Wayne O'Leary

The GOP’s War on Medicaid

After 50 or so futile votes in the US House of Representatives to repeal the Affordable Care Act (ACA), Republicans have fallen back on an old strategy to neuter “government-run healthcare:” the undermining of the Medicaid system. The advantage of this approach from the GOP point of view is not just that Medicaid is one of the despised Big Three federal entitlements, along with Social Security and Medicare (and the easiest to demonize because it benefits the poor), but that it’s a prime component of Obamacare itself — in the form of expanded medical coverage for the low-income uninsured.

Republican efforts to cripple Medicaid, which the GOP regards as welfare for neer-do-wells, are nothing new. The joint federal-state program for the needy has been politically under siege since its inception as an amendment to the Social Security Act during LBJ’s Great Society. Among the most recent attacks was Republican House Budget Committee Chairman Paul Ryan’s failed 2011 scheme to turn it into a limited block-grant program minus federal guidelines and half its budget.

Out in the hinterland, a desire to defund Medicaid has long been characteristic of GOP governance despite the fact that Washington puts up half to three-quarters of the money (allocated according to state per-capita incomes). Budgetary nickel-and-diming at the state level over the years has focused on restricting eligibility standards, reducing services or benefits, and lowering payments to providers, thereby reducing their participation.

Since the 1990s, however, the adoption of corporate managed care has become the tactic of choice for those seeking a fiscal ratcheting down of Medicaid on behalf of state taxpayers. Notwithstanding the government program’s admirable record of cost containment compared to private health insurance — roughly half the cost per participant from 2000 to 2003 — private-based managed care emerged as the popular recourse for politicians with a dim view of Medicaid, especially in Southern red states, because it promised to do something to, not for, “undeserving” recipients.

Simply put, managed care eliminated the patient freedom of choice represented by fee-for-service (picking one’s own doctor) and replaced it with a gatekeeper process that limited access to only certain network providers and treatments. Today, managed care for Medicaid, formerly the province of major insurers, is increasingly subcontracted to specialized health maintenance organizations (HMOs), such as WellCare or Amerigroup, that make a profit by cutting costs and providing the minimum care allowable. In 2007, Fortune magazine described the growth and shareholder returns of these companies as “spectacular.”

Ironically, the arrival of Medicaid managed care coincided with the Clinton administration’s attempt to pass a national healthcare reform based essentially on HMOs; the Clinton plan was roundly rejected as coercive and restrictive, a charge conspicuously not levelled on behalf of Medicaid’s managed-care enrollees, who apparently should be satisfied with whatever they get. The same increasingly applies to the nearly two-thirds (60%) of nursing-home residents nationwide whose long-term care is paid for by Medicaid; their involuntary transition into managed care, pioneered by states in the Republican South and West (Florida, Tennessee, Kansas, and Arizona), is rapidly becoming a fait accompli.

Even in the majority of states that have yet to impose managed care on their Medicaid programs, benefit cuts are increasingly becoming the order of the day. Enrollees living in most red states can expect, or have already experienced, limits on doctor visits, laboratory services, x-rays, and vouchers to cover transportation to medical facilities, as well as an end to formerly covered expenses like dentures, eyeglasses, and hearing aids. But that’s not enough for red-state politicos, whose primary focus has now shifted to nullifying the ACA’s expansion of Medicaid eligibility, which the conservative Supreme Court, in its wisdom, gave them the right to do.

The expansion, aimed at providing insurance coverage at mostly federal expense for 15 million working-poor Americans — those with annual incomes of up to 138% above the poverty line, or roughly $15,400 for individuals and $31,800 for a family of four — has been rejected outright by 19 of the 50 states, nearly all of them Republican strongholds in the South and West; another five are holding it up for debate. In a cynical twist of strategy, several red states, led by Arkansas, have agreed to participate, but only on special terms and only after making a political point.

We’ve had the “Cornhusker Kickback” and the “Louisiana Purchase,” under-the-table political deals negotiated as the price of affirmative congressional votes for the ACA; now, we have what might be termed the “Arkansas Outrage.” Last year, Arkansas agreed to accept the additional Medicaid enrollees it had, in effect, held hostage, provided the state were allowed to redirect the federal expansionary “matching” funds (90 to 100 percent of the total cost through 2020 and no less than 90% thereafter) to private insurance companies.

The waiver Arkansas received, which has since been obtained by Iowa (and may be granted to a number of other, mostly red, states), means federal taxpayers will be indirectly subsidizing private insurers — in this case, Arkansas Blue Cross Blue Shield and three other companies. The state’s sarcastically named “private option,” evidently an ideological exercise in rhetorical one-upmanship, will also allow it to charge those qualifying for the Obamacare expansion co-payments of up to $600 annually, fees Medicaid recipients are not normally assessed.

What Arkansas’ so-called private-option model really does is eliminate the single-payer aspect of Medicaid for the expanded portion of the system. Under it, new enrollees would shop for private-insurance plans on Obamacare’s individual-mandate exchanges, using state Medicaid subsidies that might not be sufficient for coverage that itself might not be comprehensive. And states could choose to reduce benefits or cover fewer people, in order to stretch dollars in the more expensive private market. Arkansas Republicans are already demanding that their new Medicaid beneficiaries pay more out of pocket and lose their standard benefit of paid transportation to medical appointments, a key to accessing care already waived for Iowa and Michigan.

The Obamacare administrators who granted Arkansas’ private-option waiver appear unconcerned; private is as good as public to them, even if the government loses money through higher payments to providers. And the private-insurance industry that is already benefiting from the existing ACA’s individual mandate? It almost certainly hears new opportunities knocking.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He is the author of two prizewinning books.

From The Progressive Populist, May 1, 2014