Severing A Lifeline

Marcia D. Greenberger and Judy Waxman

August 04, 2005

Marcia D. Greenberger is co-president of the National Women’s Law Center and Judy Waxman is vice-president of health and reproductive rights at the Center. The Center is a non-profit organization that has been working since 1972 to advance and protect women’s legal rights.

It’s no secret that low-income, working Americans are being forced to make the biggest sacrifices as the federal and state governments look for ways to cut spending while preserving tax cuts for the wealthy.  Programs that improve quality of life for the poor are all too often the first on the chopping block.  This year is no exception.  Medicaid, the publicly financed program that provides health insurance for more than 54 million poor Americans, is the subject of cuts on both the state and federal levels. The program’s enrollment has grown by one-third since 2000, causing overall program expenses to rise and making the program an easy scapegoat for lawmakers who want to rein in spending.

Too many politicians would rather blame Medicaid than address the larger issues of soaring health care costs and fewer good jobs that provide health insurance.  It is no coincidence that more Americans are relying on Medicaid as the economy has weakened and as fewer employers are sponsoring health insurance.  In other words, Medicaid has worked as intended—it has responded to real needs.  Medicaid, which has kept health care costs down relative to both the private market and Medicare, isn’t the reason for rising health care costs in state and federal budgets.  On the contrary, it may be part of the solution.

Policymakers should focus on the reasons behind Medicaid’s expanding enrollment and related expansion in costs.  Instead, these issues are not even a part of the Medicaid reform debate. To the contrary, policymakers are focusing only on curbing the program’s growth. For example, with no real consideration of the underlying problems, Congress has agreed to cut $10 to $15 billion from Medicaid over the next five years. Just how those cuts will be made is the only Medicaid topic currently under debate.

Weighing in on this narrow debate, the National Governor’s Association has proposed to save money by allowing states to impose cost sharing on previously exempt populations such as hospice patients, pregnant women and children under 18. Cost sharing means beneficiaries would be responsible for co-payments for medical visits or monthly premiums to maintain health coverage.

Unfortunately, cost sharing would do nothing to resolve the underlying problem of rising health care costs. Studies and precedent show that imposing cost sharing saves money in the short run by limiting access to health care, but it doesn’t save money in the long run. Those who can’t afford co-payments or premiums avoid or delay essential medical care and often drop out of publicly funded health insurance programs altogether. Needy Americans have to forego care until serious and expensive emergencies arise. With no other way to absorb the costs of this unpaid care, hospitals will raise their prices.  In response, insurers will further raise their premiums. And so on, raising health care costs for all of us and exacerbating the underlying problems. 

On its surface, Medicaid cost sharing may sound reasonable, considering that most Americans with private health insurance are responsible for co-payments or premiums. But the reality is that people who can afford to pay premiums aren’t the ones who are eligible for Medicaid. Although income requirements vary by state and population, Medicaid beneficiaries are very poor. For example, the median income eligibility level for a mother with two children is $426 per month.  On this sort of budget, it would be impossible for a family to pay monthly premiums or co-payments without sacrificing other essentials.

Most Americans are feeling the pinch from rising health care costs and diminishing health care coverage.  Perhaps this is why so many Americans—74 percent in a recent survey by Kaiser Family Foundation—consider Medicaid to be a very important government program. By cutting Medicaid, we will simply increase the ranks of the uninsured, causing all Americans to pay more for health care. Instead of proposing unwise short-term remedies—like broad-based cuts and cost sharing that will only increase the number of uninsured and cost the public more in the long-term—policymakers should explore how to make overall health care more affordable and keep programs intact that make essential health care accessible.