One of the major challenges facing the U.S. is the Medicaid Program. Fiscally, the program’s situation is daunting. Medicaid was 2% of GDP in the year 2000. The non-partisan Congressional Budget Office (CBO) estimates it will grow to 9% of GDP by the year 2075. This, along with Medicare and Social Security, will double the size of the Federal government. In addition, since Medicaid is financed with matching state funds, this tremendous program growth will blow a whole in virtually every state budget. The trillions in program unfounded liabilities are not the only program issue. Medicaid has a well deserved reputation as a low quality provider of health care. Indeed, the program may make some beneficiaries sick through the inability to obtain medical treatment and/or its provision of substandard care. The program is rife with fraud and abuse and represents a glimpse of what a complete takeover of health care by government would look like.

Why is Medicaid such a lousy program? There are several reasons. First, there is an issue of eligibility. Particularly in the provision of nursing home services, Medicaid has effectively become an estate protection program for the middle class at enormous cost to the tax payers. http://www.centerltc.com/ In virtually every state there are more people enrolled in Medicaid than there are poor people! http://www.buckeyeinstitute.org/article/221 So one aspect of the program that will have to be dealt with is returning Medicaid to its original goal of providing quality health care for just the poor. Related to this should be a program designed to encourage the use of Medicaid as a temporary assistance program rather than a lifelong entitlement. A first step along these lines is resisting the expansion of Medicaid’s partner, the State Children’s Health Insurance Program. CBO has documented significant crowd out from SCHIP expansions. www.cbo.gov But eligibility reforms will not solve all of Medicaid’s cost and quality issues. Fortunately, one state has undertaken a huge reform of its Medicaid plan. I will talk about Florida’s innovative reform in my next blog.