Insurance in Connecticut is expensive. Policymakers are desperately seeking options to provide relief for struggling families and employers. There are several good ideas floating around that could help, but the public option based on Medicaid is not one of them.
Proponents of HB 7339 are hoping to take advantage of Medicaid’s low provider rates, innovations, and high quality to provide a publicly-run coverage option for people who don’t qualify for Medicaid based on income or citizenship status. It’s a laudable goal, but shuffling people between risk pools does nothing to lower the underlying costs that are driving up premiums. The juice just isn’t worth the squeeze.
At first look, Medicaid’s appeal is obvious. Since 2012, when Connecticut fired private insurance companies from our program, per-person costs are down, quality is up, more providers are participating, and consumer satisfaction is over 90 percent. This year, our Medicaid program is saving $968 million over 2011 costs because of our focus on coordinating care, rewarding quality, and attention to high-need, high-cost members.
In fact, the appeal of using Medicaid is so obvious that Connecticut tried it in 2008, but unfortunately it failed miserably. Piggy-backing on Medicaid, former Gov. M. Jodi Rell created the Charter Oak plan as an affordable coverage option for people who didn’t qualify for Medicaid. At first it was affordable but that didn’t last long. By 2013, Charter Oak ended in a circular death spiral as high-cost members disproportionately enrolled, causing premiums to double, causing healthier members to drop out. At its peak, Charter Oak covered only a tiny fraction of Connecticut’s uninsured. It also harmed the underlying Medicaid program because providers were required to participate in both programs.
Most providers are paid about half as much to care for Medicaid members as for privately insured patients. Many providers care for Medicaid members because it’s the right thing to do, despite losing money. But providing the same care to patients at lower Medicaid rates, for which they used to be paid commercial rates, was too much. Providers fled both programs and Medicaid members suffered.
In addition, the administration had dropped private insurers from Medicaid just before Charter Oak started but brought them back to attract the insurers into the new buy-in. The delay in firing insurers cost taxpayers hundreds of millions of dollars and cost Medicaid members with four more years of less care and lower quality.
Some believe that bringing thousands of higher income state residents into Medicaid, which serves low income people, will build political support for the program, as they believe happened with the Affordable Care Act’s expansion. But they are misinformed. The ACA brought the lowest income, single adults into Medicaid. Moreover, because of budget cuts, over 8,000 slightly higher income working parents were cut from the rolls three years ago.
Connecticut Medicaid is stronger and more popular now because we’ve lowered costs while improving quality, not because of politics or members’ income levels.
No other state has yet implemented a Medicaid buy-in public option. New Mexico is farthest along, but Connecticut is not New Mexico. New Mexico’s program will enroll mainly uninsured residents, so providers will be paid low Medicaid rates. But that’s better than nothing. Our uninsured percentage is half New Mexico’s rate. A Connecticut buy-in would likely attract currently-insured people looking for a better deal, effectively lowering payments to providers. We can’t make insurance affordable on the backs of providers who accept Medicaid patients.
There is also the problem of whether to combine the pool of buy-in members with current Medicaid members. Policymakers will have to choose between two harms. If kept separate, a Charter Oak-type death spiral making premiums unaffordable is likely. But if they are merged, massive liability for rising medical costs will fall on Medicaid. Charter Oak attracted higher cost members because the Medicaid provider panel is designed to care for safety-net, high-need members. When that happens with the new buy-in, skyrocketing costs will fall on Medicaid’s budget. Taxpayers can’t afford that, and Medicaid can’t afford more eligibility and provider rate cuts. Massachusetts, a state far more like ours than New Mexico, considered a Medicaid buy-in and rejected it because of disruption in the individual market and the state’s liability.
There are dozens more reasons why a Medicaid buy-in will fail both the people shopping for sustainable, affordable coverage and the Medicaid program. But this futile exercise will also delay real cost control for all of us. That involves more than shuffling people between risk pools but requires addressing the reasons care is so expensive in Connecticut. We need to lower healthcare prices (especially for drugs), improve quality, support primary care, preserve competition, and make sure we get the care we need, but only the care we need. We especially need to stop repeating bad ideas that don’t work. Another failed attempt by policymakers will only further undermine trust in government’s ability to make a difference. A Medicaid buy-in may be well-intentioned, but it won’t work.
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