By Adam Searing
North Carolina Medicaid is the state health program that covers almost one million children from very low-income families. It also covers another 600,000 people, but only if they fit into very specific categories such as lower-income pregnant women, parents in poverty, very low-income elderly folks and poor people with serious disabilities. In fact, about 70 percent of the money North Carolina spends for Medicaid goes to help the elderly and disabled. If someone who needs health care doesn’t fit into one of these categories it doesn’t matter how poor they are – they won’t qualify for Medicaid.
Unfortunately, there is a troubling theme in public discussion around this critical health program for kids, the disabled and the elderly. Legislators, the media and others often say that Medicaid costs are “out of control†and such costs are “busting the budget.†Implicit in this complaint is the notion that Medicaid is somehow “wasting†money. Nothing could be further from the truth.
Sure, Medicaid costs have gone up significantly, almost doubling over the last decade to become about 16 percent of North Carolina’s budget. However, the reason for the rise in Medicaid costs has nothing to do with poor management or over-generosity in the Medicaid program. North Carolina Medicaid administrative costs are at right around 4 percent — compared to almost 20 percent for private health insurers. Innovative cost-containment strategies designed to reduce emergency room visits and promote preventive care saved over $200 million last year.
No, the problem with increasing costs in Medicaid lies in an area most politicians don’t want to face – skyrocketing health-care costs for everyone. Medicaid does not deliver health care in a vacuum. The same hospitals, doctors and other health providers and institutions deliver care to people with private insurance as well as people with Medicaid. Whether Medicaid is paying the bills or private insurance, being a patient just costs more these days. Health costs for everyone have nearly doubled over the last ten years – mirroring the Medicaid increase.
Why have health costs gone up so much? First look to drug prices, which consistently rise much faster than inflation each year. In addition, very expensive drugs are prescribed when just as effective generic versions are available. Second, expensive scans like MRIs and CAT scans are often used when they’re not really needed. Third, there is little review of the health services that people receive. Unlike NC Medicaid, which identifies and helps people who end up in the emergency room unnecessarily or have a serious and expensive chronic disease, there is little care oversight in the private insurance market.
Medicaid also deals with another driver of costs – the demise of private insurance. As the costs of private health insurance rise, more and more lower-income families have lost employer-provided coverage (more than 500,000 since the year 2000). Many of those folks – especially children and pregnant women – have turned to Medicaid for health coverage.
In some ways, the rhetoric is understandable. Trying to bring down health-care costs for everyone is a hard task for politicians. It’s much easier to rail against “out of control†Medicaid costs and propose cutting poor people off Medicaid, reducing still further Medicaid payments to doctors and hospitals or cutting Medicaid services. Poor people have much less of a voice than all those special interests with their huge campaign contributions and fancy lobbyists patrolling the General Assembly.
Ironically, one of the best ways to get a handle on health-care costs generally would be to expand coverage. A recent study estimated that every family with health insurance in the state pays $1,130 more annually in extra health premiums just to help cover health costs for people without health insurance. Expanding health coverage to the 1.3 million North Carolinians without insurance would save millions in health premium costs for families. However, it’s hard to expand coverage with heavy insurance industry opposition to any plan that would provide sliding-scale affordable coverage for everyone.
Another key is to rein in drug costs. North Carolina should join the multiple states that are starting to use the Consumer Reports “Best Buy Drugs†project (www.crbestbuydrugs.com) – a project that combines the evidence on effectiveness of drugs with a look at the cost. CR estimates that Medicare and federal taxpayers could save over $8 billion just by adopting its recommendations on cholesterol-lowering drugs alone. Using these recommendations for all state health programs would save hundreds of millions in North Carolina tax dollars and provide an example for how private insurance could lower costs. However, just talk about any attempt to rein in drug costs in our General Assembly and watch the pharmaceutical industry lobbyists descend like locusts in thousand-dollar suits.
Holding down health costs isn’t something that many politicians want to tackle. But with health-care costs climbing – both for people with private coverage and people on Medicaid – it’s something that must be done