Saturday, September 15, 2007

A New Program? Or Expand An Existing Program?

There's a widespread argument that the government needs to do something about health insurance for the uninsured. I'm more sympathetic to these concerns than I used to be, partly because using emergency rooms in place of a doctor's visit is terribly inefficient. What should cost $40 at a doctor's office becomes $150 in an emergency room. Worse, from both a human suffering standpoint, and because of the costs, some poor people, because they have no coverage, wait until a minor problem becomes a major problem.

Unfortunately, because poor people tend not to be able to pay emergency room bills, through the miracle of cost-shifting, either taxpayers or insured patients get stuck with much of that $150 bill. Because hospitals built with federal funds under the Hill-Burton Act of 1946 can't turn away emergency room patients, and the very poorest Americans are eligible for Medicaid, in a sense, we already have socialized health insurance; it's just not terribly efficient in how it works. If you have an ideological objection to socialized health insurance, you are several decades too late to stop it.

So if our government decides to come up with a more rational approach to this, I find myself asking, "Does an entirely new program make sense? Or expand an existing program?" There is already federally operated health insurance system in existence for the very poorest of Americans: Medicaid. The eligibility rules allow only the very, very poorest Americans to get onto Medicaid. According to this report from the Kaiser Family Foundation (so don't believe everything that they tell you), much of the recent increase in uninsured population consists of families with incomes at 200%-399% of the federal poverty level (or about $40,000 to $80,000 per year family income for a family of four) whose employers dropped coverage.

I've read some years back that a sizable fraction of the uninsured in America earned more than $15 per hour--back when that wasn't a bad wage. My guess is that a fair number of these were people that didn't think that they needed health insurance. A family of four with an $80,000 a year income that has no health insurance makes me scratch my head. Unless they are living in California, or New York City, or a few other incredibly expensive places to live, why can't they afford health insurance? A family of four bringing in $80,000 a year in much of America should be able to buy at least catastrophic health insurance. Is the problem that they can't? Or that they have decided that they don't need it?

So here's my thought for the morning: if the problem is that a family of four earning $25,000 a year can't afford health insurance (and that does not seem ridiculous to me), instead of creating an entirely new agency, with its own fancy new offices, dozens of $100,000 a year plus bureaucrats and thousands of mid-level bureaucrats to administer a program to provide health insurance for those who are too rich for Medicaid, but who make less than say, $30,000 a year for a family of four--why not just expand Medicaid eligibility upward a bit? Some of the regulations would need to be rewritten, and that costs money, but compared to starting up an entirely new program, it has to be administratively inexpensive.

And I fear that this is why the Democrats keep pushing for an entirely new program that would largely duplicate Medicaid. A hundred thousand new unionized government employees! More union dues!

UPDATE: One of my readers pointed to this Cato Institute paper about exploding Medicaid costs to the federal government, and it opens with one of those classic "this trend will continue without anyone every coming to their senses and stopping it" statements:
Current trends and policies imply unsustainable growth in federal Medicaid outlays. In the year 2006, federal Medicaid spending was 11.9 percent of federal general revenues and 1.5 percent of GDP. Making conservative assumptions about future growth in Medicaid enrollment and spending per beneficiary, this paper estimates that the present value of federal Medicaid outlays over the next 100 years will take up 24 percent of the present value of federal general revenues and 3.7 percent of the present value of GDP calculated over the same period.

By the end of the next 100 years, that is, in the year 2106, Medicaid’s share of federal general revenues will be 48 percent—four times larger than its 11.9 percent share in 2006. In the year 2106, federal Medicaid spending as a share of GDP is estimated to be 7.4 percent—a fivefold increase from its current share of 1.5 percent. If the federal government continues to match state Medicaid outlays at the current rate, Medicaid’s share of GDP in the year 2106 will become 13 percent—or one-eighth of GDP in 2106. If current policies and trends are maintained, federal Medicaid outlays will take up 36 percent of lifetime federal general revenue taxes for males born in 2025 and 69 percent for females born in that year. For females born after 2050, almost all of their lifetime federal nonpayroll taxes will be consumed by their lifetime Medicaid benefits.
Well, heck, it could, if no one in Congress ever came to their senses, and we don't "solve" the problem by becoming the Islamic States of America, or the Space Brothers give us a cure for obesity, alcoholism, cancer, and pornography. You have to plan for the future, but this kind of breathless extrapolation is a bit much.

I find myself wondering how much of Medicaid's rapidly expanding costs are related to poor people taking their kids with bad colds to the E/R. Perhaps a bit more spending on preventative care--and especially money spent discouraging really destructive behaviors, as much as it would offend the Democrats--might save a good bit of expense down the road.

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