What to Do About Medicaid?

Tackling the addiction of government welfare

In 2018, the people of Idaho approved Medicaid Expansion via ballot initiative, with 61% voting to participate in the program. The original Medicaid was create in 1965 as part of President Lyndon Johnson’s so-called Great Society, while Expansion was part of the Affordable Care Act, aka Obamacare.

Medicaid is a state and federal partnership to cover healthcare costs for low-income children and their parents, pregnant women, people with disabilities, and senior citizens needing long-term care. The federal government pays 70% of the costs of these benefits, with Idaho contributing 30%. Expansion, on the other hand, covers anyone making under 138% of the federal poverty level. The federal government pays 90% of these benefits, with Idaho only paying 10%.

Idaho legislators resisted joining the Medicaid Expansion program for years, but were forced into it by the 2018 ballot initiative. Reclaim Idaho and other left-wing groups convinced voters that it was a cost-effective way to provide care for those who cannot afford to take care of themselves. Voters were also sold the lie that the total budget for Expansion would remain around $400 million, but it has now cleared $1 billion with no end in sight.

Medicaid as a whole, including Expansion, now takes up more than a third of our entire state budget. Any attempt to cut that back is met with cries that people will die if anything happens to their benefits, even those for able-bodied, working-age adults that have only existed for the past six years. There is tremendous resistance to even the most subtle reforms for Medicaid or any other government benefit. Welfare is a drug, one that makes quick addicts of all who partake.

House Bill 138 was written to create sideboards for Medicaid Expansion, including a cap on enrollees and work requirements for those who receive benefits. H138 included a trigger clause that would completely repeal Expansion should the federal government not grant the waivers necessary to add those sideboards. Though it passed the House, it has yet to be heard in the Senate committee. Rep. Jordan Redman, who sponsored H138, presented a new bill to the House Health & Welfare Committee Tuesday morning that is intended to create a broader base of support.

House Bill 345 includes work requirements and other sideboards, but it is missing the trigger clause. It also includes other attempts at reform, including switching to a managed care plan instead of the current value care organization plan. I asked my assistant (that is, ChatGPT) to explain the differences between these plans:

In Idaho's Medicaid program, a Value Care Organization (VCO) is a provider-led entity, such as a hospital network or group of primary care providers, that enters into value-based purchasing contracts with the state's Department of Health and Welfare. These contracts hold VCOs accountable for both healthcare outcomes and costs, allowing them to share in any savings achieved by delivering efficient and effective care.

In contrast, Managed Care Organizations (MCOs) are third-party entities contracted by the state to administer Medicaid benefits. They receive a fixed per-member, per-month payment (capitation) and assume financial risk for providing a comprehensive set of services to enrollees. While Idaho currently utilizes MCOs for specific programs, such as behavioral health services, the proposed legislation aims to expand this model across the entire Medicaid program.

The key distinction between VCOs and MCOs lies in their structure and control. VCOs are provider-led and focus on value-based care within existing Medicaid frameworks, emphasizing provider collaboration to enhance care quality and reduce costs. MCOs, however, are external organizations that manage Medicaid services, taking on financial risk and administrative responsibilities to control costs and utilization.

Columnist Brian Parsons commented during my live thread on Twitter, suggesting that managed care only moves us closer to universal healthcare:

Imagine this, government says we're going to make this "free" care available to a much larger patient base. Government then says "here is the patient pool we're bringing to the table. You can't afford to NOT accept our patients because we're now fully 1/3 or more of the population. Then government says "now that we have such a large patient base, we're not going to reimburse you unless you are saving us money, so you must adopt all of these efforts like hiring social workers, care coordinators and electronic medical records so we can access all of your patients information. So you jump through those hoops. Then government comes back and says, actually, we're going to switch to managed care now, and we're not going to reimburse you for services provided, we're just going to give you a flat amount per patient, and you can take it or leave it. What they are essentially doing is creating a monopoly in healthcare. A defacto single payer, universal HC system that drives providers out of business to be absorbed by big hospital systems and the like. Since 2012, 60% of all private healthcare has gone out of business or been acquired by big players. This is how they give you universal healthcare.

The Legislature has been considering switching to a managed care plan for several years. In 2023, Idaho Freedom Foundation Policy Analyst Niklas Kleinworth wrote that this idea was not likely to significantly bring costs down.

Change will come only by designing a system that drives people off the rolls. Medicaid should be working toward its own obsolescence, not its own growth. Until Idaho’s lawmakers work to address this fundamental issue, taxpayers will continue to feel the pressure from supporting the welfare state.

Kleinworth hit the nail on the head here. The problem with any welfare program is that it’s a welfare program. Dependence upon government breeds further dependence upon government, which means both dependence and costs will only ever continue to rise.

Nevertheless, some kind of reform is necessary, no? If managed care is the cost of work requirements, should we support this bill? While H345 is missing the explicit trigger clause in H138, it does provide for contingencies. If the federal government ever changes the ratio of funds it provides from the current 90%, then the Dept. of Health and Welfare could immediately begin cutting costs, while the Legislature would still have the option of repealing Medicaid Expansion entirely.

Kleinworth analyzed H345 for the Idaho Freedom Foundation, giving it a score of +3. This contrasts with the +5 given to H138, reflecting not only the greater scope of the newer bill but some of the downsides that come with that scope as well. One example of a negative effect of the bill is with regards to state-directed payments:

House Bill 345 retains existing code authorizing the IDHW to establish state-directed payments — a type of supplemental payment through managed care organizations that grants additional funds for providers. These payments are limited to Medicare rates for comparable services. State-directed payments are funded by a combination of taxes on providers and a federal match. This becomes a type of money laundering scheme where providers pay a tax but then they and the state get that money back with additional federal dollars attached.

This legislation does not change the tax. Instead, it continuously appropriates the revenues. This removes the threat of the Legislature redirecting the funds, which would thwart providers’ ability to recoup their tax contributions. Using a continuous appropriation removes a layer of oversight and accountability and drives more spending in the program.

In Tuesday’s committee hearing, Rep. Lucas Cayler moved to hold the bill for a week to allow H138 to receive a Senate hearing. That motion failed 7-8, while a motion to send the bill to the House floor passed on party lines. Those two votes, along with the 8-7 vote in favor of H138 last month, demonstrate the full spectrum of opinions on Medicaid Expansion. I don’t expect Democrats to ever vote against any form of welfare, while 7 or 8 Republicans want Expansion significantly reformed or even repealed. In the middle are 5 or 6 Republicans who desire reform but worry about what happens to those who are currently on the program if it goes away.

While I would like to see Expansion repealed, we cannot ignore the fact that many of our fellow citizens do depend on the program for their medical needs. Just as drug addicts need treatment, we need to provide an offramp away from dependence. We must reorient our society away from a welfare model and back toward one that not only incentivizes self-sufficiency, but creates room for people to take care of each other as well. There is nothing noble about passing a law to confiscate tax dollars and give them to someone else. That is a very different thing than giving of yourself to help your fellow man.

I think H345 is probably a good bill on the balance, though we’ll have to pay close attention to the managed care aspect to see how it performs. Let us not lose sight of the goal, however: rebuilding a society where citizens of the Republic take care of themselves, and of each other.