Medicaid That Makes Sense

stethescopeWhile Governor Robert Bentley continues to stand firm against the expansion of Medicaid, the proponents of an expansion continue to insist that Alabama grow a program which has proven unmanageable and unaffordable for the state.

Gov. Bentley joined 19 other governors in rejecting the federal offer to pay 100 percent of the additional Medicaid costs for the first three years, declining to 90 percent until 2020, when the matching rate becomes anyone’s guess. Viewed in the short run, it seems like a good deal. With the federal government picking up all or most of the tab, the state could expand Medicaid and actually incur savings for about four years. But when the federal government reduces the amount it covers and shifts the balance to Alabama, the numbers get upside down to the tune of an estimated $569 million in additional Medicaid spending by 2022 that Alabama taxpayers will have cough up.

Alabama can’t pay for Medicaid in its present form. We are barely over five months into the fiscal year and even with last fall’s infusion of Trust Fund money into Medicaid, the state Medicaid office is projecting a $100 million shortfall.

Funding is not the only problem with Medicaid. The quality of care should be of concern to every person enrolled in the program. A bevy of studies indicate that people enrolled in Medicaid have poorer outcomes and higher mortality rates than people with private health insurance and, in some instances, even than those who are uninsured.

In a survey of academic literature on Medicaid, Kevin Dayaratna of The Heritage Foundation found that Medicaid patients are subject to longer waits for care, late-stage diagnosis of illnesses that result in costly and often less effective treatment and higher mortality rates. Dayaratna cited a 2010 study in the Journal of Hospital Medicine that found higher in-hospital mortality rates for Medicaid patients than for privately-insured patients “even after adjusting for factors such as age, gender, income, other illnesses, and severity.” The same study also found that “Medicaid patients hospitalized for strokes and pneumonia also ran up higher costs than the privately insured, as well as the uninsured.”

According to Dayaratna, the peer-reviewed studies show that Medicaid recipients receive far less preventive and early treatment care which results in much higher use of emergency rooms. Research shows that Medicaid patients end up in emergency rooms at almost four times the rate of patients with insurance and almost twice the rate as uninsured patients. Additionally, the Medicaid patients arriving at the emergency rooms were “…in poor, and in many cases, untreatable condition.”

Instead of expanding Medicaid, Alabama needs to first look at ways to make better use of the Medicaid funding that we have and focus on finding ways to save money as well as improve patient care and improve overall health. Based on the successes of Medicaid reform programs that center on managed care in Florida and Rhode Island, it is obvious that costs can be lowered, patient outcomes improved and patient satisfaction increased.



In Florida, Medicaid enrollees are allowed to choose among competing, commercial managed-care plans that provide a choice among providers and benefits with the condition that every plan cover benefits that were mandated by the state. Medicaid enrollees can choose from two to eleven plans and have access to services not normally covered by Medicaid which also improves access to specialists.

It is estimated that this program is saving Florida about $161 million per year and achieving enrollee satisfaction scores of 83 to 100 percent.

In 2008, Rhode Island was granted a waiver that capped total (state and federal) Medicaid spending at $12.1 billion through 2013. Rhode Island has been able to cut their spending to about $9.3 billion, without denying enrollees the care they need.

As indicated by the success of the Florida and Rhode Island reforms, adopting greater flexibility in the use of commercial managed care can increase patient access to preventive and early care, improve outcomes, and reduce the need for expensive treatments that drain Medicaid funds.

This is a far better course to pursue than throwing more money into a program that depletes state revenues and does little to improve patient access to services.


Gary Palmer is president of the Alabama Policy Institute, a non-partisan, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families, which are indispensable to a prosperous society.

Note: This column is a copyrighted feature distributed free of charge by the Alabama Policy Institute. Permission to reprint in whole or in part is hereby granted, provided that the author and API are properly cited. For information or comments, contact Gary Palmer by phone, 205.870.9900, or by email, garyp@alabamapolicy.org