By Ed Weisbart, M.D.
Missouri Independent, Oct. 21, 2025
What would you say if I told you itās possible to cut $250 million from the Missouri Medicaid budget while also improving the health of people on Medicaid? All we need to do is cut out the middleman by not renewing our state contracts with insurance corporations like Centene, Blue Cross and United Healthcare.
Over the past decade, the corporations running Medicaid nationally averaged an astronomical overhead rate of 13%. On top of that, Missouri spends untold millions of dollars overseeing these corporations.
All this waste disappears if we switch to an enhanced form of the fee-for-service model that Missouri Medicaid currently uses for our aged, blind and disabled people. Other states, such as Connecticut, have cut out the middleman and run their Medicaid programs with a total overhead of 4-6%. Since 2012, that tiny state has saved $4 billion.
Connecticut did this without a significant increase in state agency staffing by outsourcing much of the work to private commercial businesses called āAdministrative Services Organizationsā that are paid a flat fee for a defined service, avoiding the conflicts of interest inherent in so-called āmanaged careā organizations.
States like Missouri that allow insurance corporations to run their Medicaid program have consistently seen higher and more rapidly growing expenses. Between 2004 and 2015, counties that outsourced their Medicaid program to insurance corporations had their costs rise $1,584 per person per year above what was being spent in comparable counties that avoided this trap.
By switching to enhanced fee for service, we would have to absorb some of the administrative functions done by insurers, but we would also stop spending anything on insurance company overhead and oversight. On balance, we could expect a modest increase in administrative expenses but save between 10-17% of total costs.
In total, after accounting for the portion of savings that would go back to the federal government (they fund the majority of Medicaid), our state would save between 152 and 258 million dollars per year, in 2023 dollars.
Weāre not the only state in this position. Nationwide deprivatization of Medicaid would annually save all states combined as much as $34 billion and the federal government as much as $43 billion, for a total of $77 billion for the country.
To be clear, thatās not enough to completely mitigate the recent federal cuts to Medicaid funding ā but it would go a long way. Without this approach, we face a range of unpalatable alternatives.
We could instead cut the āoptionalā Medicaid benefits like pharmacy, dentistry, physical therapy, occupational therapy, and hospice care. Sadly, many states facing a budget crisis decide to cut long-term home health services, a self-defeating strategy as these are the very services that keep people from being institutionalized at even higher costs to the state.
Or we could cut more people from Medicaid.
Or we could cut back on what we pay doctors, though many people on Medicaid already have difficulty finding a physician who accepts Missouriās paltry Medicaid fee schedule.
Or we could cut back on what we pay hospitals, but Missouri already has too many hospitals at risk of closure. Cutting their funding would accelerate the crisis, particularly in rural communities.
Or we could reduce state funding for other essential services, like education.
Or we could raise taxes.
None of these choices are acceptable. Removing managed care organizations from Medicaid would protect the entire healthcare system while saving us hundreds of millions of dollars per year.
As striking as those numbers are, itās not just about money. Removing the insurance industryās barriers to care has been shown to attract more physicians into Medicaid, increase early diagnosis of cancer, and improve overall health.
I worry about people like my 31 year-old patient with juvenile diabetes who works as a self-employed roofer. Before Missouri expanded Medicaid, he frequently resorted to taking his insulin every other day. No physician wants to see people go back to rationing a life-saving medication.
The politics seem daunting, given the prominence of large insurance corporations in Missouri. But remember, Connecticut found a way to do this in 2012, and that state is often considered āthe insurance capital of the world.ā
If they could figure out how to make it happen, Missouri can, too.
Dr. Ed Weisbart is a retired family physician in Olivette and board secretary of Physicians for a National Health Program.