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Run! It’s the Medicaid blob!

By Chris Rangel MD ⋅ January 25, 2006 ⋅  Email this post ⋅  Print this post ⋅ Post a comment

Medicaid = “The Blob”
Should we spend more on health care than education?

Remember the movie “The Blob” (any version), about an amorphous pile of alien Jello that got a bad case of the munchies? It wandered around town eating people and being a general nuisance and all the while it got bigger and bigger every time it had a meal! I get this image of “The Blob” in my head whenever I think of state Medicaid programs.

Beginning in the late 1980’s Congress expanded Medicaid eligibility to all pregnant women, infants, and children under age 6 who had incomes of up to 185% of the Federal poverty level. Other expansions of coverage including qualified Medicare beneficiaries and Supplemental Security Income (SSI) lead to 22% growth increases each year in the early 1990s.

The rate of Medicaid growth slowed in the mid 1990s when a strong economy and managed care held down enrolment growth and costs. Then by 2001 Medicaid growth was at 11% and was growing even faster than increases in total state spending. Part of this was due to the post 9/11 economy. Part was due to the collapse of managed health care and its artificial suppression of health care costs and part was due to increased costs of health care itself, a huge slice of which was the rising costs of prescription drugs.

But perhaps the biggest cause of soaring Medicaid spending has been an ever increasing movement to expand Medicaid to cover as many as possible of the 40 million or so Americans (under age 65) who lack health insurance each year. Just from 1999 to 2004 the Medicaid rolls increased from 34 to 47 million Americans! From 1998 to 2004 Medicaid spending almost doubled from 160 to $300 Billion/year! Some of this was due to soaring health care costs during this time BUT the increase in Medicaid spending was twice the rate of increased Medicare spending! The obvious conclusion is that huge expansions in Medicaid rolls were primarily responsible for the increases in Medicaid costs. For example; Medicaid is not just for impoverished families with children or the disabled anymore.

Today, a family of four can earn as much as $40,000 a year in most states and get government health insurance for children. The nation’s median household income was $43,318 in 2003

With relaxed eligibility requirement like this, I’ll be willing to bet that much of the increase in Medicaid rolls was from families who dumped their expensive private insurance to enroll in their state’s far cheaper Medicaid program. Not only that but some of these revamped programs also expanded coverage of services well beyond even private insurances. The TennCare program, Tennessee’s disastrous attempt at universal coverage through Medicaid expansion, was the latest extreme example of this but many other states have been slowly trying to expand their Medicaid coverage well beyond the initial design.

All of this massive increased state spending of Medicaid (even with matching Federal funds) is now starting to bump up against the “Law of unintended consequences“. For the first time state spending on Medicaid programs has exceeded state spending on public education as a percentage of state budgets. While it’s too early to show that this has had a negative impact on public education it is never-the-less a very disturbing trend.

Educational opportunity and access is directly proportional and closely tied to socioeconomic status (SES) which itself is directly proportional to the overall and long-term health of the individual (even to the point of being independent of genetic factors).

Part of the reason why democratic industrialized nations spend so much of their GDP on health care than less wealthy nations is because 1. they can and 2. the people believe it to be a top priority (even if it is expensive). But should health care spending automatically take priority over education spending especially when educational opportunity as such a huge impact on SES and health?

Some may counter that the reason for the differences in health status between people of different SES is that those with lower education and lower SES have less access to health care and receive poorer quality care. Ergo universal health insurance coverage and/or increased Medicaid converge should solve this, right? Wrong. McGinnis et al (2002) looked at SES and premature mortality and found that “behavior” and “social circumstance” accounted for 55%, while “deficiencies in medical care” contributed to only 10% of premature mortality!

And unhealthy behavior (particularly smoking) has been shown to be inversely proportional to education level. Several diseases, in particular cardiovascular disease, have been shown to be directly tied to the education level of the patient.

People with lower education levels also appear to spend more on health care. In particular, literacy rates significantly affect how much health care dollars are spent and resources are consumed across the board! Data from 1998 shows that functionally illiterate adults spend much more on health care and this increased spending appears to be independent of health status or income!! Low literacy adults were 1.5 times more likely to visit a physician and use 3 times more prescription medications than higher literacy adults.

In the US 44 million are functionally illiterate and another 53 million have marginal reading and computational skills. These numbers far exceed the number of Americans without health insurance (at any given time) and yet states have spent the last 15 years building up the Medicaid rolls and slowly encroaching (now exceeding) spending on education. This boggles the mind! Not only is our public education system failing (”. . is our children learning?”) but states are rushing headlong to expand and fund a program that shows no signs of slowing in it’s cost increases and is starting to gobble up education funds.

Unlike the Federal government, state governments do not have the ability to build up massive deficits without severely hurting their bond ratings and their ability to barrow for infrastructure improvements. Therefore the largest program in any state budget is inevitably going to start consuming funds from other programs. Our country can’t afford to cut education funding (not until we massively reform the public education system and try to get something for the massive amounts of money we pay for it).

As if this trend is not troubling enough there continues to be an amazing number of proponents of nationalized universal health care and most of the proposed plans for such a system look very much like Medicaid i.e. publicly funded, with few cost controls, and an abundance of covered services. And just how will such a nationalized massive program not suffer from the same spiraling cost “blobism” that is now happening to Medicaid? They have yet to come up with a plausible answer.