The Little Engine That Could and Slowly Will: A Bureaucratʼs View

Abstract

Emily Friedman's analogy of Medicaid to The Little Engine That Could is apt. Yet, unlike the little engine of storybooks, this engine is largely unknown. Friedman is entirely correct in her description of Medicaid as a program is little understood, poorly designed, and a political football. Her recognition of the ill effects it suffers from association with welfare and notions of the unworthy is crucial to understanding Medicaid today. She accurately points out the relevant history of the panic uncontrolled cost increases evoked in state and federal officials beginning early and continuing through the life of the program. It cannot be denied numbers of physicians will have little to do with Medicaid. Finally, the program clearly faces policy conflicts stemming from its attempt to serve three distinct beneficiary groups: families composed of children and their parents, persons with disabilities, and the elderly. As we look forward to the next century, among all of Friedman's observations, three strike me as particularly relevant to the program's future: Medicaid's unfathomable complexity; its unending state of flux; and its placement at what Friedman so rightly calls that permeable membrane between clinical and social services, and clinical and social problems. To reflect upon Friedman's question, How do we make the best of it? it is necessary to expand upon some of her points, add a few fundamental facts about Medicaid, and come to grips with its politics. A FEW MORE FUNDAMENTALS Unlike most welfare or health programs, the level of federal funding available to the states for Medicaid is not capped. This has proven a huge incentive for states to maximize Medicaid spending on all manner of state programs can be made eligible for federal matching. For example, if a state spending $40 million of state funds on services for the mentally ill can convince the Health Care Financing Administration $20 million of spending is for Medicaid-reimbursable services, the state can receive a minimum of $10 million in federal reimbursement. That $10 million is available to the state as new state revenue and it can be spent on anything, tax cuts included. In an era of overwhelming pressure for fiscal restraint, such an opportunity will not be overlooked by any responsible state official. Although there are probably countless reasons why Medicaid varies from state to state, one is frequently overlooked. States do not receive federal support in equal measure. The federal matching rate can vary from a minimum of 50 percent to 83 percent of a state's medical services expenditures. Even in states with per capita income in excess of the national average, state officials more easily spend a state dollar matched by two federal dollars than a dollar matched only one for one. Over the past decade, Medicaid has seen a fundamental shift in its mandate for providing healthcare to pregnant women and children as federal law has increasingly changed the program's role from bill payor to instrument of public health. This has had profound implications. States have been increasingly pushed not only to pay bills accurately and on time, but also to ensure access to and use of preventive and primary care services necessary to achieving good birth outcomes for women and to enhancing children's health. The structure of Medicaid diverges markedly from traditional health insurance. First, eligibility is unrelated to employment and enrollment in Medicaid is highly transitory. Fluctuating work status and family income small increases in income can push a family over the eligible income limits make Medicaid coverage erratic, especially for poor women and children. Despite federal demands for good health outcomes, the on-again, off-again nature of enrollment erodes the promise of the growing emphasis on preventive care. Second, the cost sharing strategies widely used to influence the healthcare-seeking behavior of commercially insured families do not work with Medicaid's very poor constituency. …