The cost of Medicaid savings

This post is co-authored by Aaron Carroll and Austin Frakt and has been cited in the 14 April 2011 edition of Health Wonk Review.

Already Rep. Ryan’s budget plan has received a lot of attention. By now you well know that one way it aims to save money is by turning Medicaid into a state block grant program. It is important to recognize that there is a cost to those savings: worse health for low-income individuals. Yet some proponents of Medicaid cuts deny this cost, citing evidence that does not support their case.

In a NEJM paper by Harold Pollack, Uwe Reinhardt, and two of us (Austin and Aaron) that published today at 5PM, we emphasize just that. It’s short and ungated, so please read it. In it, we press those who claim Medicaid is worse for health than being uninsured to cough up their causal theory as to how this could be the case.

Statistical studies should begin with an explicit model embodying the hypothesis being tested. In this case, that model should articulate the causal pathway by which a patient’s insurance status translates into clinical outcomes from particular medical procedures. Specifically, what is being assumed about the behavior and skills of physicians and hospital executives or about the groups of patients undergoing the procedures? […]

[Do they imply that] the problem must lie with the physicians and hospitals (many of them academic medical centers) providing care for Medicaid patients. Are these commentators assuming that poor, uninsured patients, who in principle may qualify for Medicaid, actually have the resources to pay doctors and hospitals more than Medicaid would and that providers therefore give these patients better care and attention, leading to better outcomes? Or is the assumption that only less technically proficient doctors and health care facilities accept Medicaid patients, and the associated lack of skill and resources results in poor clinical outcomes?

We also explain how the evidence they cite as support for the view that Medicaid is bad for health does not, in fact, do so. It can’t. It is evidence of correlation of poor health outcomes with Medicaid enrollment not evidence of a causal relationship. Other studies have shown that Medicaid enrollees are sicker than the uninsured, in ways both observable and unobservable to researchers.

Turning Medicaid into a block grant program is problematic for a number of reasons, as explained by Edwin Park and Matt Broaddus of the Center on Budget and Policy Priorities, and articulated by Harold Pollack. Fundamentally, it would leave states with fewer resources, which will result in fewer individuals covered by Medicaid and/or less generous coverage for those who remain in the program.

What we want to emphasize is that there is a tradeoff. Should Medicaid be cut back, more people will be uninsured. Contrary to what some wish you to believe, those who become uninsured will suffer worse health outcomes. Recognizing that fact doesn’t make state or federal budget problems go away, but it should make us think harder about how we want to solve them, and how we might reform Medicaid. What we should not do is cut back the program with our eyes shut. There is a real, human cost to Medicaid savings achieved by revoking coverage.

Please read our NEJM paper.

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