Medicaid: The OTHER Public Option

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As I noted earlier, the real surprise in the House health care bill wasn’t the public plan–we had pretty much known for days that House Speaker Nancy Pelosi didn’t have the votes to pass her preferred version, the so-called “robust” public plan, which would have closely tied its reimbursements to health care providers to Medicare’s rates (which can run 30% lower than what private insurance pays them). So she had to settle for one that would operate in many ways like an insurance company, negotiating with hospitals and doctors and other health care providers, and paying them significantly more generous reimbursements.

It was that decision, I am told, that led to the real news in the bill–a provision, inserted at the last minute, to drastically expand the Medicaid program, even beyond what had been anticipated in an earlier version of the legislation. Here’s what happened:

Once the Speaker decided to go with the weaker version of the public option, she found herself with another problem. Because the weaker version saved less money, she would have to find $85 billion, so the bill’s 10-year price tag could come in under the $900-billion limit that President Obama had set. One way to do that was to take 2.5 million people who would have been using government subisidies to buy insurance on the new “exchanges” that would be established under the bill, and shift them instead into the Medicaid program. So instead of setting the qualifications for Medicaid at 133% of poverty, as the legislation initially stipulated, the level was lifted to 150%. (In other words, where a family of four earning up to about $29,300 would have qualified for Medicaid under the initial version of the bill, the program now would accept a family earning up to about $33,000 a year).

Either way, you are seeing a dramatic expansion of the program, which is administered jointly with the states. Currently, people in most states qualify not on the basis of income, but rather on a combination of income and some other criterion–such as being elderly, disabled, or pregnant. Single adults are generally excluded from Medicaid if they do not also fit one of these other categories.

There are reasons to worry about the implications of putting millions of new people on the medicaid rolls. Already, medicaid recipients in some parts of the country complain they cannot find doctors and other health care providers who are willing to accept the low reimbursements that medicaid pays. However, House Energy and Commerce Committee Chairman Henry Waxman told me that there are a number of provisions in the bill that would aim to assure more health care providers for medicaid recipients. One is a $12-billion expansion of the community health centers program, which would more than double its capacity over the next five years, to handle 38.6 million people. Another element of the legislation would boost the payments to primary care providers who accept medicaid patients, bringing their reimbursement rates in line with those paid by the medicare program.

While Waxman acknowledged that his own preference had been to put more people into the health insurance exchanges, he insisted that the shift is “not a bad policy.” But one real fight ahead could be who will have to pay for all those new medicaid recipients. The House bill would have the federal government paying 100% of the costs for the first two years, and 91% of it after that. Under the legislation passed by the Senate Finance Committee, a far greater share would fall on the states–whose governors say their budgets could not take the additional strain.