The New England Journal of Medicine
February 21, 2002
Volume 346:635-640
By Sara Rosenbaum, J.D.
“Medicaid, codified under Title XIX of the Social Security Act, provides federal financial assistance to states operating approved medical-assistance plans. Unlike eligibility for Medicare, eligibility for Medicaid is means-tested (i.e., there are financial criteria for enrollment); like Medicare, however, Medicaid is an individual legal entitlement.”
“In August 2001, apparently in response to recommendations by the National Governors Association, the Bush administration announced a section-1115 demonstration initiative known as Health Insurance Flexibility and Accountability (HIFA).”
“The initial purpose of HIFA may have been to permit reductions in coverage as a trade-off for a limited expansion of eligibility.”
“HIFA appears to be an attempt to restructure Medicaid as a program that provides “premium support,” with the states subsidizing the enrollment of low-income persons in private insurance plans that offer more limited coverage than the traditional Medicaid program. Were most or all states to apply for participation in the HIFA program (section 1115 does not impose an upper limit on the number of participating states), then eventually the principles of Medicaid coverage would parallel those of private insurance coverage. In 1997, Congress took a step in this direction when it enacted the State Children’s Health Insurance Program. This program gives states the option of buying private insurance for uninsured children in families near the federal poverty level, rather than expanding Medicaid to cover them.
“The long-term consequences of such changes for the millions of beneficiaries with chronic illness or disability are unclear. As of the end of 2001, Congress had held no oversight hearings on HIFA. Nor has there been congressional scrutiny of the program’s emphasis on demonstration projects that help low-income workers buy coverage through their employers when it is available – despite concern about ‘health insurance crowd-out.’ This phenomenon occurs when public funds are substituted for employers’ contributions to health insurance coverage.
“In view of the fundamental disagreement over which features of Medicaid are problematic, much less how to change them, broad congressional action is unlikely in the near future. It remains to be seen whether Congress will permit the Bush administration to transform Medicaid into a premium-support program and to do so with a minimum of oversight.”
Comment: Recent attempts to reform health care coverage have been left primarily to the employers and health plans interacting in the health care marketplace. Health security for average-income individuals and families is being threatened by the market’s response in shifting risk to the patient-employee-beneficiary.
In the meantime, in Washington, less attention has been given to low-income health care disparities because of the “success” of Medicaid and S-CHIP in meeting those needs (though there have been notable attempts on the state level to expand S-CHIP to the parents of the covered children). But what is happening to these programs designed to assure that the most vulnerable do have health care coverage? They are falling victim to the administration’s favored policy principles of “accountability and flexibility,” using the model of “premium support.” What this means is that these chronically under-funded programs will not only face further budget limitations, but they will also provide fewer benefits. This will be disastrous for low-income individuals in America because of unaffordable out-of-pocket expenses and fewer providers willing to accept patients on these programs.
More than ever, the moral imperative is quite clear. Since we already have the resources to provide comprehensive care for everyone, we must accelerate our efforts to reform the way in which we pay for health care since that has been the primary cause of misallocation of our resources. In the meantime, it is absolutely essential that we protect the programs that we do have until we can enact an equitable system of funding comprehensive coverage for everyone.
Professor Donald Light, responding on premium support and HIFA (Health Insurance Flexibilty and Accountability):
A major consequence of any premium support approach that depends on individuals neogtiating in the individual market and with providers is that purchasing power will plummet for the same amount of money. Hospitals, clinics, labs and physicians charge individuals about 4-5 times as much as their regular negotiated rates with plans and insurers. Insurance companies charge much higher premiums for less coverage on the argument that they are at serious risk when they insure one patient at a time. This argument, to my knowledge, is completely false from the perspective of the overall risk pool that an insurer subscribes. In short, a HIFA approach saddles the poorest citizens with the highest bills for the least care.