Abstract
In conventional wisdom, Medicaid has been thought to be Medicare’s afterthought—a means-tested program for the poor in contrast to the universal entitlement program for senior citizens. Yet, as Frank Thompson points out, Medicaid actually services more people than does Medicare and costs about 80% of the more iconic program. Typically, means-testing programs are thought to be more vulnerable than social insurance entitlements (Pierson, 1994). Consequently, proponents of the social insurance state have long opposed means-testing in favor of universality or entitlement. Similarly, Medicaid is often thought of as a program for poor people with all the additional baggage that entails from the standpoint of more prosperous taxpayers. Means-tested programs are also thought to provide irregular coverage as individuals or their families move in and out of the income boundaries covered by such programs. Medicaid, certainly on the surface, seems to fit this description. Of particular importance, reimbursement levels of Medicaid are substantially lower than those of Medicare or private insurance meaning that more providers are likely not to accept Medicaid patients or to accept only a limited number of them. In a system of different payment schedules, Medicaid patients are typically last in line.
While Medicaid patients do suffer from being last in line especially for physician visits and certainly for specialist treatments and have a lesser rate of take-up than those covered by Medicare and private insurance, in most respects Thompson shows that Medicaid has been remarkably resilient as a program, has diversified its clientele base, has been dissociated from unpopular programs, and has absorbed programs that decrease the severity of the means test and increase sympathy for the program’s clients. As the author notes, Medicaid is actually the platform on which the Obama health care initiative is based, making Medicaid expansion the default option for those of insufficient means to purchase private insurance or to have it partially subsidized for them. The Medicaid expansion was predicated on full federal funding for the first three years to be reduced to 90% by 2018. It was actually the Medicaid expansion and, particularly, the federal penalty for noncompliance on the part of states that the U.S. Supreme Court found to be unconstitutional in 2012 rather than the more publicized mandate for individuals to purchase insurance or be subject to a tax penalty. As a result, some states currently governed by Republicans are withholding entry into the expanded Medicaid system despite the favorable terms of accepting the expansion.
Medicaid Politics masterfully weaves together the strands of party politics, U.S. federalism, and the challenges facing Medicaid. First, while Medicaid actually has grown despite threats to its programmatic character and has become especially connected to long-term health care, the parties are strongly divided over the program’s continuity in its present administrative form. After the 1994 elections, which gave the Republicans control over both chambers of Congress for the first time in 40 years, the Republican leadership in the House of Representatives tried to turn Medicaid into a block grant operated at the discretion of the states. Democrats, alternatively, have long favored categorical grants limiting discretion at the state level. Medicaid is a joint federal–state contribution program and while neither level of government wants to be responsible for footing all of the financial obligations each wants to have the authority to determine how it is spent. In more recent times, the Republican budget proposal initiated by Rep. Paul Ryan (R-Wisconsin) also sets out to make Medicaid into a block grant with funding to follow the Cost of Living Index (CLI) although health care costs are, in fact, higher than the CLI.
The protracted struggle over the budget in 1995 eventually led the Republicans to concede their position on turning Medicaid into a block grant. In return, subsequent presidential administrations began to grant waivers more frequently when states applied for them. Thompson argues that the increased use of waivers provided an outlet for governors to work around federal restrictions in a collaborative mode and stifled, at least for a time, the pressure to move toward transforming Medicaid into a block grant. In this regard, Thompson thinks that the demonstration waivers were a safety valve that contributed to Medicaid’s durability. However, the Affordable Care Act, Obama’s signature health care law, defines the who and the what of Medicaid coverage more definitively and thus has created in its wake more Republican support for converting the program into a block grant as in the Ryan proposal.
The U.S. system of competitive federalism means that states will vary widely depending on their relative resources and their willingness to apply resources to health care and other social support systems. They also vary in their political characteristics and in their overall health care performance records. The relative degree of commitment on health care across states looms especially large and that, in turn, reflects a state’s political profile. Overall, states that are richer have smaller percentages of people living in poverty, have fewer uninsured people and more tax resources, have higher per capita Medicaid expenditures, and have a better ratio of Medicaid enrollees relative to the population in poverty. In sum, politics matters, and it matters profoundly. It is highly likely, therefore, that turning Medicaid into a block grant would exacerbate the existing inequities of health coverage across states.
Given these deep political differences, it is not surprising that Thompson ends this book on a distinctly political note, namely, that the story of health care coverage will be greatly determined by what happens at the ballot box.
Two very important elements in Thompson’s Medicaid saga are especially worthy of attention. First, the classic theory of competitive federalism holds that states will compete to hold taxes down in order to attract business development and to gain affluent citizens who presumably will vote with their feet. It further holds that states that expend more than their neighbors on income support and service programs will become welfare magnets, thus gaining populations that grow dependent on the state’s resources. Yet Thompson finds that Medicaid has had a catalytic effect rather than a restraining one. In many cases, Thompson concludes, the use of waivers also expanded innovation at the state level, increasing services or covered populations while also generating greater support from Washington.
