Medicaid gets even leaner as accountability improves
Republicans are proposing budget cuts of at least $880 billion, which would require major structural changes to Medicaid. It is difficult to convince the public that this major threat to access to health care is a good thing. Medicaid is a popular program that covers many voters at a low cost. It helps older adults receive the services they require to remain in their homes. It helps bring babies safely into this world and helps them grow up healthy. It helps babies grow up healthy and safely. As Representative Gonzales (R-TX) astutely asked: “at what point do you stop cutting into the fat and start cutting into the bone?”
Cutting $880 billion from Medicaid would be doing just that–cutting into the bone. Medicaid is the nation’s most affordable comprehensive health care program, and it offers long-lasting and positive health and economic benefits for its enrollees. Medicaid cuts would result in a massive shift of costs to the state governments and taxpayers. Here’s why:Medicaid has the highest cost-effectiveness of any health insurance program in America. Medicaid is the most cost-effective health insurance program in the country. In one comparison, Medicaid costs for low-income adults were 45% lower than the cost of Marketplace insurance for a similar group. In the same study, Medicaid enrollees’ average annual out-of pocket expenses were over 10 times less ($45 vs. £569). Covering people through Medicaid is far more efficient than other health programs and cost-effective for enrollees.
Administrative costs are low
- , at just 3.9% of total Medicaid spending in 2023. Medicaid managed care plans incur additional administrative costs, but almost all states require that Medicaid plans spend 85% or more of their plan expenditures on covered health services. Several states have set this requirement at over 90%. Private individual and small-group plans have a threshold of 80% which allows for greater administrative costs and profit. Large group insurers must meet 85% thresholds, but their overall service costs are typically higher than Medicaid, which translates to higher administrative expenses and profits.Medicaid has improved accountability through
- better book-keeping and transparency.
- Rates of incomplete documentation or other errors in Medicaid payment and eligibility data declined by over 75% from 2019 to 2024. These errors are now only 3 to 6% in Medicaid payment and eligibility records. Most of these errors (80%), however, are due to insufficient documentation or technical mistakes and not necessarily an incorrect payment. In the past, Medicaid critics misinterpreted these payment audits as exaggerating their claims of waste. But now, they show that there have been significant improvements in record-keeping, and fewer improper payments. Three quarters of Medicaid enrollees receive managed care. Managed care plans claim to lower overall spending through reducing overutilization. In practice, managed care plans often reduce utilization because it is difficult to find a provider or obtain a service that is needed. This approach does nothing to improve efficiency; it only worsens the care outcomes. The finalized Medicaid Managed Care 2024 and Medicaid Access rules include new accountability tools such as publicly-reported secret shopper studies to correct provider directories that are rife with errors and plug holes in provider networks. Health plans will be required to report on quality outcomes, improve price transparency, and track how much revenue they spend on actual health services. These tools are designed to ensure that plans manage their costs in the right way. This would be cutting Medicaid bone. This would be cutting Medicaid’s bone.Federal rules that streamline prior approval in Medicaid, Medicare and Marketplace plans will improve efficiency, reduce processing times and increase access to services. Prior authorization is a process that no one enjoys. It has been used too often to increase red tape and reduce access to needed care. The 2024 prior authorisation rule requires the development an electronic system to process prior authorization requests in order to speed up decisions. It also requires clear clinical criteria. Over a period of 10 years, it is estimated that the rule will save providers and patients $16.5 Billion and 221 Million Hours in administrative redtape. The cost to government is expected to be under $800 M. Cuts to federal Medicaid will likely lead to more abuses of prior approval as states and plans try to reduce costs. This is not efficiency. It is cutting the bone.States already feel the squeeze in the Medicaid program. From 2023 to 2024 federal spending on Medicaid barely changed, increasing only by 0.2%. The federal government has phased out additional support for the COVID-19 emergency public health situation, which means that states’ average Medicaid spending has increased from 30% in FY 2022 up to 35.7% by FY 2024. Medicaid cuts of this magnitude will only squeeze the states further, resulting in service cuts and coverage loss. Most likely, the most expensive services and enrollees will be targeted. This means that people with disabilities will have to wait longer to receive the support they need to remain in their home. This means that low-income kids will have more difficulty accessing critical medications. It means lower rates for specialists, which translate to longer waits to access care.
- Medicaid is not perfect, but there is more accountability for payments and care quality than there has ever been in the program, which helps reduce waste and abuse. These accountability and transparency measures, if faithfully implemented, can explain why Medicaid spending growth is projected to be lower in the next 10 year than Medicare or private health insurance, without any changes to the existing program. This is a form of gaslighting. Medicaid is already a lean program. There’s not much you can cut before you hit the bone: reduced services and providers, as well as coverage losses across-the-board. Remember that Medicaid is popular for providing low-cost healthcare to millions of low income children, families and older adults, as well as people with disabilities. People in your community. These proposed cuts would remove that care.
