Monday, September 15, 2014

Reform Medicaid First by Pauly and Grannemann (Book Review #89 of 2014)

This book was published in 2009 by the American Enterprise Institute, a conservative think tank. The authors are an academic economist and an economist who works with Medicare and Medicaid.

The authors were concerned that the Obama Administration's push for health care reform would impose a large system on top of the already complicated and diverse Medicaid programs offered by states. They argue for greater uniformity in Medicaid requirements across states and more equitable funding of those programs; wealthier states currently spend more on Medicaid and thus receive more federal matching funds.They lay out the case for reforming Medicaid as the highest priority before moving ahead ahead with whatever reforms the Administration wanted to make to private insurance and the rest of the health care system.

In principal, the authors are sympathetic to many of the policies later enacted under the Affordable Care Act. Having a payment advisory board that authorizes funding for high-value treatments (weren't these the "death panels?"), imposing uniformity from CMS on states receiving federal funding, and are even unopposed to a "public option" or at least a publicly-funded managed care organization to name a few examples. They also forsee some time of health exchange program for people to shop for coverage.

The authors do not propose many specifics for reform, but do outline a program of Medicaid with a graduated system of premiums. Medicaid could cover everyone up to 300% of the federal poverty line but with fewer services and "meaningful" premiums the higher up the income scale. They stress the importance of having low marginal tax rates as benefits are reduced or premiums increased, something that the ACA roughly failed at doing properly.

Pauly and Grannemann also advocate ending special treatment to certain providers such as rural hospitals, ending the disproportionate share hospital (DSH) subsidy, and medical education payments. By making Medicaid reimbursement rates more "adequate," the authors write, there will be no need for these types of carve-outs. States should also have more control over provider networks, similar to that in private managed care plans; seeing as how most states have moved to an MCO model this seems to be less of an issue.

Surprisingly for an AEI work, the authors are not opposed to a public option and and believe that coverage and rate-setting should be made on a "technical basis" by objective decision-makers with "expertise," a very technocratic approach. They believe in value-based cost containment, but do not offer any innovative ways to make that happen.

Several of their proposals sound like what has been adopted by Pennsylvania and Arkansas, who received waivers to try out some experiments with requiring premiums and incentives to maintain health, or private health insurance that is subsidized by the state.

This book is not for people looking for an introduction to Medicaid and specific policy proposals, for that I'd recommend the Mercatus Center's recent The Economics of Medicaid (my review here). The authors provide no definitions for things like DSH. As such, two stars out of five.

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