Federal Government Pays Bonuses for Increasing Medicaid Expenditures
In December, HHS announced the bonuses for 15 states that had made “significant progress in enrolling uninsured children in Medicaid.” The 2010 bonuses totaled $206.2 million. They were double the $75 million that was awarded to ten states in 2009. Despite HHS claims, there is no way that it can be shown that the additional children enrolled were previously uninsured or even that they needed taxpayer supported health care.
When the 2009 Children’s Health Insurance Program Reauthorization sailed through Congress, it included a bonus program for states that increased Medicaid expenditures by enrolling more children. Cynics would note that in health programs children are used as a relatively inexpensive wedge to start program expansions. Children are the healthiest segments of the population so the program seems inexpensive and later it can be argued that a child’s health depends on the health of his parents and that it is excessively burdensome to exclude parents. Cynics would also note that enrolling more people protects programs against significant reform or cancellation.
To get a bonus, a state had to incorporate 5 of 8 federally mandated features into its Medicaid program. All of the mandated features increased expenditures. Some made it easier to commit fraud. Required features included reducing or eliminating asset tests for Medicaid eligibility, ending in-person interviews, providing 12 months of continuous Medicaid coverage upon enrollment regardless of income, and using the same application for both the Medicaid and Children’s Health Insurance programs. To be eligible, states had to show that they increased child enrollment beyond the increases that would have been expected to result from the recession.
In a study of the effect of continuous coverage on utilization patterns in Medi-Cal in 2001, researchers funded by the Robert Wood Johnson Foundation were shocked by the “largely unexpected” finding that the rate of unnecessary ER visits for children with continuous coverage was nearly double that of children who were on and off Medicaid. It is not clear why this result was “unexpected.” The existing literature showed that the uninsured used emergency rooms at about the same rate as the privately insured, and that people with Medicaid coverage, who pay relatively little to use the ER, tend to be disproportionately high ER users.
In many states, the state agency that runs Medicaid gets more of its budget from the federal government than from state taxpayers. This creates an obvious conflict of interest for the agency if its federal paymaster wishes to spend more than state taxpayers can afford. In Colorado, a bonus of $13.7 million equaled roughly a quarter of the total amount that the state spent on the 288 FTEs (SIO) in the Executive Director’s Office of the state’s Medicaid oversight agency.
Wasted money. Health care rationing. Am I supposed to be surprised at this?
Let’s see if I have this right. We are paying people to drop their private coverage and enroll in a health plan that pays doctors so little that the kids end up getting their care in the emergency room?
And didn’t I read at this very site the other day that in California one in five people leave the emergency room without ever being treated?
That’s one problem with the system of Federal Matching Funds. The incentive is for stats to spend more (and care less about waste) because they are only covering a fraction of the bill.
I always rely on Linda Gorman’s good work to remind me that continuous coverage is not important to health outcomes. It’s very counter-intuitive, especially when we are blanketed all the time with messages about how important preventive care is.
Because Medicaid is guaranteed issue, we should not really care that many eligible people are not enrolled: They are healthy.
However, in a functioning private market for health insurance (i.e. where carriers can charge actuarially accurate premiums), continuous coverage is necessary to pool risk such that subscribers do not get re-underwritten after becoming sick.
John, I can cancel my private coverage anytime. Before ObamaCare I could get new coverage, too, as long as I could pass the underwriting.
Continuous coverage wasn’t required, and shouldn’t be. It has been illegal to rewrite people in the individual market who become sick for years now, no continuous coverage was required and risk got pooled anyway.