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Don't cut Medicaid, fund it better

By Aaron Carroll, Special to CNN
  • Aaron Carroll: Tackling deficit usually means scrutinizing Social Security, Medicare, Medicaid
  • But politicians back off on Social Security, Medicare, set sights on Medicaid cuts, he says
  • Medicaid funds uneven in states, often inadequate; if anything should be increased, he says
  • Carroll: Solutions? Federalize Medicaid, let Medicaid recipients into health care exchanges

Editor's note: Dr. Aaron E. Carroll is an associate professor of pediatrics at the Indiana University School of Medicine and the director of the university's Center for Health Policy and Professionalism Research. He blogs about health policy at The Incidental Economist.

(CNN) -- You can't turn on the news these days without hearing about our budget crisis. We've also been told, over and over, that it's a problem with spending -- we're doing too much of it.

There's truth in that. Even if taxes were to be raised, it's nearly impossible that we can begin to tackle the deficit without addressing the spending on Social Security, Medicare and Medicaid. Together, they total well over a trillion dollars in spending.

Whenever "entitlement" reform surfaces, however, politicians quickly coalesce around the idea that Social Security can't be touched. It also seems like Medicare is off the table, since the Republicans made it clear that cuts to Medicare to help fund the Patient Protection and Affordable Care Act were a bad idea.

This leaves Medicaid.

As states try to tackle their shortfalls, Medicaid has become a target. All over the country, governors are attempting to reduce coverage, benefits and spending. This is a pity, because Medicaid is already underfunded. That's right -- we don't spend too much --we spend too little.

Let's start with some basic facts. Medicaid is a state based program that is paid for by both states and the federal government. And, contrary to what many people think, Medicaid doesn't cover everyone who is poor.

Medicaid has to cover poor kids, poor pregnant women and people who receive Supplemental Security Income. It also has to cover parents up to 1996 welfare levels. But that's it as far as the federal requirements go. Some states do cover "optional" populations and services under Medicaid. Many do not.

Notice what states are not required to do: They need not cover adults without children. And so, in most states in the United States, it does not matter how poor you are, you can't qualify for Medicaid if you don't have kids.

Moreover, although parents can get coverage, the levels can be surprisingly low. For instance, a couple with a child who live in Arkansas and make $3,200 a year are too "rich" for Medicaid. You read that correctly. Even for parents, Medicaid doesn't go nearly far enough.

That doesn't mean that Medicaid isn't covering a lot of people. Medicaid covers one in three children in the United States, making it the largest insurer of children. It also covers one in three births, 8 million people with disabilities, and 9 million low-income Medicare beneficiaries.

Medicaid is also being unfairly maligned by those who know better. There have been a number of claims by columnists, politicians and even well-known economists that Medicaid is harming people.

They claim that Medicaid is worse than being uninsured. This just isn't so. To begin with, it's hard to imagine how this could be possible, since no one is forced to be on Medicaid. If it really were harmful, then people would choose to forgo it in large numbers, and then we'd have no crisis at all.

More importantly, the studies showing that Medicaid has poor outcomes are all ill equipped to show causation. It's important to remember that, in general, those at the very low end of the socioeconomic spectrum are less healthy than those at the high end. Those at the low end are also the ones who often qualify for Medicaid. It should be no surprise, therefore, that those who benefit from Medicaid are less healthy than those who don't, even in ways we can't see in available data.

Being on Medicaid is associated with being unhealthy, because being poor is associated with worse health and with being on Medicaid. This is a far cry from finding that Medicaid caused poor health outcomes. Unfortunately, that's often lost in all the noise.

As further evidence that studies that show Medicaid causes harm are not illustrating a causal link, they also show Medicare causes harm, relative to being uninsured. That's just not credible. Other, more sophisticated analyses prove it. In fact, the evidence strongly suggests that having Medicaid is better than having no insurance at all.

That's not to say that Medicaid is a perfect program. There are many things wrong with it. For one thing, it often reimburses inadequately, meaning that many doctors don't want to see Medicaid patients. The reason that reimbursement is low, though, is that Medicaid is underfunded.

At a cost of $366 billion to cover about 49 million people in 2009, Medicaid is one of the cheapest ways to cover people, especially a high-risk population. In fact, in crafting health care reform, Democrats chose to put more people on Medicaid than in the exchanges because giving them Medicaid was cheaper than helping them buy private insurance.

Of course, it's cheaper because it doesn't pay as much as private insurance. But fixing that would require increasing Medicaid spending, not decreasing it. One solution might be for Medicaid to be fully federalized.

Right now, and in times of economic downturns, states have simultaneously higher Medicaid enrollment and lower tax revenue. They generally can't run a deficit, but the federal government can. Another solution might be to stop treating Medicaid enrollees as second-class citizens. We could let them into Medicare or into the exchanges.

This is the tragedy of those who are arguing that Medicaid needs to be cut. Most people covered by Medicaid are children, pregnant women and elderly citizens qualifying for Supplemental Security Income.

Should they be working harder? Are they lazy? To qualify, they are already very, very poor. The safety net is there just for them. We need to bring Medicaid recipients into programs with a better base of funding, not dump them onto the street.

Yes, we can cut Medicaid and make the state budgets look better in the short term. But we will be cutting from a program that is already short on funds and protecting those who really might not be able to protect themselves. There will be a very real, very immediate, and very human cost. We should stop and consider that.

The opinions expressed in this commentary are solely those of Aaron Carroll.