A second aspect of the Medicaid story lies in how the program has been able to adapt in ways that increase the diversity and political influence of its clientele. Long-term care benefitting both the elderly and the disabled accounts for over two-thirds of Medicaid costs. Medicare does not cover long-term care. Somewhere between 40% and 45% of Medicaid costs, Thompson points out, are accounted for by the disabled under the age of 65. One aspect of Medicaid that especially has made it more attractive is an increasing emphasis on home and community-based services especially for the elderly in regard to long-term care. Unless there is a corresponding decline in nursing home beds, however, HCBS adds to Medicaid costs.
In addition, the welfare reform passed in 1996 delinked employment status from Medicaid eligibility meaning that the working poor at or below 133% of the poverty line were now eligible for Medicaid benefits. As a result, Medicaid was thus able to escape its association with the adverse connotation of being a program for welfare recipients in the American policy lexicon. As evidence indicates, a major barrier in support of service or income maintenance programs in the American context has to do with negative stereotypes associated with race (Boychuck, 2008; Gilens, 1999).
Another federal–state related program for children even farther above the poverty line was passed during the Clinton administration’s second term. In some states, the Children’s Health Insurance Program (CHIP) was bundled into Medicaid. Over time, however, more states treated CHIP as a stand-alone program. When bundled, however, there is evidence that enrollments were more seamless, transaction costs lower, and therefore take-up rates higher. Notably, a key feature of the Affordable Care Act is to better coordinate health care services and programs.
Ultimately, the future viability of Medicaid and that of other health insurance protection programs rests on the development of some measure of agreement among political elites in the United States. Judged from current perspectives, the likelihood of that appears very dim. Republicans will focus on health care costs more or less exclusively in the public sector. They are likely to demand cuts in public sector expenditures and contracting programs while not necessarily bringing down health care costs. This formula means simply that more people will be unable to access the health care system. In this scenario, Medicaid would devolve into block grants to the states, which would then have full discretion over their use, an outcome that would likely widen the variability of take-up rates across states and the availability of services and eligibility of patients. Democrats, on the other hand, will wish to widen accessibility to the health care system while attacking health care costs across the board through “best practices.” The health care suppliers, however, are apt to be quite resilient themselves in avoiding becoming the victims of cost shifting. Chances are that in the fragmented American political system they will succeed. The reality is that under current compensation rates, physicians especially have to ration their intake of Medicaid patients. Some are already doing this with Medicare patients whose compensation rates, while higher than those of Medicaid, are below those of private insurers.
Thompson concludes this book with three recommendations regarding Medicaid. The first is that Medicaid needs to be defended against budget austerity in that it is a remarkably efficient program with lower costs than most. However, it may well be that the lower costs are a consequence of lower compensatory structures and, as a result, lower utilization. Were Medicaid to have more competitive compensatory structures and higher utilization, it is possible that its cost efficiency would be diminished.
A second recommendation that Thompson offers is that observers need to be more sensitive to the federal–state dynamics in the Medicaid program and, because the states contribute funding to the program, attending to their concerns may legitimate Medicaid’s status rather than attenuate it. While states may be shirkers, they also may be innovators. The problem for all federal–state programs, however, is that the innovation-shirking mix is more likely to be systematic than random. In these days of party polarization especially, innovation and shirking are likely to follow a state’s political culture and its professionalism, thus, increasing the range of variability among the states in regard to their efforts.
A third recommendation is that Medicaid reform efforts to improve the program should be nurtured awaiting the now notorious “window of opportunity” to arise. Ideas need to be cultivated for the appropriate moment to improve the program. One suspects there is no shortage of ideas to serve that end. Whether or not, in view of budgetary pressures and the parties’ seemingly irreconcilable differences as to what reform ought to entail, a window of opportunity will arise in the near or even foreseeable future is more open to question. In many respects, however, Thompson’s research shows that these opportunities arise more frequently than we might have anticipated and that the durability of Medicaid is itself a consequence of opportunity or even threats to the program leading to changes that have helped ensure its viability.
Medicaid Politics is a book that succeeds at several levels. First, it is an excellent book about Medicaid itself and how a program is transformed from fragile to durable status. There are important lessons here about the expansion of stakeholders and program clienteles. Second, the book illustrates tensions in the federal system in collaborative responsibilities between the federal government and the states. While these tensions may be well known, the waiver process became an important safety valve in protecting Medicaid from becoming a block grant. Third, the book illustrates that the current state of American politics—a polarized system seeded with a multiplicity of veto points—works to protect the status quo whatever the status of the quo. In that regard, Medicaid is protected by a political system that poses great barriers to change and by political polarization that virtually ensures agreements will be hard to come by. Ironically, political dysfunction amid divided government has helped preserve an important safety net program even as it may now limit programmatic innovations.