Cash Payments Could Help Medicaid Beneficiaries Obtain Better Coverage

Cash payments that phase out based on income could allow Medicaid beneficiaries to shift away from low-quality care under safety net healthcare coverage to higher-quality care through private payer coverage when combined with other healthcare reforms, an issue brief from the Pacific Research Institute Center for Medical Economics and Innovation stated.

The cost difference between Medicaid enrollees and private coverage is minimal but the quality difference is profound, leading the researcher to call for a new kind of safety net.

“These cost similarities indicate that unless Medicaid provides superior healthcare services compared to private insurance, or at a bare minimum comparable services, a more efficient social safety net would replace the entire Medicaid program with a cash-based system that enabled people to purchase private health insurance and healthcare services,” the researcher noted.

“The evidence demonstrates that Medicaid consistently provides inferior, not even comparable, healthcare services to enrollees.”

The quality of care in Medicaid is worse than the quality of private payer enrollees’ care. The researcher’s literary analysis identified that access to care and patient outcomes are worse for Medicaid beneficiaries than private payer members.

In the past, private payer members have had a 1.6 times higher chance of securing a primary care appointment. In separate work, multiple studies found that Medicaid beneficiaries stayed at the hospital longer, had higher costs, and had higher mortality rates after surgical operations. Other works found that Medicaid beneficiaries saw higher readmission rates as well.

Medicaid beneficiaries are not the only stakeholders who lose due to Medicaid’s quality. Providers lose around 18 percent of their Medicaid revenue in uncompensated care and billing issues. This compounds the negative impact on Medicaid beneficiaries because providers are less willing to accept Medicaid patients.

The researcher advocated for privatizing Medicaid by offering Medicaid beneficiaries the funds to purchase their own private coverage.

Specifically, the federal government would give each Medicaid beneficiary an individual health savings account (HSA) and provide a federal contribution based on household income with additional requirements based on work, education, and timeframe for spending. States could also contribute.

Beneficiaries could phase out of Medicaid as their incomes increase. The researcher argued that this approach would incentivize Medicaid patients to transition to the workplace and would prevent the sudden loss of benefits that occurs when enrollment is tied to income.

“Achieving this goal is politically complex, but administratively straightforward,” the researcher acknowledged.

This recommendation was one part of a multi-part series on health insurance reform, which promoted efficiency in the health insurance market, transparency and competition in the drug market, and innovation among healthcare providers.

Separate studies have shown that most people in Medicaid work. In 2019, six out of ten female Medicaid beneficiaries and seven out of ten male beneficiaries were working. However, many of the companies where Medicaid beneficiaries worked did not offer health insurance.

Consumers are interested in HSAs that could be attached to plans other than high deductible health plans (HDHPs), an Employee Benefit Research Institute (EBRI) survey found.

However, separate research indicated that HSAs combined with HDHPs do not decrease costs. Deductibles and out-of-pocket maximums between plans with and without HSAs have become increasingly similar, a study published in Health Affairs found. Higher-income enrollees and healthy individuals are more likely to benefit from this plan and account combination.