Is Medicaid too big to fail?

If you could change one thing about Medicaid, what would it be? It’s an interesting question that often seems to produce as many answers as there are people answering it. The conventional wisdom always has been that if you’ve seen one state Medicaid program you’ve seen only one state Medicaid program because there is such variety among the states in the ways they handle Medicaid. The same often is true of Medicaid experts and the approaches they bring to resolving Medicaid’s problems.

The question about the single most important change to recommend for Medicaid was one of several posed by moderator Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, to a panel of experts convened for a symposium on the future of Medicaid at the University of the Sciences in Philadelphia.

National Conference of State Legislatures health policy director Joy Wilson said the thing she would change is the way people view Medicaid because not enough people see it as a mainstream program and as a quality program. "If we were able to do with Medicaid what we have done with SCHIP, that would be a major step in the right direction," she said, "because we need that support for the program."

A former Michigan governor, John Engler, called for much greater use of electronic medical records to make it easier to move information around. He also talked in terms of making more information available to consumers so they can make better health care decisions in terms of their own care as well as allocation of resources within communities.

Ms. Rowland pointed out Mr. Engler’s reforms apply to the whole health care system and he said Medicaid can’t be separated from the rest of the system but needs to be a leader, with the government using Medicaid, Medicare, and the Veterans Administration programs to drive overall health care reform.

Heritage Foundation Center for Health Policy Studies senior health policy analyst Nina Owcharenko suggested that improved communication between the states and the federal government would be the single most important reform that could be accomplished now.

"There’s a lack of interest of those in Washington to address the Medicaid problem head on," she declared. "I think the debate over Medicare lost any kind of steam to look at the Medicaid program, which is actually more costly than the Medicare program is today. The Bush administration put out a reform proposal that looked at separating long-term care from acute care and maybe funding them separately so you could get at the crux of what the program is about. Unfortunately, that just kind of fizzled out, but it’s a debate that’s important to have come back up in the coming months to years."

Challenging assumptions

But it was left to the Urban Institute’s director of the Assessing the New Federalism Project, Alan Weil, to object to the assumptions behind the question and move the discussion in a new direction.

"The variety of answers already given suggest, first of all, that it’s very hard to talk about the things that need to be done in the Medicaid program without talking about the things that need to be done in the health care system as a whole," Mr. Weil said. "At one level, we want Medicaid to be a leader; and in many respects, it has been a leader despite its negative reputation in some areas. But in other ways, it has been a follower because there have been tremendous changes in the health care system since the program was created."

Mr. Weil said he also would begin by separating out and thinking very differently about long-term care and chronic care and what it means for our country to try to finance and meet the service needs of people with chronic conditions.

He praised Medicaid as an innovative program in meeting the evolving needs of people with chronic conditions.

"As those conditions have changed with time, as our treatment patterns have changed with time, as the role of pharmaceuticals has changed, there’s really no other payer out there with as much experience and understanding about the complex needs of populations with long-term and chronic conditions as the Medicaid program," Mr. Weil said. "That’s not to say that Medicaid’s gotten it all right. But I would worry, for example, about the federal government just taking over the running as well as the financing, because one of the benefits we’ve had of state variety and leadership in this area is that we have learned a great deal. But we’ve lost the sense of how complex a problem this is, that Medicaid is filling in roles for Medicare and also is filling in and making it possible for much of the private employer system to function as well."

Zero-based Medicaid

Mr. Weil said that over time, many of the high-cost items have been pulled out of the Medicare program and the employer system and put in Medicaid.

"If I could do just one thing, I would say let’s take a look at these [costs] across the populations and try to figure out how much we really need and who should really do these things. If we fixed that, Medicaid would be in a much better position to meet the acute care needs of the moms and kids who form the bulk of the program, and it would be a much more manageable program. But I also think we would have a more honest discussion about the changing demographics of this country and the increasing demands on the health care system due to the burden of chronic conditions," he said.

Stakeholder buy-in needed

Ms. Rowland also asked the panelists how to achieve stakeholder buy-in to any massive overhaul of Medicaid.

Ms. Wilson said the most important factor is to develop more trust between states and the federal government. "Right now, we’re always looking over our shoulder at each other, and you can’t really proceed with that kind of a relationship," she said. "Part of that is a fiscal issue, where there’s a shell game. We’re moving too little money around — you’ve got it, I’ve got it — and somehow we’ve got to get past that and really try to have a conversation about what we can really do, whether it’s incremental or we’re talking about revolutionizing, and what we can do in a position of trust moving together."

To Mr. Engler, it’s important that organizations representing legislators and governors come together to see if they can fashion a united proposal.

"If you have different proposals, you’re dead," he said. "That’s Washington."

Mr. Weil again objected to the question because he saw a faulty premise. He said that when Medicare and Medicaid were created, they were fashioned on the Blue Cross claims payment model, and Medicare still is overwhelmingly a fee-for-service system.

"Only in 2006 are we going to start seeing prescription drug coverage," Mr. Weil said. "It does nothing for long-term and chronic care. It has really changed very little with the times and the practice of medicine and the organization of medicine, whereas Medicaid has covered prescription drugs for years, has developed systems to meet very chronic needs of populations, stepped in to address the HIV/AIDS epidemic, is working with systems to respond to people with traumatic brain injuries that would have been fatal when this program began. And you know, Medicaid muddles through. It’s not pretty, and there’s certainly a lot more good to be done with this program. But in fact, Medicaid is a very responsive program to changes in the health care system, especially relative to the other big payers in the system.

"I think the harder question is, How do we get the broader health care system to engage in these kinds of discussions as opposed to thinking that these are Medicaid problems and Medicaid issues?’ Because imperfect as it is, and with all the ideas for improvement we’ve discussed today and many more we haven’t had time to get into, this is a program that has evolved and will continue to do so; and we shouldn’t let the problems today, as real as they may be, let us think that this is a program that can never respond to challenge.

"As Gov. Engler said, Medicaid is a program too big to fail. The challenge is how to provide all these services. While we may differ on strategies for putting a program out into the future, we know that this nation requires something that is a Medicaid, even if we rename it. The future of Medicaid is the future of how we care for all of the ills in our society that fall through the cracks."

Closing the session, Ms. Owcharenko said the best first step in looking to the future of Medicaid might be to look at how to provide better care for current beneficiaries, by realigning the focus, realigning the incentives, and really looking at how to make Medicaid more patient-centered, rather than system-centered.

For his closing comment, Mr. Weil drew on his past experience as a state Medicaid administrator to remind the audience that while conversations such as this one often are on budgets, allocation of responsibility, and benefit levels, "at the end of the day, this is an incredibly important program for approximately 50 million Americans, which is a phenomenal number of people, with a tremendously heterogeneous set of needs ranging from very low-income people to people with very substantial medical, physical, and mental needs that we simply aren’t set up as a society to meet any other way. So this is a program that we need to pay attention to, but we need to move with a lot of care and caution because it is the safety net. And it’s the safety net for a lot of people who would have nowhere to turn without it. So we need to remember it’s not just a line in the budget, but it’s also a very important set of supports for some of our most vulnerable and disadvantaged neighbors."

(To view a webcast of the symposium or read a transcript, go to