Thomas Donlan of Barron’s devotes his latest editorial commentary to a built-in flaw in Medicaid’s funding model.
No player can win at the street game of three-card monte because the card the mark is looking for isn’t there at all. The card sharp running the game palmed it and laid down another one from his sleeve. Or maybe he switched a black card for the red card as he put the cards on the table. The dealer can’t lose.
In the version of three-card monte that 49 states play with the federal government’s Medicaid program, the states also can’t lose, because they’ve rigged it to put only winning cards in the game.
Here’s how it works. A state legislature passes a bill taxing health-care providers. Hospitals, nursing homes, and other providers pay the tax (or assessment or fee). Then the state uses the revenue to increase its spending on Medicaid services. When the federal government notes the increased spending, it increases its payment to providers. Because the federal share of Medicaid spending is always more than 50%, the new federal money allows providers to pay the state tax with money left over.
This isn’t fraud, because everybody in state and federal government knows what’s going on. The suckers on the street are federal taxpayers, who are paying more and more for medical care for more and more Americans. …
… If the feds paid the whole bill, which was $544.5 billion last year, it would be the largest federal spending program other than defense. It’s bigger than both Social Security and Medicare, and it’s growing faster than either one of them.
Medicaid is also inefficient: Even though it pays less for a given procedure than the average for private health insurance, the providers make it up on volume. Medicaid spending per beneficiary is 40% greater than spending per beneficiary of private insurance.
After several major expansions of eligibility, the Medicaid program now has more than 70 million beneficiaries, which is more than 20% of the U.S. population.
