A Poverty Program for All

By Friedland, Robert B. | Aging Today, July/August 2005 | Go to article overview

A Poverty Program for All


Friedland, Robert B., Aging Today


THE MEDICAID CONUNDRUM: CONTROLLING COST VS. EXTENDING CARE

Confronting the implications of an aging society begins in communities. After all, communities are where people live, work, educate their children and seek healthcare and social services, among them long-term care. So it is not surprising that most of the responsibility for organizing and financing many of the services affecting people's lives are provided either through local government or, more often, through the state. One program enabling communities to effectively meet some key challenges of an aging society is Medicaid. Established 40 years ago, Medicaid is jointly financed by states and the federal government with the intent of ensuring access to healthcare and nursing home care for elders, those with disabilities and children whose families have low incomes and few financial assets. Even though Medicaid eligibility is targeted to the poor, the program helps support the health and long-term care infrastructure vital to everyone.

Healthcare is now the second-largest expenditure category in state budgets, following education, according to the U.S. Census Bureau. Medicaid is the largest source of personal healthcare expenditures-in 2003, the program financed 17% of all personal healthcare. The largest source of healthcare coverage in the United States, Medicaid covers at least 9 million more people than Medicare and expends more than $27 billion more than the federal program.

Moreover, Medicaid is responsible for the sickest segment of the U.S. population. Except for pregnant women and children, most Medicaid beneficiaries are in need of health or social services. The program covers people of all ages, and disproportionate shares of people applying for Medicaid have a serious health condition. Medicaid finances more maternity care, prescription drugs and longterm care than any other U.S. program.

Although federal law established key principles for eligibility and coverage, states have a considerable amount of flexibility in defining terms, choosing options, and implementing and administrating the program. Therefore, each state program is different. A person might be eligible for Medicaid assistance in one state but not in another. Furthermore, eligibility does not guarantee the same access to care or disposition of treatments. Research, such as a 2002 report by the Government Accountability Office ("Long-Term Care, Availability of Medicaid Home and Community-Based Services for Elderly Individuals Varies Considerably"), and a 2003 study by the Georgetown University LongTerm Care Financing Project ("Choices and Consequences: The Availability of Community-Based Long-Term Care Services to the Low-Income Population") show that people in two different states with identical characteristics might have very different healthcare experiences even though they have the same condition.

In addition to establishing a floor of standards, the federal government serves as a critical conduit for reallocating the nation's wealth so that states with lower incomes are better able to meet their citizens' healthcare needs. States with a lower per capita income get a higher federal match than those with higher incomes. For every dollar spent by the state, the federal government provides between 50 cents and 77 cents, depending on the state's per capita income. Across all states, about 57% of Medicaid is financed through the federal budget.

Medicaid expenditures tend to increase faster during economic declines as more and more families lose employer-provided healthcare coverage. Irrespective of the business cycle, however, Medicaid expenditures have escalated in recent years because of rising healthcare and prescription drug costs, and because of the growing population at risk for needing longterm care. For example, between 1992 and 2004, total Medicaid expenditures increased, on average, 7.5% per year, according to the Office of State Agency Financial Management. …

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