Give Medicaid Dollars Directly to Patients
As Republicans take another crack at devising a plan to replace ObamaCare, here’s an idea they should consider: Give each Medicaid patient a health savings account—and put $7,000 in it every year.
Under ObamaCare, Medicaid has become the only option for millions of Americans. But that doesn’t mean much if the doctors in their communities don’t accept new patients through the program—and 30% of physicians don’t.
The GOP’s recently benched health-care bill would have substantially reformed Medicaid by giving the states block grants, along with more flexibility on how to spend the money. But there’s a better model. Republicans should empower Medicaid patients by providing funds to them directly, which would allow them to build a personal safety net that could last a lifetime.
Washington and state governments spent $545 billion in 2015 on 73 million Americans covered by Medicaid and the Children’s Health Insurance Program. Instead lawmakers could take $511 billion of that total, divide it equally among enrollees, and give each one a health savings account with $7,000 a year. This would be real money for the poor, stored in real private accounts.
Recipients could use the deposit to buy health insurance and cover the cost of prescriptions, copays, deductibles and other related expenses. Unspent money would carry over to the following year. Enrollees could share that $7,000 with a sick spouse, sibling, parent or child.
Most recipients would probably use the funds to buy private health insurance, many for the first time. The average annual premium last year for an (overpriced) bronze plan on the ObamaCare exchanges was about $3,100 for a 30-year-old, $3,500 for a 40-year-old, $4,900 for a 50-year-old, and $7,400 for a 60-year-old. After that, at age 65, Americans qualify for Medicare.
Those figures mean that even after paying the premiums, all but the oldest Medicaid recipients would have money left over each year to save or spend on additional health-care costs. Enrollees who are relatively young and healthy soon would build personal safety nets worth tens of thousands of dollars. This would not only be good for them, it would stabilize Medicaid, which has become an enormous and unpredictable burden on state budgets.
Because bronze-plan deductibles are high—a 2017 average of about $6,100 for an individual and $12,400 for a family—some patients, especially those over 59 or with serious health problems, will need more help. Lawmakers could allocate the remaining $34 billion in the Medicaid budget line to assist them.
Under this plan, ObamaCare’s ban on pre-existing conditions should be kept in place for a set period with a firm sunset date. That would give Medicaid recipients time to buy in without penalty. Increasing the number of people enrolled in private insurance would then help spread risk and lower costs.
This plan would be a major improvement on both ObamaCare and the Republican proposal, creating personal safety nets and giving tens of millions access to high-quality health insurance. It might just be popular too.
Mr. Haskins is executive editor and Mr. Hamilton a research fellow at the Heartland Institute.