Controlling Medicaid Costs: Federalism, Competition, and Choice

Controlling Medicaid Costs: Federalism, Competition, and Choice

Controlling Medicaid Costs: Federalism, Competition, and Choice

Controlling Medicaid Costs: Federalism, Competition, and Choice

Excerpt

Many people believe the current Medicaid program is too expensive; yet it fails to cover some low-income people most of us would like to help with their medical care costs. This statement with its apparent inconsistency probably captures much of the current frustration with the Medicaid program. Is it just wishful thinking for us to expect Medicaid to perform better at lower costs? Or is there something about the current form of the Medicaid program that has led to a less than optimal allocation of Medicaid resources--that is, something that could be corrected by restructuring the program?

In this study we take an optimistic view and argue that there are in fact ways to modify the Medicaid program that would produce better results for the dollars spent. Our approach is straightforward; in the tradition of federalism, it seeks to place administrative and financial responsibilities at the most appropriate levels of government. Unlike many recent proposals for "federalism," however, which merely amount to a reshuffling of programs from one level of authority to another, our plan calls for more fundamental changes aimed at providing the means and incentives for cost control and efficient use of resources.

Stiffening cost constraints for Medicaid are a fact of current political life. Our major theme, however, is that a leaner and in some ways better benefit package could be made available to Medicaid beneficiaries if a better system of incentives for economizing on the use of resources were implemented for governmental decision makers, providers, and beneficiaries themselves. Such a system could be devised by changing the signals to state governments to encourage them to offer a more equitable but less costly benefit package tailored to the particular characteristics of their states' Medicaid clients and medical care markets. A combination of supplementable voucher-like arrangements and greater administrative flexibility and responsibility for the states would provide the means to meet the medical care needs of the poor in a less costly and more equitable way.

The reforms proposed here are directed to the major problems of Medicaid, including rapidly growing expenditures, inequitable . . .

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