Medicaid managers like deer in headlights

To put it in Heartland terms, state Medicaid managers are like deer in the headlights. The costs keep escalating beyond any ideas they have about control and management of the fiscal disaster that the program represents.

Take Wisconsin. Everything was cut in the current two-year budget – everything except Medicaid. Education was cut at all levels: university, technical college and K-12. Environmental programs were throttled back. Aids to municipalities were slashed. The Medicaid budget rose more than a billion dollars in a budget where state revenues were $14 billion. That jump in expenses crowded out just about everything else we care about in our society.

Total state and federal funding for Medicaid in Wisconsin is now running at $7 billion a year, with the state sucking up about $2 billion. Back in 1998, one in 12 Wisconsinites were in BadgerCare (our name for Medicaid); now it’s one in five. That’s a staggering 1.2 million people.

Even that enormous budget increase for Medicaid proved insufficient. Midway into the two-year budget cycle, the state is still running in the red because Medicaid needs another $129 million by June 2013.

So, what to do?

The Republican response in Wisconsin is to push people off Medicaid. The latest rendition would eliminate 17,000 from the rolls and raise premiums for a lot more. The Republicans wanted more, but the reductions had to be negotiated with the federal government, run by the Democrats.

The Obama team’s response is to fight enrollment cuts, add more poor people to the rolls under ObamaCare and, for the most part, use debt to pay for the cost over-runs.

It occurs to neither party to bring management expertise to bear. It never occurs that the Medicaid economic model is busted and is therefore unsustainable. They don’t look to successful reforms in the private sector for guidance. It doesn’t dawn on them that innovation is a necessity. They miss the root cause of their problem, the hyperinflation of medical costs. Their inaction is drowning them, even though they have the advantage of government-imposed price controls.

Here are a few just dead plain obvious first steps to fix the busted Medicaid model:

• Turn the program over to the 50 states. There’s no way Medicaid can be boldly managed when there is joint federal and state control, where every innovation has to be negotiated until it dies. Send the federal money (about 60% of the tab) to the states in bloc grants so innovation can flourish.

• Set up incentives and disincentives to drive out the rampant abuses in the dysfunctional Medicaid system. When care is free (when anything is free) it is over utilized. Give the poor Americans a health reimbursement account (HRA) that they can draw against for care. Let the account build up year to year if recipients control their spending. No more will recipients call 911, order an ambulance to the ER for a sore throat – not when it’s their money. (More than one-half of U.S. companies, including the giant health care companies and insurers, use such plans. This is proven stuff.)

• Where there is a critical mass of Medicaid recipients, put in free primary care clinics to keep people healthy and out of expensive hospitals.

This is not rocket science. It’s not political science (obviously not working). It’s all about management science. It’s about managing behavior change on the part of recipients and providers.

That’s something we’re pretty good at in this country – at least in the private sector.

If the politicos would enable innovative management, they wouldn’t have to cut as many poor people off the rolls.

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