The Lessons of Medicaid vs. Medicare

Health care reimbursement is so complicated that not many really understand it. Many people do not understand the differences between Medicare (a federal program which covers the elderly and disabled) and Medicaid (a combined state and federal program which covers the poor, including acting as a secondary insurance for the elderly poor). Some of those who are aware of this don’t realize the tremendous differences between the two programs, leading to poor suggestions for expanding health care coverage such as expanding Medicaid to more people.

It is good to see a blog post from someone who does realize the fundamental problem with Medicaid. In linking to an article at The Wall Street Journal, Megan McArdle writes:

In the Wall Street Journal, Scott Gottlieb of AEI excoriates Medicaid’s wacky reimbursement strategy, which seemingly consists of lowballing everything until the only people who will accept Medicaid patients are Medicaid mills that make up the deficits through fraud.

There is a little hyperbole here but Megan basically understands the system. I won’t say that every physician who takes Medicaid is practicing fraud. Some doctors are willing to lose money, and some are such poor businessmen that they don’t realize how much they are losing. Megan is essentially correct as the options for those who accept Medicaid are to lose money or to commit fraud to make it worth their time and cover the overhead. As a  consequence of these equally unacceptable options, the article Megan cites demonstrates how this results in poorer outcomes for Medicaid patients:

Accumulating medical data shows that Medicaid recipients’ poor health outcomes aren’t just a function of their underlying medical problems, but a more direct consequence of the program’s shortcomings. Take the treatment of serious heart conditions, which are among the most closely evaluated Medicaid services.

One study published in the Journal of the American College of Cardiology (2005) found that Medicaid patients were almost 50% more likely to die after coronary artery bypass surgery than patients with private coverage or Medicare. The authors suggest this may be a result of poorer long-term, follow-up care. Like other similar studies, this one tried to control for the other social and medical factors that are believed to influence patients’ clinical outcomes.

Another study in the journal Ethnicity and Disease (2006) showed that elderly Medicaid patients with unstable angina had worse care, partly because they were less likely to get timely interventions or be treated at higher quality hospitals. Three other recent studies showed that Medicaid patients presenting with heart attacks or unstable angina received cardiac catheterization less often than Medicare or private paying patients. This procedure to open blocked heart arteries has become standard care, with ample evidence showing it improves outcomes.

The same trends can be observed in other diseases. For example, a study of adults with cancer published in the journal Cancer (2005) found that patients on Medicaid were two to three times more likely to die from the disease even after researchers corrected for differences in the location of the tumor and its stage when diagnosed.

This is hardly a rational model for expanding health care. Megan concludes:

It seems to me that there is no good reason for Medicare and Medicaid to be two separate programs.  Housecleaners are surely no less deserving of decent medical care than Palm Beach retirees, yet we arduously separate the two programs so as to lavish extra care on the more affluent class of beneficiaries.  It’s no good saying that the Medicare recipient earned theirs through contributions, because they didn’t–people in the system now are net beneficiaries, not contributors.   It’s just that on average they’re whiter, they speak better English and their subsidized lifestyles are considerably better upholstered.  I’m not sure why any of these entitles them to a better grade of publicly provided healthcare.

Ultimately the disparities between coverage provided to Medicare and Medicaid patients should be eliminated, but I don’t think this is realistic at the moment. Hopefully this will be addressed in any system of universal health care which is ultimately developed. In the mean time, I would also prefer that Medicaid not be used as the solution for the increased number of people recently left without health care coverage.

Gottlieb concludes his op-ed by writing:

The troubling evidence about the quality of Medicaid patients’ services is a cautionary tale for Mr. Obama as he sets about to administer more of our health care inside government agencies. Turning Medicaid around should be the least we demand before turning over more of our private health-care market to similar government management.

While we have Medicaid, along with problems with the VA system which could be used a strong argument against increased government involvement in health care, we also have the opposite with Medicare which often provides better care at a lower price than private insurance. The lesson of Medicaid is not that government cannot be involved in health care, but that it is essential that any government program be done right.

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